We study human capital reallocation following firm-specific idiosyncratic shocks. We analyze relegation battles in the English Premier League, a setting that offers well-identified idiosyncratic shocks as well as both individual-level and firm-level productivity metrics. Following a negative idiosyncratic shock, we find that relatively more productive players move to more productive clubs and maintain their long-term productivity. They get replaced with lower productivity players. Overall, our results show that in a setting with highly transferable and observable skills, idiosyncratic shocks lead to a reallocation of human capital that moves the industry toward a better overall match between individual-level and firm-level productivity. (JEL G31, G32, G33, J24)

I document that the network structure of the online economy significantly contributes to rising industry concentration. Firms that are central in the online economy benefit more from increased economies of scale, decreased search costs, and network effects resulting from digitalization. Industries with firms that are more central become more concentrated and central firms have larger increases in market share. These results are driven by firms’ ability to generate revenue, as evidenced by central firms earning higher risk-adjusted returns and having more positive earnings surprises. Centrality is also associated with increasing productivity, but profitability only increases for central firms in business-to-consumer industries.

Using a novel typology of serial acquirers, we examine several puzzles documented in the prior literature. We show that acquisitions by different types of acquirers are driven by different factors, they acquire different sizes of targets, and subsequent acquisitions by acquirers are predictable ex ante. Controlling for market anticipation, the most frequent serial acquirers do not earn declining returns as they continue acquiring, while less frequent acquirers do. Our methodology enhances our understanding of serial acquisition dynamics, anticipation, and economic value adjustments. The methodology is likely to be relevant to topics related to event anticipation beyond those covered in this study. (JEL G14, G34, G35)

We estimate the effect of the spring 2023 failures of Silicon Valley Bank and Signature Bank on the “connectedness” of US bank stock return volatilities using the forecast error variance decomposition framework of Diebold and Yilmaz (2012, 2014) and Lastrapes and Wiesen (2021). Using split-sample and time-varying VAR methods, we find that those failures significantly increased spillovers across a sample of surviving regional banks, but had only small and temporary effects on spillovers across systemically important too-big-to-fail banks. Our main findings imply that regulatory policy toward systemically important banks has been credible but that additional oversight of regional banks should be considered.

Discretionary income smoothing has been argued to increase bank opacity and degrade financial system stability by making banks more difficult to monitor. However, no direct empirical association between discretionary smoothing and opacity has been established to date. We argue that smoothing could reflect either the opportunistic exercise of discretion that disconnects loan loss provisions (LLPs) from changes in underlying credit quality, consistent with smoothing increasing opacity, or an informative exercise of discretion to communicate forward‐looking information about loan losses. We examine the association between discretionary smoothing and the informativeness of LLPs for a sample of banks from 1994 to 2019 and find that discretionary smoothing is, on average, associated with more informative LLPs. However, this association is nuanced, with cross‐sectional differences and changes over time. We find evidence that an intervention by the SEC into bank LLP practices in the late 1990s curbed opportunistic smoothing via provisioning for homogeneous loans. Subsequently, smoothing is associated with more informative provisions, including for banks with both more homogeneous and more heterogeneous loan portfolios. Our findings are inconsistent with the notion that smoothing may be associated with greater opacity.

We exploit staggered real estate transaction tax (RETT) hikes across German states to identify the effect on the growth rates of regional house prices and outstanding mortgage loans by all local German banks. The results show that a RETT hike by one percentage point reduces regional house prices by 3%–4%. Furthermore, IV-regressions yield that a 1 percentage point drop in regional house prices induced by a RETT increase leads to a 0.3% decline in regional mortgage lending, particularly among low-capitalized banks in rural regions.

Using VAR and Local Projections models, enhanced with macroeconomic factors and monetary policy shocks, we investigate the underlying mechanisms through which the Fed’s and ECB’s react to bank reactions of geopolitical risks between January 1994 and March 2024. Our findings reveal that central banks react to geopolitical risk events by tightening monetary policy to fend off potential inflationary pressures. However, the effect is often temporary, as policymakers typically adopt accommodative measures during economic expansions and shift to tighter policies during contractions. Analyzing reactions based on central bank presidents' tenures, we find that while earlier responses were limited, in recent years, both central banks have reacted more strongly and immediately, reflecting their growing concern over geopolitical risks. Furthermore, we document that the Fed adopted a more accommodative stance in response to bilateral geopolitical risk shocks between the US and China, driven by changes in capital flows and trade activities. In contrast, the ECB’s responses were more consistently contractionary, particularly in periods of heightened inflation concerns or when geopolitical tensions threatened price stability within the euro area.

Dividends are clustered in increments of 5, such as 25, 50, and 75. Firms that gravitate towards these ‘prominent’ amounts have lower operating performance and lower annual five-factor alphas of 77 b.p. Consistent with agency frictions that lead to lazy decisions, clustering effects are stronger for entrenched firms, with more market power, and less shareholder activism. Dividend increases also cluster more than cuts, consistent with saliency bias. In a counterfactual exercise, we find no similar patterns in a sample of ADRs. Our results complement a number of recent studies showing the economic importance of simple decision heuristics.

We provide an economics-based review of the pros and cons of ESG disclosures, emphasizing environmental disclosures from an investor-centric perspective. Our survey intends to guide corporate management and regulators in navigating the ESG disclosure terrain. Rather than summarizing the vast and growing ESG literature, we assess the economic arguments for ESG disclosure regulation and the form of this disclosure. We discuss investors’ demand for ESG information and its supply by publicly traded firms. We analyze the case for and against mandatory ESG disclosure. Finally, we weigh the efficiency of disclosure requirement characteristics, assuming mandatory ESG disclosure is warranted. We intend to be positive rather than prescriptive, providing a line of reasoning readers can employ to reach their own conclusions about what we ought to do.