Knowledge that Transforms

Abstract We examine how firms are affected by the political bargaining power of their headquarters’ region. Exploiting variation in the strategic importance of swing states stemming from shifting partisan balance in the U.S. Senate, we find that corporate valuations and investments positively respond to increases in regional political influence. We verify the valuation findings using an event study based on the 2021 Georgia runoff election that unexpectedly produced a 50-50 balance in the Senate. We investigate potential policy mechanisms and find that tax incentives constitute the most likely channel through which firms benefit from the political bargaining power of their headquarters’ region.

Abstract We study how firms can design their organizational structures to overcome dynamic commitment problems when entering new markets. A manager exerts costly effort to first develop and subsequently manage an investment opportunity. Ex post, the firm underinvests in projects that generate high management rents. However, the prospect of those rents helps offset the manager’s initial project development cost, making ex ante commitment to invest optimal. Levered subsidiaries mitigate this time-consistency problem by introducing risk-shifting incentives that counteract underinvestment. Subsidiaries are most valuable for projects that are costly to develop, have moderate management costs, and yield returns uncorrelated with existing business. (JEL G32, G34, L22)

Abstract Using granular data on global investment funds in difference-in-differences regressions around the announcement of the U.S. Inflation Reduction Act (IRA), we identify a novel international spillover channel of green industrial policies. Sustainable global investment funds received more inflows with the act announcement, in turn increasing their cross-border portfolio investments worldwide. Recipient economies better prepared to address climate change benefited most from sustainable global funds’ additional investments. Our results are stronger for funds with a larger portfolio share invested in the United States and in IRA-targeted industries. Yet, we see strong international spillovers even for non-U.S.-domiciled sustainable funds investing entirely outside the United States. Thus, global investment funds have become an important conduit for the international spillover of climate policies. (JEL F3, G1, G2, Q5)Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Abstract Using a data set of public procurement auctions and registered shareholders of all bidding firms in Singapore, we study the effects of ownership networks on prices and efficiency in product markets. We find participating bidders with common owners or common owners’ owners are more likely to submit identical bids, and the identical bids are associated with higher contract prices. Our structural estimates suggest removing ownership network effects improves a procurer’s cost efficiency. Our findings are robust to falsification tests, bid rounding concerns, placebo tests using other common stakeholder relationships, and weighting based on a machine-learning prediction of the auction format.

Abstract Does AI make firms vulnerable or resilient to cyberrisk? We develop a firm-year measure of AI intensity for U.S. listed firms using patents and 10-K business descriptions. A 1-standard-deviation increase in cyberrisk reduces patenting by 25%–30% for non-AI firms, with larger declines in data-intensive technologies. Frontier AI firms are much less affected, and their valuations rise when cyberrisk is high. This resilience does not extend to firms that adopt external AI tools without internal AI innovation. The evidence fits two channels: cyberrisk raises the cost of data-intensive innovation, and internal AI development builds organizational capacity to sustain innovation under cyberrisk.

Abstract We model mortgage refinancing as a bargaining game involving the borrowing household, the incumbent lender, and outside banks. We show that bargaining can provide a competitive advantage to the incumbent bank. In equilibrium, the borrower’s ability to refinance depends on the incumbent bank’s cost (dis)advantage relative to locally present competing banks and on the average creditworthiness of borrowers in the relevant market. It is also driven by borrower impatience and switching costs. We find empirical support for the key predictions of our model in an administrative data set covering the universe of mortgages in Belgium. (JEL G11, G21, G51)

About 37% of Chinese listed firms have medical expertise, as measured by the existence of senior executives with a medical degree or medical-industry experience. Using the COVID-19 outbreak in China as a natural experiment, we find that the stock returns of firms with medical expertise, excluding those within the healthcare and pharmaceutical industry, are significantly higher than those without. The positive impact is more pronounced if a CEO or Chairman has medical expertise and if the firm is not state-owned. Overall, this study underlines the importance of diversified executive human capital on firm performance through disentangling macro shocks.

Abstract When firms can issue debt at discrete dates only, debt maturity becomes an effective tool to constrain investment and debt policies. In the absence of other frictions, single-period debt restores first-best investment. With market freezes, long-maturity debt amplifies underinvestment and the leverage ratchet effect, while short maturity mitigates these distortions. Calibrating the model to U.S. nonfinancial firms shows that choosing the optimal debt maturity can reduce the cost of commitment problems and market frictions by up to 4% of firm value. A decomposition of the equilibrium credit spread reveals that the component associated with time-inconsistent debt and investment policies is largest when leverage and default risk are low, and is substantially reduced by shorter debt maturities. (JEL G12, G31, G32, E22)

Abstract We analyze how countercyclical liquidity policy—via reserve requirements (RRs)—affects the credit cycle. For identification, we exploit supervisory credit register data and RR changes in Brazil made for monetary and macroprudential purposes and affecting banks differently. We find that countercyclical liquidity policy smooths credit supply cycles at the loan and firm levels. The effects of easing during crises are three times stronger than are those of tightening during booms, particularly for low-risk firms. We also explore interest rate policy. Credit supply effects are stronger among high-risk firms and during tightening, when interest rates are more effective than RRs.

Abstract This paper studies the impact of career concerns on technological change by analyzing the adoption of digital cinematography in the U.S. motion picture industry. This setting allows us to collect rich data on the adoption of this new technology at the project level (i.e., movie) and on the career of the main decision-maker (i.e., director). We find that early-career directors played a leading role in the adoption of digital technology, an effect that appears to be explained by career concerns, rather than alternative motives we consider and analyze. Technological savviness also plays a role. (JEL: G30, O33, L82, M50)Received: June 25, 2025Editor: J. Anthony Cookson Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.