I construct an informationally robust auction to sell a common‐value good. I examine the revenue guarantee of an auction over all information structures of bidders and all equilibria. As the number of bidders gets large, the revenue guarantee of my auction converges to the full surplus, regardless of how information changes as more bidders are added. My auction also maximizes the revenue guarantee when there is a single bidder.

The extant literature suggests that one of the main causes of the recent financial crisis was the excessive use of short-term debt by banks. Using a large sample of banks, we find that increases in repurchase agreements (repos) were recognized by external capital markets to increase bank risk in the pre-crisis period. In the crisis, we find a negative relationship between repos and risk. We attribute this result to evidence suggesting that “good” banks were able to continue funding their repos, whereas “bad” banks had to significantly decrease their repo funding.

This paper studies how peer performance affects firms’ earnings management decisions. Using peer firms’ idiosyncratic returns as an exogenous peer performance measure and the instrumental variable approach, we find that higher peer performance leads to higher discretionary accruals. This effect is salient for both industry leaders and followers and is robust to alternative discretionary accrual measures and alternative peer definitions. We examine two mechanisms through which peer performance affects firms’ earnings management. We find that analysts revise their earnings forecasts according to peer performance and that when peer performance is higher, firms are less likely to meet or beat analyst consensus without managing earnings. This evidence suggests a capital market pressure mechanism. In addition, the effect of peer performance is more pronounced in firms using relative performance evaluation, suggesting a compensation pressure mechanism. In sum, our evidence suggests that managers report opportunistically to match peer performance.

We find that deviations from the covered interest rate parity (CIP) condition imply large, persistent, and systematic arbitrage opportunities in one of the largest asset markets in the world. Contrary to the common view, these deviations for major currencies are not explained away by credit risk or transaction costs. They are particularly strong for forward contracts that appear on banks' balance sheets at the end of the quarter, pointing to a causal effect of banking regulation on asset prices. The CIP deviations also appear significantly correlated with other fixed income spreads and with nominal interest rates.

This paper examines the informational role of equity options trading around Federal Open Market Committee (FOMC) announcements. We find that information contained in option trades prior to FOMC rate change announcements, measured as implied volatility spread, predicts bank stock returns to a greater degree than does volatility spread prior to non-meeting days. We examine U.S. banks due to their interest rate sensitivity; however, we also show that return predictability around rate changes is reliably stronger in all firms, across all industries that are more interest rate sensitive. We find that return predictability is primarily driven by surprise changes in interest rates that occur during meetings with high degrees of information asymmetry. Finally, we document that volatility spread impounds information about FOMC meetings before that information is reflected in stock prices; this effect is significantly greater during surprise events, suggesting that the options market is an important source of informed trading.

This study investigates how adopting new performance measures affects the decision process through which supervisors make subjective adjustments. In our setting, the Chinese government substituted economic value added (EVA) for return on equity (ROE) in the performance score formula it uses to evaluate State-Owned Enterprises (SOEs). In accordance with the Chinese government's objective to increase the capital efficiency of SOEs, supervisors shifted the weight in subjective adjustment decisions from ROE to EVA after EVA adoption. Consistent with EVA adoption creating fairness concerns, however, supervisors did not penalize SOEs for performing poorly on EVA when they performed well on ROE, and accomplished this by shifting the weight from EVA back to ROE. Additional analyses suggest that personal preferences motivated supervisors to make these lenient subjective adjustments. Overall, our findings indicate that adopting new performance measures creates fairness concerns that motivate supervisors to consider their personal preferences in subjective adjustment decisions.