Anti-recharacterization laws significantly increase the rights of securitization creditors by allowing the buyers of securitized assets to exclusively and immediately seize collateral in bankruptcy. However, strengthening the rights of securitization creditors can limit other creditors’ ability to recover loans. We find that, after a state adopts an anti-recharacterization law, local banks operating in the same state accrue more loan loss provisions, tighten their loan contracts, and incur higher future loan charge-offs. These findings are consistent with the argument that a safe harbor for securitization transactions advantages Wall Street-style structured finance at the expense of Main Street-style lending.

This paper investigates the impact of higher education on corporate innovation. To establish causality, we exploit a policy-induced exogenous shock in the supply of Chinese college-educated labor starting in 2003. Using a difference-in-differences approach, we find that Chinese firms in skilled industries generate better innovation outcomes as measured by patents and citations than those in unskilled industries. This effect is more pronounced among firms headquartered in a province with more science and engineering college graduates, young firms that are more likely to hire young graduates, and firms located near universities. Moreover, higher education expansion increases a firm's innovative human capital in terms of the number of educated employees and inventors. Finally, we show that technological innovation is a mechanism through which higher education affects productivity growth and, thus, the economy.

This paper investigates the impact of rank-and-file employees on corporate innovation. We show that paying higher relative wages to rank-and-file employees promotes better innovation outcomes in terms of patent quantity and quality. This effect is more significant among firms with large proportions of skilled employees, industries with high levels of R&D intensity, provinces with competitive local labor markets, and non-SOEs. Further analyses reveal that efficiency wages can serve as an underlying economic channel that fosters innovation by retaining and attracting valuable human capital and stimulating their working enthusiasm. Finally, we show that technological innovation is a mechanism through which rank-and-file employees affect productivity growth and thereby affect the economy.

This study assesses a new mechanism, the deposit channel, in the transmission of interest rate shock to household consumption using an administrative panel data set of financial transactions for Turkey. Our empirical strategy exploits variation in consumers' adherence to the Islamic laws that forbid earning interest and employs a standard difference-in-difference design. Following an unanticipated announcement of interest rate hike, rate-sensitive consumers significantly reduce their overall spending, and the response persists throughout the post-announcement period. The response of debt payment, disparate exposure to inflation, exchange rate, and the demographic difference can hardly fully account for the documented consumption response heterogeneity.

Gender gap can arise due to various factors—socio-economic, culture, risk attitudes, and macro-economic circumstances. Using a unique dataset that merges motor vehicle events with bankruptcy outcomes and personal data from Singapore, this study finds significant evidence of a gender gap in personal bankruptcy risk. We show that women’s odds of being involved in bankruptcy events are 28% of those of men after controlling for demographic variables, housing type, cultural and spatial fixed effects. Using motor vehicle accidents as an instrument, we confirm that the gender gap in bankruptcy risk is mainly driven by risk-taking behavior. The heterogeneity analyses show that culture also explains part of the difference. Chinese, Indian, and Malay women have differential bankruptcy rates in Singapore.

This paper adopts a novel approach to examine the roles of gender difference and intra-household economic power in mortgage signing order. We develop an “economic power” index based on relative economic power within the same-sex couple households. We then use this measure along with gender identity and other factors to explain signing order in different-gender couples. Our results suggest that, while pure economic power explains much of the observed signing order, gender difference plays an important role. Analysis exploiting regional variation reveals that gender difference in signing order is greater in states with a larger gender wage gap and red states whose residents predominantly vote for the Republican.

We hypothesize that social trust, in mitigating contracting incompleteness, may have an important effect on the activeness and effectiveness of delegated portfolio management. Using a complete sample of worldwide open-end mutual funds, we find that trust is positively associated with the activeness of funds and that trust-related active share delivers superior performance (e.g., approximately 2% per year for cross-border investments). Moreover, “trust in the market” and “trust in managers” play important yet different roles for different types of cross-border delegated portfolio management. Our results suggest that trust acts as a fundamental building block for delegated portfolio management.

This paper investigates the effect of frictions in consumption taxes on firms' product mix decisions. We use a stacked difference-indifferences approach that exploits the staggered transition from a sales tax with the risk of tax cascading to a value added tax (VAT) with credits on inputs across states in India, as well as detailed data on listed manufacturing firms' production decisions. We find that the switch to a VAT system induces affected firms to narrow their product scope and to reduce vertical integration. That is, firms cut the internal production of input goods and instead focus their production on their best-performing products. Firms affected by the switch to VAT reduce their firm size and are more likely to outsource production of input goods. We also show that this vertical disintegration results in lower manufacturing costs, higher profitability and firm value, and increased investment efficiency for affected firms. Overall, the paper shows that alleviating frictions in sales tax or VAT systems can reduce investment and productivity distortions and improve the allocation of capital across firms.