We study whether institutional investors that sign the Principles for Responsible Investment (PRI), a commitment to responsible investing, exhibit better portfolio-level environmental, social, and governance (ESG) scores. Signatories outside of the USA have superior ESG scores than nonsignatories, but US signatories have at best similar ESG ratings, and worse scores if they have underperformed recently, are retail-client facing, and joined the PRI late. US signatories do not improve the ESG scores of portfolio companies after investing in them. Commercial motives, uncertainty about fiduciary duties, and lower ESG market maturity explain why US-domiciled PRI signatories do not follow through on their responsible investment commitments.

We survey a large sample of Swedish households and connect the responses to administrative data to relate pro-environmental attitudes and values to actual investment decisions. Pro-environment households are not more likely to hold pro-environment portfolios. This results from financial disengagement: they are less likely to own stocks, check pension balances, or make green active retirement planning choices. Green financial engagement is stronger in settings where financial literacy is higher or where informational hurdles are lower. Informational barriers appear to prevent financial market prices and returns from fully reflecting household environmental preferences.

This paper explores how a prominent place-based policy in China, the national high-tech zones, affects local innovation output and entrepreneurial activities. Making use of staggered establishments of national high-tech zones in various Chinese cities, we find that the establishment of national high-tech zones has positive effects on local innovation output and entrepreneurial activities. A number of additional tests suggest that the effects appear causal. Access to finance, reductions in administrative burdens, and talent cultivation are three plausible underlying economic channels. Our paper sheds new light on the evaluation of the effectiveness of China’s place-based policies

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.

This paper examines the role of local politicians’ patronage connections to top political leaders (i.e., the Central Committee of the Communist Party of China) in privatization outcomes. We find that connected local politicians are more likely to sell state-owned enterprises (SOEs) to corrupt buyers at substantially discounted prices. The SOEs purchased by corrupt buyers engage in significantly more fraudulent and corrupt activities following privatization and thus perform worse. For identification, we use the mandatory retirement ages of Central Committee members in a fuzzy regression discontinuity design. When local politicians lose their connections because Central Committee members step down after reaching mandatory retirement ages, we find a 14.4 percentage point drop in the likelihood of choosing corrupt buyers and a 90.13% drop in price discounts for privatization sales. Consequently, the privatized SOEs experience jumps in efficiency gains after the age cut-offs for mandatory retirement

Using a comprehensive dataset collected by the Federal Reserve, I find that over one-third of corporate loans issued by US banks are fully guaranteed by legal entities separate from borrowing firms. Using an empirical strategy that accounts for time-varying firm and lender effects, I find that the existence of a third-party credit guarantee is negatively related to loan risk, loan rate, and loan delinquency. Third-party credit guarantees alleviate the effect of collateral constraints in credit market. Firms (particularly smaller firms) that experience a negative shock to their asset values are less likely to use collateral and more likely to use credit guarantees in new borrowings.

An arbitrageur with short investment horizon gains from accelerating price discovery by advertising his private information. However, advertising many assets may overload investors’ attention, reducing the number of informed traders per asset, and slowing price discovery. So the arbitrageur optimally concentrates advertising on just a few assets, unless his trades have significant price impact. The arbitrageur’s gain from advertising is increasing in the assets’ mispricing and in the precision of his private information, and is decreasing in its complexity. If several arbitrageurs have private information, inefficient equilibria can arise, where substantial mispricing persists or investors’ attention is overloaded.

Using a portfolio theory framework, we introduce the concept of “political beta” to model firm-level export diversification in response to global political risk. Our model predicts that firms are less responsive to changes in political relations with lower beta countries—those that contribute less to the firm’s total political risk. We document patterns consistent with our model using disaggregated Russian firm-by-destination-country data during 2001–2011: Trade is positively correlated with political relations, though the effect is far weaker for trading partners whose political relations with Russia are relatively uncorrelated with those of other partners in a firm’s export portfolio.

We study the role of social networks in hedge fund activism. Actively managed funds whose managers are socially connected to activists are more likely than unconnected managers to invest in target stocks; their investment decisions are profitable. Importantly, such effects are greater for funds facing more severe information asymmetry. Connected funds are 14.2 percentage points more likely to support activists in proxy contests and contribute to reducing proxy contest costs. Our evidence shows that social ties benefit both connected investors and activists, and suggests that social networks reduce information asymmetry around activist campaigns by facilitating information exchange and increasing trust.

We price the risky component of specialness spreads—identified by their deviations from the expected auction cycle—within a dynamic term structure model estimated using daily prices of all outstanding Treasury securities and corresponding special collateral (SC) repo rates. This allows us to derive a time-varying SC risk premium that we quantitatively link to various price anomalies, such as the on-the-run premium. The SC risk premium explains about 80% of the on-the-run premium and a substantial share of other Treasury price anomalies, suggesting that unexpected fluctuations in the specialness spreads of recently issued nominal Treasury securities are a common risk factor.