Knowledge that Transforms

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An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

Citation: Greenwood, Robin, Samuel G. Hanson, and Gordon Y. Liao. "Asset Price Dynamics in Partially Segmented Markets." Review of Financial Studies 31, no. 9 (September 2018): 3307–3343. (Internet Appendix Here: http://www.people.hbs.edu/shanson/smc_IA_20170910.pdf.) Link to publisher's version: https://academic.oup.com/rfs/article-abstract/31/9/3307/4985215?redirectedFrom=fulltext Keywords: System Shocks, Asset Pricing

Although acquisitions are a popular form of investment, the link between rms' nancial constraints and acquisition policies is not well understood. We develop a model in which nancially constrained bidders approach targets, decide how much to bid and whether to bid in cash or in stock. In equilibrium, nancial constraints do not aect the identity of the winning bidder, but they lower bidders' incentives to approach the target. Auctions are initiated by bidders with low constraints or high synergies. The use of cash is positively related to synergies and the acquirer's gains from the deal and negatively to nancial constraints. (D44, G32,

We exploit a natural experiment to provide one of the first measurements of the causal effect of negative credit information on employment and earnings. We estimate that one additional year of negative credit information reduces employment by 3 percentage points and wage earnings by $1, 000. In comparison, the decrease in credit is only one-fourth as large. Negative credit information also causes an increase in self-employment and a decrease in mobility. Further evidence suggests this cost of default is inefficiently borne by those most creditworthy among previous defaulters. Received April 5, 2017; editorial decision September 2, 2017 by Editor Andrew Karolyi.

Low-income households with proximate access to payday loans exhibit greater economic distress, higher take-up of food assistance benefits, and greater delinquency on child support payments than peers without proximate loan access. These findings suggest that borrowing can exacerbate distress, leading borrowers to use transfer programs and to prioritize payday loan payments over other liabilities like child support. In that way, payday lending produces negative externalities—costs imposed on taxpayers that fund transfer programs and nonresident family members that fail to receive child support. Received August 13, 2014; editorial decision December 5, 2016 by Editor Alexander Ljungqvist.

We examine how debt priority structure affects bank funding costs and soundness. Leveraging an unexplored natural experiment that changes the priority of claims on banks’ assets, we document asymmetric effects that are consistent with changes in monitoring intensity by various creditors depending on whether creditors move up or down the priority ladder. The enactment of depositor preference laws that confer priority on depositors reduces deposit rates but increases nondeposit rates. Importantly, subordinating nondepositor claims reduces bank risk-taking, consistent with market discipline. This insight highlights a role for debt priority structure in the regulatory framework. Received September 1, 2016; editorial decision August 31, 2017 by Editor Philip Strahan.