How costly is the poor governance of market intermediaries? Using unique trade level data from the stock market in Pakistan, we find that when brokers trade on their own behalf, they earn annual rates of return that are 50-90 percentage points higher than those earned by outside investors. Neither market timing nor liquidity provision by brokers can explain this profitability differential. Instead we find compelling evidence for a specific trade-based “pump and dump” price manipulation scheme: When prices are low, colluding brokers trade amongst themselves to artificially raise prices and attract positive-feedback traders. Once prices have risen, the former exit leaving the latter to suffer the ensuing price fall. Conservative estimates suggest these manipulation rents can account for almost a half of total broker earnings. These large rents may explain why market reforms are hard to implement and emerging equity markets often remain marginal with few outsiders investing and little capital raised.

During the decade of the 1990s the number of women serving on corporate boards increased substantially. Over this decade, we show that the likelihood of a firm adding a woman to its board in a given year is negatively affected by the number of woman already on the board. The probability of adding a woman is materially increased when a female director departs the board. Adding a director, therefore, is clearly not gender neutral. Although we find that women tend to serve on better performing firms, we also document insignificant abnormal returns on the announcement of a woman added to the board. Rather than the demand for women directors being performance based, our results suggest corporations responding to either internal or external calls for diversity.

This paper examines the policy issues associated with resolving the possible failure of Fannie Mae or Freddie Mac (housing enterprises). It compares and contrasts these issues with those raised in the context of large bank failures and also identifies important differences in the extant supervisory authorities. Based on these discussions, a number of policy suggestions are offered to minimize the cost of resolution and protect taxpayers from loss should a large bank or housing enterprise fail.

This article examines the determinants of changes in the U.S. wage structure from 1976 to 2000. Our main empirical observation is that changes in both the level of wages and the returns to skill over this period were primarily driven by changes in the ratio of human capital to physical capital. We show that this pattern conforms extremely well to a simple model of technological adoption following a major change in technological opportunities. In contrast, we do not find much empirical support for the view that ongoing (factor‐augmenting) skill‐biased technological progress has been an important driving force over this period.

We provide a model of bookbuilding in IPOs, in which the issuer can choose to ration shares. Before informed investors submit their bids, they know that, in the aggregate, winning bidders will receive only a fraction of their demand. We demonstrate that this mitigates the winner's curse, that is, the incentive of bidders to shade their bids. It leads to more aggressive bidding, to the extent that rationing can be revenue-enhancing. In a parametric example, we characterize bid and revenue functions, and the optimal degree of rationing. We show that, when investors’information is diffuse, maximal rationing is optimal. Conversely, when their information is concentrated, the seller should not ration shares. We provide testable predictions on bid dispersion and the degree of rationing. Our model reconciles the documented anomaly that higher bidders in IPOs do not necessarily receive higher allocations.

Logit and probit models of turnover=f(performance, firm type, firm type*performance, controls) are often used when testing whether turnover is “more sensitive to performance” for different types of firms. Researchers using this specification typically focus on the significance of the interaction term coefficient. If the intent is to show that the likelihood (rather than the odds) of turnover changes by more for one type of firm as performance varies, then this is an inappropriate test. Simulations are used to demonstrate how focusing on this particular coefficient can generate incorrect inferences. I then show how analyzing marginal effects eliminates this inference problem.