IN the August I947 issue of this REVIEW, Mr. Willard W. Cochrane, presenting a summary of his study about family budgets among Corn Belt farmers in the United States,' concluded that two different forces emanate from the income-outlay behavior of farm families: an explosive force associated with expenditures for capital and a stabilizing force associated with expenditures for family living.2 The character of farmers' expenditures as a whole, however, was not ascertained. Furthermore, the procedure seems doubtful.

We document the importance of political promotion incentives for supervisors in banking supervision. Utilizing the merger of the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) in 2018, we explore the actions of head of the CBRC's regional offices. We find that the increased political promotion incentives are associated with higher frequency, greater amount, and greater severity of penalties in regional banking supervision. The enhanced supervision is more remarkable when the head of the CBRC's regional offices has a higher political rank. After the merger of the two commissions, the regional banking supervision is significantly weakened with the disappearance of political promotion incentives. Furthermore, these enhanced regional supervision triggered by the merger event reduce bank risk. Our findings show that the increased political promotion incentives affect the supervisor's activities and improve the supervision effectiveness.

To address how technological progress in financial intermediation affects the economy, a costly-state verification framework is embedded into the standard growth model. The framework has two novel ingredients. First, firms differ in the risk/return combinations that they offer. Second, the efficacy of monitoring depends upon the amount of resources invested in the activity. A financial theory of firm size results. Undeserving firms are over-financed, deserving ones under-funded. Technological advance in intermediation leads to more capital accumulation and a redirection of funds away from unproductive firms toward productive ones. With continued progress, the economy approaches its first-best equilibrium. (JEL G21, G31, O16, O33, O41)

We examine the impact of internal coalition, measured by the appointment of the top executives and directors by the CEO after he assumes office, on stock crash risk during 2000–2014. The appointment-based internal coalition has a positive and significant impact on stock crash risk. Internal coalition is a more important factor than measures of CEO power, such as CEO tenure and duality, in predicting stock price crash. We address the endogeneity concerns by utilizing an exogenous shock to the internal coalition to conduct difference-in-differences (DID) regressions. The main results survive numerous robustness tests.