Prior research finds that investors respond more favorably to a disaggregated earnings forecast than to an aggregated one. The present study examines whether this initial favorable effect on investors’ decisions leads to investors giving management the benefit of the doubt, or backfires in the event of a subsequent earnings surprise announcement. The results of our experiment indicate a “backfire effect” consistent with Expectation Violation Theory. We find that investors’ negative reactions to an earnings surprise are stronger if they first observed a disaggregated forecast than if they first saw an aggregated forecast. The largest downward adjustment in investment interest occurs when the disaggregated forecast is later found to be overstated. This study provides evidence of the complexity of the effect of disaggregated earnings forecast and adds to the literature concerning the costs and benefits of accounting information disaggregation.

This study considers the experience of china's one-child policy to examine how fertility restrictions affect economic and social outcomes over a lifetime. Using variations in these penalties across provinces and over time, we find that exposure to stricter fertility restrictions when young leads to higher education levels, more white-collar jobs, delayed marriage, and lower fertility rates. Further consequences include lower rates of residing with the elderly and higher household income, consumption, and savings. Finally, exposure to stricter fertility restrictions in early life increases female empowerment. Overall, fertility restrictions imposed when people are young have powerful effects throughout their life cycle.

This paper describes the design and behavior of an experimental economy with the structure of the Ramsey-Cass-Koopmans model of optimal growth. The experiment includes three different implementations of the model: a decentralized implementation with multiple agents and a market for capital, a treatment where individual subjects are placed in the role of social planners, and a treatment where the social planner consists of five agents making a joint decision. The findings highlight the role of market institutions in facilitating convergence to the optimal steady state.

This paper studies the real effects of losing political capital by exploiting exogenous shocks from the sudden deaths of politically connected independent directors in Chinese firms. Using difference-in-differences estimation, we find that upon losing political capital, a firm boosts its physical capital expenditures by 28%, or 2.93 percentage points, which is an order of magnitude larger than estimates from the United States. The loss of political capital leads to a decrease in the economic benefits a firm can obtain, in terms of bank loans, tax benefits, and government subsidies, and an increase in its production costs. Our evidence suggests that private firms use physical capital investment as a substitute for political capital.

Debt-financed share buybacks generate positive short-term and long-run abnormal stock returns. Leveraged buyback firms have more debt capacity, higher marginal tax rate, lower excess cash and lower growth prospects ex ante, increase leverage and reduce investments more sharply ex post than cash-financed buyback firms. Firms that are over-levered ex-ante are associated with lower returns and real investments following leveraged buybacks. The lower announcement returns of over-levered firms are concentrated on firms with weaker corporate governance. The evidence is consistent with leveraged buybacks enabling firms to optimize their leverage, on average benefiting shareholders. The benefits decrease with a firm's leverage ex ante.

This paper analyzes the trading behavior of stock market investors. Purchases and sales are highly correlated when we divide investors geographically. Investors who live near a firm's headquarters react in a similar manner to releases of public information. We are able to make this identification by exploiting a unique feature of individual brokerage accounts in the People's Republic of China. The data allow us to pinpoint an investor's location at the time he or she places a trade. Our results are consistent with a simple, rational expectations model of heterogeneously informed investors.

Financial distress is a prevalent issue among the youth. An influential stream of literature has argued that religion wields significant influence over human life. Using a representative sample of U.S. young people, we explore whether religiosity matters for financial distress. To deal with endogeneity issue, we exploit arguably exogeneous within-school variation in adolescents’ peers. By instrumenting an adolescent's own religiosity with the religiosity of their school peer group, we find that higher levels of religiosity causally and significantly reduce the likelihood of financial distress at young adulthood. Our results withstand a variety of robustness checks. To shed light on the mechanisms, we explore the impact of religiosity on an individual's sociability and various psychological attributes. We find that more religious individuals hold higher levels of self-control, a crucial attribute that aids in averting financial distress. Our study contributes to the literature by providing rigorous causal evidence that identifies religiosity as a meaningful predictor of reduced financial distress among young adults.