This article examines whether agency conflicts introduced by securitization affect servicers’ asset liquidation decisions. We find securitized loans are 25.4–28.5 percent less likely to be liquidated via short sales than portfolio loans. Securitized loan servicers’ bias against short sales does not represent an agency conflict if short sale and real estate owned (REO) liquidations are equally efficient. However, we find REOs have significantly lower average liquidation prices, higher average liquidation expenses, and longer average liquidation times than short sales. Although short sales benefit investors, securitized loan servicers have a financial incentive to pursue REOs.

We assemble a property-level panel of appraiser-reported attributes associated with 4.6 million loan applications from 2013 to 2017 to test whether attributes were consistently reported. Appraisers have an incentive to misreport property attributes to justify higher appraised values to ensure that associated mortgage loans are approved. We focus on property transactions with multiple sets of attributes reported by the same appraiser within four quarters and find evidence consistent with an intent to inflate valuations through attribute misreporting. We find that strategic misreporting of attributes is prevalent across markets, and that highly leveraged borrowers whose appraisals had inconsistently reported attributes were 9.8 percent more likely to become seriously delinquent in their loan payments.

Companies planning a private placement typically gauge the interest of potential buyers before the offering is publicly announced. Regulators are concerned with this practice, called wall-crossing, as it might invite insider trading, especially when the potential investors are hedge funds. We examine privately placed common stock and convertible offerings and find evidence of widespread pre-announcement short selling. We show that pre-announcement short sellers are able to predict announcement day returns. The effects are especially strong when hedge funds are involved and when the number of buyers is high. We also observe pre-announcement trading in the options market.

Does market power of banks affect firm performance? To answer this question we examine 25,236 syndicated loan facilities granted between 2000 and 2010 by 296 banks to 9,029 US non-financial firms. Accounting for both observed and unobserved bank and firm heterogeneity, we find that firms that were recently poorly performing obtain loans from banks with more market power. However, in the year after loan origination market power positively affects firm performance, but only if it is not too high. Our estimates thus suggest that bank market power can facilitate access to credit by poorly performing firms, yet at the same time also boosts the performance of the firms that obtain credit.

This article provides cross-country evidence that variations in bank regulatory policies result in differences in income distribution. In particular, the overall liberalization of banking systems decreases income inequality significantly. However, this effect becomes insignificant for countries with low levels of economic and institutional development and for market-based economies. Among liberalization policies, credit and interest rate controls have the most significant negative effect on inequality. Privatizations and liberalization of international capital flows also decrease income inequality; the latter also increases the income share of the relatively poor. In contrast, liberalization of securities markets increases income inequality substantially.

In this article, we examine whether comovement in the stock prices of pairs of Chinese firms connected to the same political network are systematically shaped by the prevailing coordination versus competition incentives of that network’s politicians. We find strong evidence from 2000 to 2012 (Jiang’s and Hu’s regimes) that stock price comovement is affected by the embeddedness of the firm–politician ties within the network. Among pairs of firms connected to a network through a common politician, we document an increase in stock price comovement. For those pairs of firms connected to a common network via separate politicians (rather than a common politician), we document a relative decrease in stock price comovement. This negative effect suggests that politicians’ relationships within these political networks are generally adversarial rather than cooperative in nature. These results become significantly weaker during Xi’s regime from 2013 to 2017, suggesting that Xi’s anti-corruption campaign and state-owned enterprise reforms may have attenuated these political network effects on the firms. Our additional tests also show that stock price comovement becomes even more positive (negative) in settings which are expected to increase the coordination or decrease the competition (decrease the coordination or increase the competition) of the politicians.

We suggest that forward guidance, via publicly committing the central bank to future actions and creating associated expectations, fundamentally affects bank lending decisions independently of other forms of monetary policy. To test this hypothesis, we build a forward guidance measure based on the language used in the Federal Open Market Committee meetings and match this measure with syndicated loans. Our results show that expansionary forward guidance decreases corporate loan spreads and that this effect is stronger for well-capitalized banks lending to riskier firms. Forward guidance also affects nonprice lending terms, such as covenants, performance pricing provisions, and the loan syndicate structure. Additionally, banks tend to initiate new lending relationships with lower spreads after forward guidance issuance.

We use an arbitrage-free term structure model with spanned stochastic volatility to determine the value of the deflation protection option embedded in Treasury inflation-protected securities. The model accurately prices the deflation protection option prior to the financial crisis when its value was near zero; at the peak of the crisis in late 2008 when deflationary concerns spiked sharply; and in the post-crisis period. During 2009, the average value of this option at the 5-year maturity was 41 basis points on a par-yield basis. The option value is shown to be closely linked to overall market uncertainty as measured by the VIX, especially during and after the 2008 financial crisis.