ABSTRACT The relation between investment bank reputation and the price and quality of bond underwriting services is studied here. After controlling for endogeneity in issuer–underwriter matching, I find that reputable banks obtain lower yields and charge higher fees, but issuers' net proceeds are higher. These relations are pronounced in the junk‐bond category, in which reputable banks' underwriting criteria are most stringent. These findings suggest that banks' underwriting decisions reflect reputation concerns, and are thus informative of issue quality. They also suggest that economic rents are earned on reputation, and thereby provide continued incentives for underwriters to maintain reputation.

We propose a novel and easy-to-implement approach to detect potential overbilling based on the hours worked implied by the service codes which physicians submit to Medicare. Using the Medicare Part B Fee- for-Service (FFS) Physician Utilization and Payment Data in 2012 and 2013 released by the Centers for Medicare and Medicaid Services, we construct estimates for physicians' hours spent on Medicare beneficiaries. We find that about 2,300 physicians, representing about 3 percent of those with 20 or more hours of Medicare Part B FFS services, have billed Medicare over 100 hours per week. We consider these implausibly long hours.

We develop a top-down macro stress test that assesses a community bank's ability to withstand a severe and prolonged period of high credit losses. The model groups banks by geography and subjects them to the 90th percentile chargeoff rates that banks experienced between 2008 and 2012. Because of local data limitations, our historical loss approach better reflects patterns of community bank stress than a linear econometric approach that estimates the relationship between macroeconomic conditions and bank performance. We put all U.S. community banks at year-end 2017 through the test and highlight two results. First, banks are much better prepared to withstand an adverse shock than they were on the verge of the financial crisis because banks have shifted away from the riskiest loan types. Second, the Tax Cuts and Jobs Act of 2017 has increased bank insolvency risk from an adverse shock in 2018 because the higher bank capital is more than offset by the weaker automatic stabilizer effect from operating losses.

We show that fund families allocate their most skilled managers to market segments in which manager skill is rewarded best. In efficient markets, even skilled managers cannot generate excess returns. In less efficient markets, skilled managers can exploit inefficiencies and generate higher performance than unskilled managers. Fund families seem to be aware of the relation between skill, efficiency, and performance, and allocate more skilled managers to inefficient markets. They pursue this strategy when hiring new fund managers and when reassigning managers to funds within the family. Overall, we conclude that fund families allocate fund managers in an efficient way.

Uncompetitive contests for grades, promotions, retention, and job assignments, which feature lax standards and limited candidate pools, are often criticized for being unmeritocratic. We show that when contestants are strategic, lax standards and exclusivity can make selection more meritocratic. When many contestants compete for a few promotions, strategic contestants adopt high-risk strategies. Risk-taking reduces the correlation between performance and ability. Through reducing the effects of risk-taking, “Peter principle” promotion policies, which entail promoting some contestants that are unlikely to be worthy, can increase the overall correlation between selection and ability and thus further meritocracy.

We present and empirically implement an equilibrium labor market search model where risk-averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. We use our estimated model to evaluate the equilibrium impact of many health care reform proposals, including the 2010 Affordable Care Act (ACA). We use the estimates of the early impact of the ACA as a model validation. We find that income-based subsidies for health insurance premiums are crucial for the sustainability of the ACA, while the ACA can still substantially reduce the uninsured rate without the individual or the employer mandate.

Using finite mixture models, we find that financial distress is related to realized return negatively (positively) for one (the other) latent group. The negative (positive) relation concentrates in firms with large negative (positive) realized return; the likelihood for a firm to be in the latent group with a positive relation is negatively related to its price-to-value ratio estimate and mispricing score, both of which measure relative mispricing. The mispricing-correction component of realized return is negative (positive) for overvalued (undervalued) firms and decreases (increases) with corrected overvaluation (undervaluation). Overall, our findings are consistent with the view that mispricing—undervaluation and overvaluation—is larger for firms with higher financial distress. Evident in our findings, an overall negative relation between financial distress and realized return is driven by the negative relation between financial distress and the mispricing-correction component for overvalued firms and, therefore, it is not at odds with the risk-reward paradigm. • The relation between distress and realized return is positive (negative) for undervalued (overvalued) firms. • The negative overall relation between distress and realized return does not contradict the risk-reward paradigm. • Zhuo (June) Cheng acknowledges financial support from Hong Kong SAR Research Grants Council, China (#15506018).

This paper takes advantage of the dynamic nature of institutional reforms in transition economies and explores the causal effects of those reforms on bank risk. Using a difference-in-difference approach, we show that banks’ financial stability increases substantially after these countries reform their legal institutions, liberalize banking, and restructure corporate governance. We also find that the effects of legal and governance reforms on bank risk may critically depend on the progress of banking reforms. A further examination of alternative risk measures reveals that the increases in financial stability among banks mainly come from the reduction of asset risk. Banks tend to have lower ROA volatility and fewer nonperforming loans after reforming the institutional environment. Finally, we split our sample into foreign and domestic banks and find that the enhancement of financial stability is more pronounced for domestic banks.

Understanding the nature and sources of human identity is an important objective in the study of a variety of social problems. Scholarly and popular writing on the cultural determinants of economic disadvantage underscores this point. Some analysts (e.g., Edward Banfield, 1970; Thomas Sowell, 1994; John McWhorter, 2000; John Ogbu, 2003) have hypothesized that a causal connection exists between the poor social performance of a group of people and their “culture.” That disadvantaged people harbor “dysfunctional” notions about identity has been offered as an explanation of a group’s welfare dependency, or its low academic proficiency. It has been said, for instance, that people fare poorly because they focus overly much on their own victimization, or because they disassociate themselves from their more successful fellows, and so on. At the root of such cultural criticism lies the presumption that the disadvantaged should “reform” themselves: If those people would only see themselves differently, the critics hint, they could be so much better off. This mode of social explanation easily accommodates racial overtones. With the present paper we intend to raise serious doubts about such normative criticisms of the poor when applied to their conceptions of identity. We show that the identities adopted by a group of people can be perfectly consistent with rational individual choices, even though feasible alternative configurations may exist under which everyone would be better off. Indeed, we argue that identity choice by interactive agents with ongoing economic relations has a “tragedy of the commons” quality about it: the profile of dominant strategies for the agents can yield a Pareto-inferior collective outcome. Preaching “identity reform” to such people is a bit like trying to counter an overfishing problem by lecturing fishermen on the moral need for forbearance! We wish to be explicit and clear at the outset about what we have in mind when using the term “identity.” Human identity includes both a personal and a social aspect. Social identity deals with how an individual is perceived and categorized by others (e.g., Erving Goffman, 1963). In contrast, personal identity, which is the subject of this paper, and which psychologists sometimes call “ego identity,” deals with a person’s answer to the question: “Who am I?” Our proposed model of personal identity posits that, to answer this question, an agent must provide a “narrative” about her personal history. That is, she has to summarize her life experiences. Because a full personal history is (necessarily) a very complex object, and since their cognitive capacities are limited, answering the “Who Am I?” question requires agents to project elaborate personal accounts onto manageable categories of self-description. We think of an agent’s identity as the mechanism she uses to convert complex personal history into a more simplified account of herself. A group’s “collective identity” is any self-representational mode of this sort which has been adopted in common by (most of) the agents in that group. We formalize the problem of selective selfrepresentation and use the resulting framework to study the efficiency implications of the “identity” choices people make. This, we believe, is one way that economic analysis can contribute to the study of identity-related issues.