Very little. A plethora of integrated assessment models (IAMs) have been constructed and used to estimate the social cost of carbon (SCC) and evaluate alternative abatement policies. These models have crucial flaws that make them close to useless as tools for policy analysis: certain inputs (e.g., the discount rate) are arbitrary, but have huge effects on the SCC estimates the models produce; the models' descriptions of the impact of climate change are completely ad hoc, with no theoretical or empirical foundation; and the models can tell us nothing about the most important driver of the SCC, the possibility of a catastrophic climate outcome. IAM-based analyses of climate policy create a perception of knowledge and precision, but that perception is illusory and misleading. (JEL C51, Q54, Q58)

Presenting data on all full-length articles in the three top general economics journals for one year in each decade 1960s–2010s, I analyze changes in patterns of coauthorship, age structure and methodology, and their possible causes. The distribution of number of authors has shifted steadily rightward. In the last two decades, the fraction of older authors has almost quadrupled. Top journals are publishing many fewer papers that represent pure theory, regardless of subfield, somewhat less empirical work based on publicly available data sets, and many more empirical studies based on data collected by the author(s) or on laboratory or field experiments. (JEL A14)

Prior literature shows that implied volatility spreads between call and put options are positively related to future underlying stock returns. In this paper, however, we demonstrate that the volatility spreads are negatively related to future out-of-the-money call option returns. Using unique data on option volumes, we reconcile the two pieces of evidence by showing that option demand by sophisticated, firm investors drives the positive stock return predictability based on volatility spreads, while demand by less sophisticated, customer investors drives the negative call option return predictability. Overall, our evidence suggests that volatility spreads contain information about both firm fundamentals and option mispricing. (JEL G12, G13, G14, L83)

During the late 1990s, the SEC alleged that banks were overstating loan loss allowances to establish cookie jar reserves. Their intervention in bank accounting culminated in 2001 with new guidance (SAB 102) designed to improve financial reporting quality. We show that banks' allowance estimation changed in response to the SEC's intervention. While allowance informativeness (as proxied by the ability to explain future losses) improved for Strong Banks, informativeness declined for Weak Banks whose incentives are to understate allowances. Our results help to explain why some (Weak) banks delayed loss recognition during the recent financial crisis.

When a firm has minimal agency and informational asymmetry problems it should make efficient capital budgeting decisions. Many firms over-invest prior to CEO turnover, halt investments in the period surrounding the turnover, and then greatly increase their level of expenditures. Empirical analysis of the cross-sectional and inter-temporal variation in the quality of firms' corporate capital budgeting decision reveals that the impact of CEO turnover is asymmetric between under- and over-investing firms, and this complements the larger literature using average firm-wide performance measures. Firms are more likely to have forced turnovers when there is more over-investment prior to the turnover, and these firms make more efficient investment decisions subsequently. Board influence is largely insignificant prior to a CEO turnover but is consistently associated with higher levels of investment subsequently.

We model the reorganization decision of distressed firms. One of the novel features of our paper is that we examine the asset and liability side restructuring decisions jointly to resolve financial distress. Secondly, we model several institutional features of coping with financial distress such as debtor-in-possession financing, prepackaged bankruptcies, and asset sales. In our model, asset liquidity, indirect costs of financial distress, and the option value of equity are the determinants of the choice between Chapter 11 reorganizations and workouts. The model develops several testable predictions, some of which are novel and others of which are able to explain previously documented empirical results.

This paper investigates whether breastfeeding affects 5- to 6-year old children's cognitive development using three U.S. longitudinal data sets. The results for the full samples roughly point to a dose-response effect of breastfeeding on children's cognitive outcomes, with breastfeeding six months or more associated with about one-tenth of a standard deviation increase in cognitive test scores. The breastfeeding effects do not appear to be due to differences in maternal employment, cognitive ability, or parenting skills. In contrast, within-sibling results show no statistically significant breastfeeding effect.

ABSTRACT This paper investigates reporting honesty when managers have monetary incentives to overstate their performance. We argue that managers who report about their performance will take into account how their report affects their peers (i.e., other managers at the same hierarchical level). This effect depends on the design of the organization's control system, in particular, on the reward structure and the information policy regarding individual performance reports. The reward structure determines if peers’ monetary payoff is increased or decreased when managers claim a higher level of performance. The information policy determines if managers will be able to link individual peers to their reports and affects the nonmonetary costs of breaking social norms. We present the results of a laboratory experiment. As predicted, we find that participants are more likely to overstate their performance if this increases the monetary payoff of others than if their reported performance decreases others’ monetary gains. In addition, overstatements are lower under an open information policy, where each individual's reported performance is made public, compared to a closed information policy, where participants only learn the average performance of the other participants. Our findings have several important implications for management accounting research and practice.

This paper empirically examines how capital affects a bank’s performance (survival and market share) and how this effect varies across banking crises, market crises, and normal times that occurred in the US over the past quarter century. We have two main results. First, capital helps small banks to increase their probability of survival and market share at all times (during banking crises, market crises, and normal times). Second, capital enhances the performance of medium and large banks primarily during banking crises. Additional tests explore channels through which capital generates these effects. Numerous robustness checks and additional tests are performed.