The 2020 COVID-19 crisis can spur research on firms' corporate finance decisions and their macroeconomic implications, similar to the wave of important research on banking and household finance triggered by the 2008 financial crisis. What are the relevant corporate finance mechanisms in this crisis? Modeling dynamics and timing considerations are likely important, as is integrating corporate financing considerations into modern quantifiable macroeconomics models. Recent empirical work, including articles in this special issue, on the drag from debt in the COVID-19 crisis provides a first glimpse into the new research agenda.

Abstract We analyze the relationship between asset price bubbles and systemic risk, using bank-level data covering almost 30 years. Banks’ systemic risk already rises during a bubble’s buildup and even more so during its bust. The increase in risk strongly differs across banks and by bubble. It depends on bank characteristics (especially bank size) and bubble characteristics and can become very large: in a median real estate bust, systemic risk increases by almost 70% of the median for banks with unfavorable characteristics. These results emphasize the importance of bank-level factors in the buildup of financial fragility during bubble episodes. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Abstract This paper finds noninterest income is positively correlated with the total systemic risk for U.S. banks. Decomposing total systemic risk into three components, we find that noninterest income is positively related to a bank’s tail risk, positively related to a bank’s interconnectedness risk, and an insignificantly related to a bank’s exposure to macroeconomic and finance factors. We also find that noninterest income is more volatile and negatively related to interest income. Finally, we find trading and other noninterest income to be positively correlated with systemic risk. Other noninterest income, compared with trading income, has a slightly larger economic impact. (JEL G01, G18, G20, G21, G32, G38) Received October 31, 2019; editorial decision February 3, 2020 by Editor Andrew Ellul.