We develop a dynamic agency model of a public corporation. Managers underinvest because of risk aversion. They smooth rents and payout. They do not exploit interest tax shields fully. The interactions of investment, debt, and payout decisions can change drastically depending on managers’preferences. Managers with power utility set investment, debt, and payout proportional to the firm’s net worth, generating a constant (possibly negative) net debt ratio. With exponential utility, investment decisions are separated from decisions about debt and payout. More profitable firms become cash cows, and less profitable firms accumulate debt, as in a pecking-order model.

We develop a quantifiable multi-country sourcing model in which firms self-select into importing based on their productivity and country-specific variables. In contrast to canonical export models where firm profits are additively separable across destination markets, global sourcing decisions naturally interact through the firm's cost function. We show that, under an empirically relevant condition, selection into importing exhibits complementarities across source markets. We exploit these complementarities to solve the firm's problem and estimate the model. Comparing counterfactual predictions to reduced-form evidence highlights the importance of interdependencies in firms' sourcing decisions across markets, which generate heterogeneous domestic sourcing responses to trade shocks. (JEL D24, F14, F23, L14, L21)

AbstractWe analyse business‐NGO (B2N) alliances through the lenses of multiple agency and behavioural agency theories to identify the sources of agency problems and the most effective choice of mitigation mechanisms. We contend that three types of agency relationships constitute B2N alliances: the relationship between the firm's managers and B2N alliance employees; the relationship between the NGO's managers and the B2N alliance employees; and the novel ‘claimed principal‐agent relationship’ involving the external beneficiary, the NGO's managers and the alliance employees. We argue that B2N alliances’ three types of agency problems stem from (1) the relative emphasis on public vs. private goods, both at the employee and at the partner levels, and (2) the level of the external beneficiary's voice. We then predict the mechanisms to mitigate these problems: hiring altruistic over self‐interested individuals; narrowly specifying the employees’ activities; emphasizing input‐based and intrinsic incentive mechanisms; and investing significantly into non‐intrusive monitoring mechanisms.

Responding to the paucity of institutional literature meaningfully distinguishing between emotional displays and the experience of emotions, I describe the process by which display rules are codified into the logics governing an institutional regime. I then theorize the role of feigning behaviors—emotional displays that are decoupled from the physiological experience of emotion either in intensity or valence (positive/negative)—in the higher-order dynamics of institutional logics. Specifically, I suggest that the two categories of feigning behavior (valence congruous feigning and diametric feigning) can play different roles in catalyzing the coexistence, blending, and contestation of logics. This research aids institutional theorists in understanding the local affairs and “on-the-ground” lived experiences of logics by highlighting the role of feigned emotional display as the ubiquitous mechanism through which persons navigate and cope with institutional mandates.

A new basis for an international poverty measurement is proposed based on linear programming for specifying the least cost diet and explicit budgeting for nonfood spending. This approach is superior to the World Bank's $1-a-day line because it is (i) clearly related to survival and well being; (ii) comparable across time and space since the same nutritional requirements are used everywhere while nonfood spending is tailored to climate; (iii) adjusts consumption patterns to local prices; (iv) presents no index number problems since solutions are always in local prices; and (v) requires only readily available information. The new approach implies much more poverty than the World Bank's, especially in Asia. (JEL C61, I14, I31, I32, O15)

This paper develops a method for forecasting the marginal abatement cost (MAC) of climate policy using three features of the failed Waxman-Markey bill. First, the MAC is revealed by the price of traded permits. Second, the permit price is estimated using a regression discontinuity design (RDD) comparing stock returns of firms on either side of the policy's free permit cutoff rule. Third, because Waxman-Markey was never implemented, I extend the RDD approach to incorporate prediction market prices which normalize estimates by policy realization probabilities. A final bounding analysis recovers a MAC range of $5 to $19 per ton CO 2 e. (JEL G12, G14, Q52, Q54, Q58)

We document that borrowing costs and credit ratings are less sensitive to off-balance sheet lease financing than to on-balance sheet debt financing, particularly for firms that are financially constrained and firms that have limited ability to use tax shields. This evidence is consistent with theoretical predictions based on tax benefits as well as bankruptcy costs. Our evidence on borrowing costs and credit ratings suggests that credit markets treat operating leases differently from balance sheet debt. Consistent with this interpretation, we document that firms closer to ratings borderlines lease more, particularly around the investment grade borderline.

Abstract Using U.S. data from 1929 to 2015, we show that elevated credit-market sentiment in year t − 2 is associated with a decline in economic activity in years t and t + 1. Underlying this result is the existence of predictable mean reversion in credit-market conditions. When credit risk is aggressively priced, spreads subsequently widen. The timing of this widening is, in turn, closely tied to the onset of a contraction in economic activity. Exploring the mechanism, we find that buoyant credit-market sentiment in year t − 2 also forecasts a change in the composition of external finance: net debt issuance falls in year t, while net equity issuance increases, consistent with the reversal in credit-market conditions leading to an inward shift in credit supply. Unlike much of the current literature on the role of financial frictions in macroeconomics, this article suggests that investor sentiment in credit markets can be an important driver of economic fluctuations.