Jonathan H. Adler of William and Mary Law School reviews “The Chevron Doctrine: Its Rise and Fall, and the Future of the Administrative State” by Thomas W. Merrill. The Econlit abstract of this book begins: “Explores the standard that courts apply in determining whether an administrative agency has correctly interpreted the statute under which it operates, delving into where this standard – the Chevron doctrine – came from, how it spread, and arguments over its adequacy.”

When measured using trade-time aggregation, intraday patterns in trading activity remain ∪ -shaped, but estimates of volatility and Kyle’s lambda fall sharply from open to close. ∪ -shaped patterns in volatility and Kyle’s lambda found using commonly-used calendar-time aggregation reflect over-aggregation biases when trading activity is high as near the open and close. Indicative of imperfectly-competitive liquidity provision, trade-time aggregation also reveals that in active markets, expected trade imbalances are positively priced and unexpected trade imbalances are more strongly priced when they share the sign of expected imbalances, while in less active markets expected trade imbalances are negatively priced. • When properly measured using trade-time aggregation, intraday patterns in trading activity are ∪ -shaped, but estimates of volatility and Kyle’s lambda fall sharply from open to close. • ∪ -shaped patterns in volatility and Kyle’s lambda found using commonly- used calendar-time aggregation reflect over-aggregation biases when trad- ing activity is high as near open and close. • Contrary to competitive liquidity provision, in active markets returns per- sist, expected trade imbalances are positively priced and unexpected trade imbalances are more strongly priced when they have the same sign as ex- pected imbalances. • In further contrast to competitive liquidity provision, in less active markets prices revert and expected trade imbalances are negatively priced.

We demonstrate that a persistent pattern exists in the evolution of the MTB ratio from 1999 to 2023, wherein firms with high (low) MTB ratios tend to maintain those levels over time. The persistence of the MTB ratio is independent of industry effects and cannot be well explained by accounting performance. Intangible investment plays a crucial role in determining the MTB ratio, and its persistence is primarily maintained through continued internal intangible investment rather than external mergers and acquisitions. Moreover, although U.S. firms have increased their investment in intangible assets over the past 25 years, the gap between high- and low-MTB firms in intangible investment has widened. Our results suggest that the basis of stock value has shifted from tangible to intangible investments over time.

Research concludes that managers’ political orientation influences their decision-making and offers the political connections and risk tolerance hypotheses as explanations. We investigate partisan bias as an additional way political orientation may influence managers’ decisions. Partisan bias results in individuals whose partisan orientation aligns with that of the US president expressing more optimistic economic expectations. We examine whether partisan bias is present in managers’ annual earnings forecasts. We find that firms with CEOs whose partisanship aligns with that of the US president issue more optimistically biased annual earnings forecasts than firms with other CEOs. Higher-ability CEOs, however, are less susceptible to partisan bias. Additionally, we find that overestimating customer demand contributes to the forecast over-optimism of partisan-aligned CEOs and results in greater firm overinvestment. Furthermore, investors fail to discount the news in forecasts of partisan-aligned CEOs, and their firms’ post-forecast abnormal returns are lower.

Abstract …is “should I buy any?”. Under Bayesian portfolio theory, ongoing zero weights in cryptocurrency are surprisingly difficult to generate. With 10 years of prior data, equity investors would need very pessimistic priors on mean returns to never buy cryptocurrency: −10.6 percent per month for Bitcoin, and −19.6 percent for a diversified cryptocurrency portfolio. Most priors that involve never purchasing cryptocurrency imply shorting it. Optimal weights are generally small, non-trivial (1–5 percent magnitude), frequently positive, and smooth. The certainty equivalent gains from cryptocurrency are comparable to international diversification and prominent anomaly portfolios. Costs (storage and fees) would need to exceed 21–39 percent annually to deter trading.

Auditors at all ranks should be skeptical when searching for information throughout audits. However, we lever domain learning theory from educational psychology to posit that their skepticism unlikely develops evenly across ranks, but rather depends on a supportive learning culture, a construct from the management literature. To test that perceived learning culture moderates the association between auditor rank and skeptical information search, we use a laboratory study with 166 Dutch auditors at a Big 4 firm and follow-up interviews with seven top leaders of that firm. A more supportive perceived learning culture is associated with more skeptical information search, but only in audit managers and partners - not in associates and seniors. Interviewees attribute this pattern to values acquired over time through socialization, role expectations, knowledge development, and wider task characteristics.

The change in the cost of capital that results from a divestiture strategy can be closely approximated by a simple function of three parameters: (1) the fraction of socially conscious capital, (2) the fraction of targeted firms in the economy and (3) the return correlation between the targeted firms and the rest of the stock market. When calibrated to current data, we demonstrate that the impact on the cost of capital is too small to meaningfully affect real investment decisions. We then derive the conditions that would be required for the strategy to have a meaningful impact. We empirically corroborate our theoretical results by studying firm changes in ESG status and are unable to detect an impact of ESG divestiture strategies on the cost of capital of treated firms. Our results suggest that to have impact, instead of divesting, socially conscious investors should invest and exercise their rights of control to change corporate policy.

Utilizing a unique and novel setting of disclosure mandate threshold under Regulation AB (Reg AB), we investigate the relationship between disclosure and trust in asset securitization. Post-Reg AB enactment, we observe a significant bunching of originators just below the disclosure threshold. Less trustworthy originators are more likely to adjust their portfolio sizes to remain below this threshold, particularly when loan originators and deal sponsors are unaffiliated, which are cases in which disclosure plays a greater role in reducing information asymmetry. Additionally, these originators are more likely to misrepresent loan quality. Our findings reveal a strong relationship between disclosure and trust—trustworthy originators disclose more and originate higher-quality loans, while less trustworthy originators disclose less and produce lower-quality loans.

We examine the relations between recent board declassifications, takeover activity and takeover gains over the period 2003–2014. We report that firms that declassified their boards in the previous five years are more likely to be a takeover target compared to firms whose boards remain classified. We also report that, once targeted, these firms receive lower takeover premiums and realize lower abnormal returns around the announcement of the transaction. Finally, we find that these firms obtain a smaller share of abnormal dollar merger gains. These results are consistent with the interpretation that firms that declassified their boards have lost some bargaining power in negotiating M&A transactions.