This paper documents a new channel for rating-based bond market segmentation, which, in contrast to prior research, is based on nonregulatory investment management practices. A 2005 Lehman Brothers index redefinition provides a quasinatural experiment in which a number of previously high-yield split-rated bonds were mechanically relabeled as investment grade. Although their regulatory standing was unaffected, these bonds had abnormal yield declines of 21 basis points. These valuation changes can be traced to buying by asset-class-sensitive institutional investors for whom these bonds became investable. Reputation, regulation, indexation, and liquidity cannot explain the observed price and trading patterns. (JEL G12, G14)

Abstract We find that firms’ financial resources play an important role in mitigating the spread of COVID-19. We study nursing homes—whose residents account for over one-third of all U.S. COVID-19 deaths—at a time when investment in risk mitigation was costly and critical. Facilities with less liquidity and those experiencing more severe cash flow shocks had more cases of COVID-19. The importance of cash flow is further supported by tests exploiting state-level variation in Medicaid reimbursement expansion. Evidence on personal protective equipment supplies suggests a lack of financial resources leads to lower investment in risk mitigation. (JEL G30, G32, I10) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Abstract Between 2010 and 2020, the U.S. coal industry experienced a 50% drop in production, employment, and active mines, driven by regulatory factors and technological innovation in alternative energy sources. We study the impact of this energy transition on household employment, wages, migration, and home ownership in affected communities. Compared to non-coal-producing, resource-rich counties, coal-producing counties experience 6% and 4% drops in employment and wages, respectively, during this period. Economic mobility and access to banking services significantly moderate these real effects, suggesting a potential role for finance to shape the industrial and economic changes associated with climate transitions. (JEL G20, G50, J61, Q55, Q58) Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Abstract We show there is a much stronger negative, dynamic relation between changes in economic uncertainty and Treasury yields over weaker economic times since at least 1990. We document this economic-state variation in uncertainty-yield dynamics for weekly and monthly change horizons, for nominal yields and real-yield proxies, for multiple economic-state identification methods, and for different economic uncertainty metrics. We present additional findings that suggest short-term fluctuations in precautionary-savings and consumption-smoothing forces are more impactful on interest rate dynamics during weaker economic times, especially relying on surveys of expected economic growth and inflation. Received February 8, 2019; editorial decision August 24, 2020 by Editor Nikolai Roussanov. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Information, which can arrive in multiple forms, is a fundamental component of all financial transactions and markets. We define hard and soft information and describe the relative advantages of each. Hard information is quantitative, is easy to store, and can be transmitted in impersonal ways. Its information content is independent of its collection. As technology changes, the way we collect, process, and communicate information, it changes the structure of markets, the design of financial intermediaries, and the incentives to use or misuse information. We survey the literature to understand how information type influences the continued evolution of financial markets and institutions. Received October 25, 2016; editorial decision September 6, 2018 by Editor Efraim Benmelech.

Monetary policy became more difficult to characterize during and after the mortgage foreclose and financial crises because of a shift to a new credit policy focused on private sector credit and that relies on traditional commercial banking strategies. The new credit policy broke the tight link that had existed between Fed credit and its effective monetary base, the monetary base that affects monetary aggregates. The Fed has adopted an exit strategy, but the discretionary powers that it followed remain in place as does a mistaken policy on the payment of interest on excess reserves.

This article empirically tests the hypothesis that credit-screening standards can be first increasing and then decreasing in the quality of the bank's pool of potential borrowers, which in turn may vary through the business cycle or across different segments of the lending markets. A key implication is that banks with lending opportunities toward the middle of the quality spectrum can have loan portfolios that perform better than do the portfolios of banks with loan-origination opportunities that are either too weak or too strong. Using banks’ volume of secondary-market loan sales as a proxy for the richness of lending opportunities, I find an inverse U-shaped relation between the performance of banks’ loan portfolios and their activity in the loan sales market. The pattern deserves scrutiny for its policy implications, as many regulators hold the view that countercyclical variation in credit standards may have a destabilizing effect on business cycles.

Abstract The U.S. banking sector had nearly 70% fewer banks in 2022 relative to 1989, primarily because of mergers. We develop a methodology to estimate cross-market spillover effects of bank mergers and test whether the operations of incumbents facing consolidating competitors in one market are affected in other markets. We find that nonmerging banks within a market that are one standard deviation more exposed to mergers in other markets increase deposits by 2.1% relative to their less exposed competitors. Our methodology may be applied elsewhere to assess the aggregate impacts of industry consolidation and illustrates challenges with product-based or geographic market definitions.