Recent evidence indicates the value premium declined over time. We argue this decline happened because book equity, BE, is no longer a good proxy for fundamental equity, FE, defined as the present value of cash flows under a common discount rate across firms. Specifically, we estimate FE for public US firms over time and find that the premium associated with the fundamental-to-market ratio, FE/ME, subsumes the BE/ME premium and has been relatively stable while the cross-sectional correlation between FE/ME and BE/ME decreased over time, inducing an apparent decline in the value premium. We also show that FE/ME captures the value premium better than several alternative value signals beyond BE/ME.

This paper presents new evidence on performance persistence for U.S. private equity (buyout and venture capital) funds. We use high quality cash-flow data from Burgiss's large sample of institutional investors (as of December 2020) which allows us to examine how persistence has changed over more than three decades of fundraising. Venture capital (VC) performance remains remarkably persistent across funds raised by the same general partner (GP). In contrast, buyout funds' performance persistence becomes noticeably weaker over time. The patterns are different when we restrict the analysis to information that would have been available to investors – interim performance on the previous fund at the time a new fund is raised – rather than using final, or latest, performance. We find little evidence of persistence for buyouts, especially post-2000. We continue to find persistence for VC funds though it declines post-2000. The differences are driven by interim performance reported at the time of fundraising being only moderately correlated to final performance and GPs avoiding fundraising when interim performance is poor. Finally, we look at GPs who introduce new fund styles and find that performance is noticeably lower for buyouts (but not VC). Exploring the reasons for these divergent trends in persistence between buyout and VC is a promising area for future research.

We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones’ investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms.

We exploit a unique experiment, where the intraday price moves of Indian IPO listings are restricted within a narrow band, to examine the consequences of price bands for stock prices, investor trading behavior, and stock market liquidity. Based on difference-in-differences estimations, we find that price bands lead to a significant reduction in the price variability of IPO stocks. The decrease in variability is accompanied by increases in post-IPO selling by individual investors, the price impact of trades, and IPO expected returns. Bid-ask spreads remain similar. The findings provide new evidence on the effects of intraday price bands on equity markets.

A concern central to the economics of privacy is that firms may use consumer data to price discriminate. A common response is that consumers should have control over their data and the ability to choose how firms access it. Since firms draw inferences based on both the data seen as well as the consumer's disclosure choices, the strategic implications of this proposal are unclear. We investigate whether such measures improve consumer welfare in monopolistic and competitive environments. We find that consumer control can guarantee gains for every consumer type relative to both perfect price discrimination and no personalized pricing. This result is driven by two ideas. First, consumers can use disclosure to amplify competition between firms. Second, consumers can share information that induces a seller---even a monopolist---to make price concessions. Furthermore, whether consumer control improves consumer surplus depends on both the technology of disclosure and the competitiveness of the marketplace. In a competitive market, simple disclosure technologies such as "track / do-not-track'' suffice for guaranteeing gains in consumer welfare. However, in a monopolistic market, welfare gains require richer forms of disclosure technology whereby consumers can decide how much information they would like to convey.

Using a large sample of U.S. firms sponsoring defined benefit (DB) plans, we examine the impact of pension risk on firms’ cash management decisions. We document a positive curvilinear relationship between pension risk and cash holdings, finding that cash holdings by firms with high pension risk dramatically increase as their pension risk increases. However, this relationship appears only in the case of financially unconstrained firms, which suggests that the incentives to hedge against pension risk are only relevant when such risk is manageable. These results hold across different specifications, as well as when using several tests to address the potential endogeneity issue. We conduct multiple tests to examine alternative explanations of the findings, and we find that our results are mainly explained by the hedging incentives against pension risk and that the excess cash held by firms with higher pension risk is realized in a higher marginal value of cash.

We find that CEOs with more favorable surnames receive significantly higher compensation. The estimated effect of surname favorability is unique and incremental to the documented effects of various firm, board, and CEO characteristics. CEOs with French or German surnames receive significantly lower compensation after the French and German governments' opposition to the Iraq war. Surname favorability is not associated with corporate investments, disclosure policies, or firm performances. The results are more pronounced for professional (i.e., non-founder) or short-tenured CEOs and for firms with lower institutional ownership. Surname favorability reduces the likelihood of forced CEO turnover following poor stock performance but is not associated with a CEO's self-serving behaviors. Our results suggest that the effect of surname favorability is attributable to inefficient contracting by the board of directors. Our findings have implications for corporate stakeholders who have committed to the efficient contracting of CEO compensations.

In a rich, calibrated life-cycle model, we show that well-designed mandatory pension plans significantly improve the welfare of individuals procrastinating on savings, and even improve most rational individuals’ welfare through a return tax advantage and fair annuitization. For a group of heterogeneous savers, in terms of preferences and sophistication, the best plan has contributions of 10% of income from age 30, a glidepath investment strategy, payouts following a variable lifelong annuity, and options to choose a different investment strategy and to modify the annuitization feature. This plan generates an average welfare gain of $175,000 per individual.

We investigate how lender default shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, especially to borrowers with pre-existing relationships, leading to a reduction in real investment for all borrowing firms. The decline in investment is more pronounced when agency problems with creditors like asset substitution and claim dilution are higher. Moreover, the decline in investment is not attributable to more frequent covenant violations or to market conditions. The evidence highlights the role of supply-side frictions through the asset side of lenders’ balance sheets on corporate investment and how agency problems may act as mechanisms.