We examine the causal effects of a policy allowing early withdrawal of pension funds on individuals’ investment behavior. Upon turning 55, eligible individuals may withdraw a portion of their pension savings. Using detailed brokerage data, we find that this liquidity access triggers increased trading of 9% to 33%, especially in riskier, leveraged assets, without improving investment performance. The resulting increase in trading costs and portfolio volatility, particularly among males and lower-income investors, ultimately diminishes retirement wealth.

The sensitivity of the external finance premium to firms’ net-worth-to-capital ratio is central to the strength of the financial accelerator, yet direct firm-level evidence remains scarce. We estimate this elasticity using balance sheet and income statement data for Swiss nonfinancial firms over 1998–2016. To address the endogeneity of net worth, we employ two complementary instrumental variable strategies: one based on firms’ non-operating income and the other a shift-share design that interacts predetermined exposure to financial income with aggregate dividend returns. Mapping the estimated elasticity into the costly state verification framework as implemented by Bernanke et al. (1999) yields structural monitoring costs of about one quarter of firms’ gross return on capital, with estimates ranging from 0.15 to 0.35 across specifications. Our results provide direct firm-level support for the financial accelerator mechanism and imply monitoring costs of the same order of magnitude as the benchmark calibration of Bernanke et al. (1999).

In the Australian real estate market, about a third of properties are sold at auction. Properties that fail auctions sell later for a 1.3 percent discount. Consistent with a causal channel, the effect holds with property-level fixed effects and when auction failure is instrumented by adverse weather or seller overvaluation. Prices cluster below round numbers, and the discount fades over time, inconsistent with our effects reflecting unobserved property characteristics. The evidence suggests that there are behavioral factors affecting the valuations of buyers and sellers.

This study estimates analyst-level stickiness in forecast updating and investigates its underlying determinants. Consistent with recent experimental findings on belief updating under cognitive noise, analysts often compress their forecasts toward an intermediate default, such as prior forecasts, when uncertain about forecast precision, leading to forecast stickiness. This tendency is more evident among analysts with characteristics associated with higher cognitive noise, including lower forecast accuracy, limited experience, and complex portfolio coverage, and during periods of heightened macroeconomic uncertainty. A model incorporating sticky updating behavior shows that the consensus revision by sticky analysts exhibits stronger return predictability than the traditional consensus revision by all analysts, with this predictability increasing with the proportion of sticky analysts covering a stock. Empirical evidence supports these predictions. Additionally, the return predictability of sticky revisions is especially pronounced when forecast difficulty is elevated. Analyst-level stickiness provides more information about the cross-section of stock returns than firm-level stickiness.

This article explores the relationship between a firm’s legal contracting environment and its innovation incentives. Using granular data from the pharmaceutical industry, we examine a contracting mechanism through which incumbents maintain market power: “pay-for-delay” agreements to delay the market entry of competitors. Exploiting a shock where such contracts become legally tenuous, we find that affected incumbents subsequently increase their innovation activity across a variety of project-level measures. Exploring the nature of this innovation, we also find that it is more “impactful” from a scientific and commercial standpoint. The results provide novel evidence that restricting the contracting space can boost innovation at the firm level. However, at the extensive margin we find a reduction in innovation by new entrants in response to increased competition, suggesting a nuanced effect on aggregate innovation.

The idea of separating retail and investment banking remains controversial. Exploiting the introduction of UK ring-fencing requirements, we show that this separation has a range of previously undocumented side effects for credit supply, competition, and risk-taking in credit markets not directly targeted by the reform. By redirecting the benefits of deposit funding toward retail activities, ring-fencing incentivises universal banks to expand mortgage lending. This rebalancing reduces the cost of household credit, without eroding lending standards. But it also increases mortgage market concentration, pushes smaller banks toward riskier lending, and is mirrored by a reduction in syndicated loans and credit lines.

We study the interaction of expansionary rate-based monetary policy and quantitative easing, despite their concurrent implementation, by exploiting heterogeneous banks and the introduction of negative monetary-policy rates in a fragmented euro area. Quantitative easing increases credit supply less when banks’ funding costs do not decrease simultaneously. Using administrative data from Germany, we uncover that among banks selling their securities, central-bank reserves remain disproportionately with high-deposit banks that are constrained due to sticky customer deposits at the zero lower bound. Affected German banks lend relatively less to firms while increasing their interbank exposure in the euro area.

This study analyzes the wide dispersion in bid-ask spreads across clients in over-the-counter (OTC) markets. Our data detailed data comprise a dealing bank's complete trading record in a major OTC contract and include client IDs, seven client types, and precise markups. Average spreads are lowest for hedge funds (<1 basis point, bp) and highest for individuals and for small and medium enterprises (>50 bps). Regression results suggest that the primary source of variation is clients’ execution efficiency, meaning their ability to minimize execution costs. Efficient trading, which can require investments in knowledge and technology, has three dimensions: reliance on low-cost platforms; familiarity with market technologies, conventions, and negotiating strategies; and breadth of dealing relationships. Relations between proxies for client execution efficiency and client incentives to invest, such as trade frequency, are consistent with rational inattention.

Rapid growth of stablecoins has raised concerns about issuer default and spillover risks. To assess these risks, we model a stablecoin issuer facing persistent demand shocks. Absent regulation, the issuer holds little capital and favours interest-bearing but illiquid bonds over cash. This exposes coin-holders to default risk and poses spillovers via bond fire-sales. How can regulation mitigate these risks? Capital and liquidity thresholds can help, especially when introduced as usable buffers. The thresholds can be breached, providing flexibility. However, breaches trigger additional redemptions that discipline the issuer. The thresholds operate through asymmetric channels: the liquidity threshold raises only cash, whereas the capital threshold increases both capital and cash. Both thresholds mitigate default and spillover risks, making them substitutes when either risk is targeted separately but complements when both risks are targeted jointly. We provide a two-way mapping that helps derive capital-liquidity threshold combinations implied by chosen risk targets (and vice-versa).