Defense litigation counsel are retained by target firm management to defend them in mergers and acquisition (M&A) litigation. We use hand collected data from a ten-year period (2003−2012) to examine whether the choice of defense litigation counsel affects the outcome of M&A litigation and shareholder value. We construct league tables for defense litigation firms and identify the top 10 defense litigation firms. Comparing these firms with all other defense litigation firms, we find that top defense litigation counsel are involved in a significantly higher proportion of cash deals, non-same-industry deals (implying a lower possibility of antitrust-related concerns), and friendlier deals, all of which are associated with smaller initial takeover premium proposals. We find evidence that, controlling for endogeneity, top defense litigation counsel negotiate cheaper and faster settlements than other defense litigation counsel thereby protecting low premium deals from more serious challenges. We also show that top defense litigation counsel are more effective in multijurisdictional litigation cases, again obtaining cheaper and faster settlements in low premium deals, which we theorize shows that they are better able to handle the complexity and strategy that accompany these lawsuits.

Aggregate real wages exhibit less procyclicality than most macroeconomic models predict. We use 35 years of Current Population Survey data to confirm that the puzzling behavior of wages largely owes to changes in the composition of the employed over the business cycle. This composition effect relates to changes in both the number and the relative wage levels of those entering and exiting. The changing gap in wages of entrants and exiters is especially important for the unemployed. A large part of this wage gap is due to differences in average Mincer residuals between entrants and exiters.

We study the effect of a country's political freedom status on corporate payouts around the world. In both OLS and two-stage regressions, we find that firms in less free countries pay out more cash, suggesting that low political freedom is associated with a less friendly investment environment. Consistent with this view, we further find that firms reduce payouts when a country's political freedom status improves, while they tend to pay out past excess cash and cut future investment in the face of a deterioration in political freedom. In additional analysis, we also find that firms in less free countries do not pay out cash mainly to ease agency concerns: cash payouts in these countries are more volatile and hence less valuable.

We develop an almost affine term-structure model with a closed-form solution for factor loadings in which the spot rate and the risk price are fractionally integrated processes with different integration orders. This model is used to explain two stylized facts. First, predictability of longterm excess bond returns requires sufficient volatility and persistence in the risk price. Second, the large volatility of long-term bond returns requires persistence in the spot rate. Decomposing long-term bond returns, we find that the expectations component from the level factor is more volatile than returns themselves and that the risk premium correlates negatively with level-factor innovations.

We combine data on trade, production, and input use to document changes in the value-added content of trade between 1970 and 2009. The ratio of value-added to gross exports fell by roughly 10 percentage points worldwide. The ratio declined 20 percentage points in manufacturing, but rose in nonmanufacturing sectors. Declines also differ across countries and trade partners: they are larger for fast-growing countries, for nearby trade partners, and among partners that adopt regional trade agreements. Using a multisector structural gravity model with input-output linkages, we show that changes in trade frictions play a dominant role in explaining all these facts.

Using a database of daily institutional trades, we document that a majority of short-term institutional trades lose money. In aggregate, over 23% of round-trip trades are held for less than 3 months, and the returns on these trades average -3.91% (nonannualized). These losses are pervasive across all types of stocks, with the lowest returns occurring in small stocks, value stocks, and low-momentum stocks. Short-term trades lose more in more volatile markets. Across funds, the worst short-term returns accrue to funds that do the most trading, and there is no evidence of persistent skill or disposition effect in short-term institutional trades.

This paper establishes a new empirical fact: Mutual funds’ flow-performance sensitivity is a hump-shaped function of aggregate risk-factor realizations. Explanations based on extant theories can explain only a fraction of the pattern. We thus develop a new parsimonious model. It assumes Bayesian investors who are uncertain about the degree to which fund returns are exposed to systematic risk. Fund performance is then less informative about manager skill when factor realizations are larger in absolute value. The data also support the out-of-sample prediction that the hump shape is more pronounced for funds with more uncertain risk loadings.Received October 24, 2014; editorial decision October 11, 2016 by Editor Itay Goldstein.

Deleveraging risk is the risk attributable to investing in a security held by levered investors. When there is an aggregate negative shock to the availability of funding capital, securities with a greater presence of levered investors experience extreme return realizations as these investors unwind their positions. Using data on equity loans as a proxy for the degree of levered positions in a given stock, we find robust evidence of deleveraging risk. Stocks with a high degree of short selling experience large positive returns and a decrease in short selling around periods of funding capital scarcity.