We demonstrate that predictable uninformed cash flows forecast aggregate market stock returns. Buying pressure from dividend payments (announced weeks prior) predicts higher value-weighted market returns, with returns for the top quintile of payment days four times higher than the lowest. This holds internationally and increases when reinvestment is high and market liquidity is low. We estimate a market-level price multiplier of 1.9. These results suggest price pressure is a widespread result of flows, not an anomaly. (JEL G12, G14, G35)

When firms have discretion in valuing their balance sheet debt, how do they make this valuation decision given its impact on firm value? Firms make extensive use of operating leases, but unlike other types of debt, their balance sheet value is set by the firm. Using novel information on operating leases, we examine firm behavior in valuing these leases. We find that 20% of firms report higher-than-expected rates, reflecting their cost of unsecured rather than collateralized borrowing. These firms have poor information quality, operate in competitive markets, and understate lease and debt ratios by 15%.

Narcissism is a multifaceted personality trait that profoundly influences individuals' cognition, emotions, and actions. This study investigates the relationship between narcissistic CEOs and their engagement in opportunistic insider trading. Utilizing a quantitative measure of CEOs' narcissism derived from textual analysis, we find that CEOs with a higher level of narcissism engage in opportunistic insider trading more intensely. To mitigate endogeneity concerns, we employ various rigorous approaches, including matching, instrumental variable, Heckman's two-step sample selection model, and falsification tests. Through cross-sectional analysis, we find that the impact of CEOs' narcissism on opportunistic insider trading is more pronounced among CEOs with limited legal knowledge, facing weaker external and internal monitoring pressure, working at larger firms, and being male. In addition, we demonstrate that the insider trades of narcissistic CEOs are less profitable and less informative than those of non-narcissistic CEOs, as evidenced by subsequent stock performance.

Investment-financing maturity mismatches are common among firms worldwide, yet little is known about how government interventions can tackle them. This paper investigates China's Industry-Finance Cooperation Pilot Program as a quasi-natural experiment to examine whether, to what extent, and through what mechanisms government policies can address maturity mismatches. Using a multi-period difference-in-differences (DID) model and a sample of publicly listed A-share firms in China from 2014 to 2022, we find that the pilot program significantly reduces maturity mismatches by improving bank-firm information flows, reducing banks' concerns over moral hazard, and narrowing the term spread between short- and long-term interest rates. These findings provide empirical evidence that government policies can simultaneously tackle both supply and demand causes of maturity mismatches. Cross-sectional analyses reveal that the mismatch alleviation effect is strongest among non-state-owned enterprises, firms with low collateral availability, financially constrained firms, and those in highly competitive industries. Further, we find that alleviating maturity mismatches enhances firm stability, lowers financial distress, and improves market valuation, suggesting that these mismatches often reflect firms' “forced choices” rather than strategic preferences. Finally, analysis of bank-level data shows that the pilot program not only benefits firms but also reduces banks' credit and financial risks. Overall, this paper offers novel insights for policymakers by demonstrating how government interventions can improve corporate financing decisions while reducing systemic financial risks. It contributes to the broader corporate finance literature by highlighting the importance of credit availability in fostering financial stability and sustainable growth, particularly in emerging markets.

We develop a theory of monotone comparative statics for models with adjustment costs. We show that comparative‐statics conclusions may be drawn under the usual ordinal complementarity assumptions on the objective function, assuming very little about costs: only a mild monotonicity condition is required. We use this insight to prove a general Le Chatelier principle: under the ordinal complementarity assumptions, if short‐run adjustment is subject to a monotone cost, then the long‐run response to a shock is greater than the short‐run response. We extend these results to a fully dynamic model of adjustment over time: the Le Chatelier principle remains valid, and under slightly stronger assumptions, optimal adjustment follows a monotone path. We apply our results to models of saving, production, pricing, labor supply, and investment.

We exploit heterogeneity in decreasing returns to scale (DRS) parameters across mutual funds to analyze the importance of scalability for investors’ capital allocation decisions. We find strong evidence that steeper DRS attenuate flow sensitivity to performance. We calibrate a rational model of active fund management and show that a large fraction of cross-sectional variation in assets-under-management is due to investors anticipating the effects of scale on return performance. We conclude that DRS play a key role in achieving equilibrium in the intermediated investment management market.

We demonstrate that investment income taxes incentivize capital allocation to the ecofriendly green sector away from the non-ecofriendly brown sector in a stylized economy. This tax reduces the arrival intensity of climate disasters, delivers the socially optimal allocation, and can be jointly implemented with a carbon tax, expanding policymakers’ toolkit to reduce climate disasters. Extending the model with heterogeneous investors, we show that investment income taxes can obtain support from a political majority and thereby relax political constraints faced by a carbon tax alone.

ABSTRACT This article studies the effects of the largest residential racial desegregation initiative in U.S. history, the Gautreaux Assisted Housing Program. From the late 1970s to the 1990s, Gautreaux moved thousands of Black families into predominantly white neighborhoods to support racial and economic integration. We link historical program records to administrative data and use plausibly exogenous variation in neighborhood placements to study how desegregating moves affect children in the long run. Being placed in the predominantly white neighborhoods targeted by the program significantly increases children’s future lifetime earnings and wealth. These moves also increase the likelihood of marriage and particularly raise the probability of being married to a white spouse. Moreover, placements through Gautreaux affect neighborhood choices in adulthood. Those placed in predominantly white neighborhoods during childhood live in more racially diverse areas with higher rates of upward mobility nearly 40 years later.

We provide a new theory of exchange access fees that explains why fees relatively reduce the probability of execution and increase the limit order queue length on “maker-taker” platforms. Nonetheless, the limit order subsidy greatly improves market depth, together with market efficiency and trading volume. Moreover, fee structures never “wash out” regardless of the minimum tick. The regulatory requirement that trading and order flow depend only on raw (nominal) spreads and prices underpins the multi-billion-dollar subsidy to limit orders. So long as a platform remains competitive, elimination of the fee structure does not alter the raw spread, but it does lower the cum fee spread. We test these implications with a unilateral maker-taker fee/rebate reduction using NASDAQ's “quasi-natural” $1.9 trillion experiment to find support for our theory.

Although federal judges are the ultimate arbiters of insider trading enforcement, the role of their political ideology in insider trading is unclear. Using the partisanship of judges’ nominating presidents to measure judge ideology, we first document that liberal judges are associated with heavier penalties in insider trading lawsuits than conservative judges. Next, we find that firms located in circuits with more liberal judges have fewer opportunistic insider sales. Cross-sectional analyses show that this deterrent effect is stronger when managers face a higher risk of insider trading lawsuits. Finally, we find that the Securities and Exchange Commission considers judges’ ideology when selecting litigation forums.