This paper shows that job mobility is a valuable channel that employed workers use to mitigate bad labor market shocks. I estimate a model of wage dynamics jointly with a dynamic model of employment and job mobility. The key feature of the model is the specification of wage shocks at the worker-firm-match level, for workers can respond to these shocks by changing jobs. I find that, relative to the variance of individual-level shocks, the variance of match-level shocks is large and the consequent value of job mobility is substantial, particularly for workers whose match-specific wages are low.

Most studies consider chief executive officer (CEO) turnover from the firm's perspective. In this paper, I suggest that the labor market conditions for CEOs affect turnover outcomes. I use CEOs' positions on corporate executive and director networks to assess their employment options. Controlling for performance, firm characteristics, and personal traits, I find that CEO connectedness significantly increases turnover probability, especially for poor performers. I also show that connectedness increases the likelihood of CEOs leaving for other full-time positions, or their retiring and taking part-time positions elsewhere, but does not have a significant effect on the likelihood that they will step down and remain with the firm in other capacities. The evidence supports the idea that a CEO's connectedness expands outside options and thus increases turnover probability.

Abstract Contrary to the prediction of the standard portfolio diversification theory, many investors place a large fraction of their stock investment in a small number of stocks. I show that underdiversification may be caused by solvency requirements. My model predicts that for quite general preferences and return distributions: (1) underdiversification decreases in discretionary wealth; and (2) expected return and covariance determine which stocks to invest in, but variance, higher moments, and Sharpe ratio do not matter for this choice. In addition, a less-diversified stock portfolio has a higher expected return, a higher volatility, and a higher skewness, and idiosyncratic risks are priced.

Despite significant interest in corporate culture, there is little empirical research on its role in influencing corporate misconduct. Using cultural background information on key company insiders, I construct a measure of corporate corruption culture, capturing a firm's general attitude toward opportunistic behavior. Firms with high corruption culture are more likely to engage in earnings management, accounting fraud, option backdating, and opportunistic insider trading. I further explore the inner workings of corruption culture and find evidence that it operates both as a selection mechanism and by having a direct influence on individual behavior.

We model the interplay between trade in the interbank market and creditor runs on financial institutions. We show that the feedback between them can amplify a small shock into "interbank market freezing" with "liquidity evaporating." Credit crunches of the interbank market drive up the interbank rate. For an individual institution, a higher interbank rate — meaning a higher funding cost — results in more severe coordination problems among creditors in debt rollover decisions. Creditors thus behave more conservatively and run more often. Facing an increased chance of creditor runs, institutions demand more and supply less liquidity, tightening the interbank market.

[This study examines takeover bidding contests in which privately informed bidders have incentives to signal high values to uninformed investors through their bids. Such incentives could arise in a large number of situations from financing and managerial concerns. The findings show that the dynamic nature of the takeover contests plays a critical role in the signaling process, allowing bidders to signal high values in two ways. Such signaling bears important consequences on the bids, the allocative efficiency, the target's and bidders' profits, as well as the winner's post-takeover stock price performance and volatility.]

[In this article, I explicitly solve dynamic portfolio choice problems, up to the solution of an ordinary differential equation (ODE), when the asset returns are quadratic and the agent has a constant relative risk aversion (CRRA) coefficient. My solution includes as special cases many existing explicit solutions of dynamic portfolio choice problems. I also present three applications that are not in the literature. Application 1 is the bond portfolio selection problem when bond returns are described by "quadratic term structure models." Application 2 is the stock portfolio selection problem when stock return volatility is stochastic as in Heston model. Application 3 is a bond and stock portfolio selection problem when the interest rate is stochastic and stock returns display stochastic volatility.]

Abstract Many developing economies adopt industrial policies favoring selected sectors. Is there an economic logic to this type of intervention? I analyze industrial policy when economic sectors form a production network via input-output linkages. Market imperfections generate distortionary effects that compound through backward demand linkages, causing upstream sectors to become the sink for imperfections and have the greatest size distortions. My key finding is that the distortion in sectoral size is a sufficient statistic for the social value of promoting that sector; thus, there is an incentive for a well-meaning government to subsidize upstream sectors. Furthermore, sectoral interventions’ aggregate effects can be simply summarized, to first order, by the cross-sector covariance between my sufficient statistic and subsidy spending. My sufficient statistic predicts sectoral policies in South Korea in the 1970s and modern-day China, suggesting that sectoral interventions might have generated positive aggregate effects in these economies.

Abstract This article examines the benefits of corporate bond diversification for U.S. investors. Analysis of a newly compiled bond-level data set for 2000–2010 finds that diversification with corporate bonds can significantly reduce volatility and increase risk-adjusted returns for U.S. investors. Unlike diversification with equities, corporate bonds offer significant out-of-sample risk reduction, particularly during the recent financial crisis. Risk-reduction gains are large even when the benchmark includes international equities or when longer samples of equities and sovereign bonds are used to inform corporate bond returns. Finally, significant risk-reduction gains remain after accounting for bond characteristics, liquidity, and informational costs.