The Journal of Financial and Quantitative Analysis © 1976 University of Washington School of Business Administration

Abstract We present a dynamic rational expectations model of closed-end fund discounts that incorporates feedback effects from activist arbitrage and lifeboats. Both activist arbitrage and lifeboats distort closed-end fund prices and lead to narrower discounts. Furthermore, both activist arbitrage and lifeboats effectuate an ex post wealth transfer from managers to investors but an ex ante wealth transfer from low-ability managers to high-ability managers. On average, investor wealth is unaffected by either activist arbitrage or lifeboats because their potential benefits are factored into higher fund prices. Although lifeboats can reduce takeover attempts, they do not increase expected managerial wealth.

I test whether retirement plan providers extend preferential corporate loan terms to firms that have an overlapping retirement plan relationship. I find that loans from affiliated retirement plan providers (i.e., relationship loans) have lower spreads than non-relationship loans. Relationship loans are also larger and exhibit longer maturities. These terms benefit shareholders without sacrificing the quality of retirement plans available to employees. The favorable terms within this banking relationship are most likely explained by the ability of retirement plan relationships to alleviate information asymmetries in the corporate loan market rather than a quid pro quo arrangement.

Abstract We document that defined benefit pension plans with significant holdings in private equity (PE) earn substantially greater returns than plans with small holdings, in both the 1990s and the 2000s. A one standard deviation increase in PE holdings is associated with 4% greater returns per year. Up to one-third of this outperformance comes from lower costs that we link to economizing on costly intermediation by avoiding fund-of-funds and investing directly. The bulk of the outperformance comes from superior gross returns only partially explained by access and experience. We conjecture that larger PE investors have superior due diligence and ability to bridge information asymmetries in PE.

Decomposing the year-to-year changes in the earnings distribution from 2004 to 2013, we analyze the role of the employer in explaining earnings inequality in the United States. Movements between the bottom, middle, and top involve 20.5 million workers each year. Another 19.9 million move between employment and nonemployment. There are large gains from working at a top-paying firm for all skill types. Working for a high-paying firm produces benefits today, through higher earnings, that persist through an increase in the probability of upward mobility. High-paying firms facilitate moving workers to the top of the distribution and keeping them there.

Abstract Many of the events that trigger clawback provisions are associated with risky corporate policies and variable performance outcomes. We propose and test the hypothesis that clawback provisions motivate managers to reduce firm risk. Panel ordinary least squares, general method of moments with instrumental variables, and propensity square matching models all indicate that clawback provisions decrease the volatility of stock returns. The channels that connect clawback presence to firm risk include more conservative investment and financial policies. The clawback-induced reduction in risk-taking appears to benefit shareholders on average. The gains from reduced risk-taking are larger for firms with fewer growth options, lower R&D, and prior wrongdoing. (JEL G32, G34, J33, M41, M52, M55)

The Journal of Financial and Quantitative Analysis © 1979 University of Washington School of Business Administration

Evaluating investments by discounting anticipated future benefits at an exogenously determined risk-adjusted discount rate (hereafter referred to as the RADR approach) is well accepted in the canon of finance. If benefits (D) are to be received for T periods and if k, the discount rate, is constant over each of the t periods, then the discrete time net present value (NPV) is de-fined as: T t (1) NPV = E D /(l + k). t=0 A positive NPV characterizes a desirable investment. A frequently offered criticism of the RADR approach centers on the fact that both risk and timing considerations are treated in the denominator of equation (1). The certainty equivalent (CE) method has been suggested as a way of distinguishing between the two effects. In computation of the CE-NPV, riskless benefits that are equal in utility to the risky projected benefits

During the Progressive Era at the beginning of the 20 th century, the United States replaced litigation by regulation as the principal mechanism of social control of business. To explain why this happened, we present a model of choice of law enforcement strategy between litigation and regulation based on the idea that justice can be subverted with sufficient expenditure of resources. The model suggests that courts are more vulnerable to subversion than regulators, especially in an environment of significant inequality of wealth and political power. The switch to regulation can then be seen as an efficient response to the subversion of justice by robber barons during the Gilded Age. The model makes sense of the progressive reform agenda, and of the successes and failures of alternative law enforcement strategies in different countries.