I study the information content of bond ratings changes using daily corporate bond data from TRACE. Abnormal bond returns over a two-day event window that includes the downgrade (upgrade) are negative (positive) and statistically significant, although the reaction to upgrades is economically small. Monthly abnormal bond returns around downgrades and upgrades are statistically significant but overstate the magnitude of the reaction relative to two-day abnormal returns. Unlike the bond market, the stock market reaction to upgrades is statistically insignificant. Evidence suggests that the differing inferences on the effect of upgrades in the two markets can be attributed to wealth transfer effects rather than relative market inefficiencies. In the cross-section, the bond market response is stronger for rating changes that appear more surprising, rating changes of lower rated firms, and upgrades that move the firm from speculative grade to investment grade.

This paper investigates the relation between information on the state of the economy and equity risk premium. We use a setup where investors have Epstein-Zin preferences and the economy randomly switches between booms and recessions. We are able to establish 2 key results: First, investors with high elasticity of intertemporal substitution (EIS) will require lower excess returns for holding stocks if they are provided with better information on the state of the economy. Second, we find that this also holds for investors with moderate EIS if they are sufficiently risk averse.

We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial entry, or if it undermines bank monitoring incentives. We derive a “pecking order” for support schemes: support funds should be channeled first to credit guarantee schemes and then, when entrepreneurs start to substitute public for private collateral, to co-funding entrepreneurial projects. The optimal level of credit guarantee is diminishing in the costs of incentivising bank monitoring. We show in an extension that the long-term effect of public subsidies may be to impair the private sector’s initiative to uncover cost savings.

We examine the firm's choice between an SEO and a PIPE, an innovation in follow-on equity selling mechanism seen in the late 1990s. Our primary finding indicates that the rapid rise of the PIPE market fills the capital needs of firms which may not have access to more traditional alternatives. This lack of access is driven mainly by information asymmetry and weak operating performance. We also show that firms are more likely to choose PIPEs when the general market and the firm's stock are performing poorly. Furthermore, we find that selected firms with access to the public market may prefer a PIPE due to specific cost considerations.

The current members of the Committee on Economic Statistics are Matthew Shapiro, University of Michigan (chair); Katharine Abraham, University of Maryland; Robert Feenstra, University of California–Davis; Dennis Fixler, Bureau of Economic Analysis; David Johnson, Census Bureau; Barbara Fraumeni, University of Southern Maine; Jonathan Parker, Northwestern University; Charles Schultze, Brookings Institution; Jack Triplett. The committee met by teleconference in January and September 2009. Katharine Abraham stepped down as chair of the Committee on Statistics early in 2009 in order to chair the newly established American Economic Association Committee on Government Relations. The Committee on Statistics is exceedingly grateful for her thoughtful and effective leadership during her tenure as chair. In January 2007, the Executive Committee voted to give the Committee standing authority to organize three sessions each year for inclusion on the program of the Association’s annual meeting. At its April 2008 meeting, the Executive Committee voted to allow the Committee to designate one session each year for publication in the annual Papers and Proceedings volume. For the January 2010 meeting, the Committee circulated a call for papers on the measurement of intangibles, trade in services, and other economic measurement topics. The following three sessions are included in the program of the January 2010 meeting: “Measuring Intangible Capital,” “Measuring Labor and Wage Dynamics with Administrative Data,” and “Measuring Cognition and Linking it to Economic Outcomes.” Details of the sessions are given in the Table. The call for papers for the 2011 session solicits submissions related to the statistical issues arising from the financial crisis and potential changes in financial regulations, markets, and institutions in addition to any topics related to economic statistics. American Economic Association Committee on Statistics (AEAStat)

Blonigen and Haynes (2002) calculated that pass-through of antidumping duty estimates to U.S. pricing of 200% would be required to eliminate potential antidumping duties. However, this calculation was based on an error in interpretation of U.S. antidumping practice, that antidumping duties themselves are subtracted in an antidumping calculation. In fact there is no such subtraction, and a pass-through of 100% theoretically suffices to eliminate potential antidumping duties

This paper examines the impact of the current financial crisis on long-term US Treasury yields by testing the impact of a series of events from December 2007 to March 2009 on the spread between 10-year USD LIBOR swap and 10-year US Treasury (constant maturity) rates to measure risk associated with Treasuries. Controlling for the liquidity of the two markets, the default risk of the swap, and the net foreign purchases of Treasury securities, we find that 13 of the tested 20 events have significantly negative coefficients. We conclude that the lower spread is consistent with greater default risk for US Treasury securities.

We investigate the role of long-term debt in influencing overinvestments by analyzing the pattern of abnormal investments around a new debt offering by unlevered firms. Before being levered when the disciplining role of debt is missing, firms retain excessive amounts of cash. The introduction of debt leads to a dramatic decline in cash ratios and the relation is stronger for firms classified as having poor investment opportunities. For the sub-sample of firms that overinvest in real assets, issuing debt leads to a reduction in abnormal capital expenditures. The decline in overinvestments is explained by debt service obligations that reduce discretionary funds under managerial control. Further, the reduction in overinvestments has a positive impact on equity value. These conclusions hold in other settings where there is a dramatic change in firms’ capital structures providing strong support for the hypothesis that debt reduces overinvestments.