This paper studies the country-level reaction of bank credit default swap (“CDS”) spreads and stock prices to bailout announcements in the US and five European countries in October 2008. Bailouts announcements are associated with bank CDS spreads narrowing, both for domestic and foreign banks, pointing to an important role for cross-border exposures. Movements in bank stock prices show mixed reactions, both domestically and cross-border, with banks receiving favorable government support outperforming foreign rivals. By January 2010, bank CDS spreads had stabilized at higher levels reflecting greater default risk, while bank stock prices remained significantly below their pre-crisis levels.

We construct a novel dataset that matches bank holding company credit default swap (CDS) positions to detailed U.S. credit registry data containing both loan and corporate bond holdings by large U.S. banks. The dataset sheds new light on how banks use CDS, and what effects, if any, CDS use has on corporate credit risk. We show that few banks insure loans, even loans of distressed borrowers, suggesting that empty creditor problems among banks are not widespread. We find that banks are more likely to sell than buy CDS when they have a lending relationship with CDS firms. We then create new aggregate measures of hedging activity based on position-level data to test the empty creditor hypothesis. Contrary to existing studies, aggregate measures of credit risk hedging that do not condition on lending relationships overstate bank hedging activity. Furthermore, our regression results do not find any evidence that firm credit risk is adversely impacted when banks in particular purchase CDS.

We analyze changes in unemployment, marginal labor force attachment, and participation in Canada and the United States using consistent measurement concepts. We show the importance for the comparative evolution of aggregate unemployment of changes in the fraction of those “wanting work”—the unemployed and marginally attached. We also study changes in the fraction of the nonemployed who are unemployed. Using micro data on labor market transition behavior at these margins, we find remarkably consistent results in the two countries, with the marginally attached displaying behavior lying between unemployment and nonattachment. The three nonemployment states are distinct in both countries.

This essay reviews Till Time’s Last Sand: A History of the Bank of England, 1694–2013, David Kynaston’s history of the Bank of England (the Bank) from its foundation in 1694 to the present day. I focus on three themes running through his narrative. First, for much of that time, the Bank was a private company playing a public role; how did it manage to do this and why was it eventually brought into public ownership? Second, I examine the various attempts to constrain the Bank’s monetary policy to follow a simple rule; these almost invariably proved unsustainable unless the rule provided enough room for discretion. Finally, I cover the Bank’s journey to becoming the lender of last resort, together with its evolving attitude to the associated risk of moral hazard.

Hedge fund activism is associated with improvements in the governance and performance of targeted firms. In this article, we show that these positive effects of activism reach beyond the targets, as nontargeted peers make similar improvements under the threat of activism. Peers with higher threat perception, as measured by director connections to past targets, are more likely to increase leverage and payout, decrease capital expenditures and cash, and improve return on assets and asset turnover. As a result, their valuations improve, and their probability of being targeted declines. Our results are not explained by time-varying industry conditions or competition effects whereby improved targets force their product market rivals to become more competitive.

We model a firm’s optimal capital structure decision in a framework in which it may later choose to enter either Chapter 11 reorganization or Chapter 7 liquidation. Creditors anticipate equityholders’ ex-post reorganization incentives and price them into the ex-ante credit spreads. Using a realistic dynamic bargaining model of reorganization, we show that the off-equilibrium threat of costly renegotiation can lead to lower leverage, even with liquidation in equilibrium. If reorganization is less efficient than liquidation, the added option of reorganization can actually make equityholders worse off ex-ante, even when they liquidate on the equilibrium path.

This discussion of the survey of the literature on financial reporting and corporate investment by Roychowdhury et al. (2019) focuses on an area in this literature that has received less attention—how financial reporting helps managers allocate capital across investment opportunities within their firms in the presence of uncertainty. We discuss the theory on investment under uncertainty and offer suggestions for future research.

Studies in social sciences suggest that a normative commitment to stable, biological married life is a potent catalyst for inculcating and nourishing prosocial values, preferences and behaviors among family members. Extrapolating from this literature, we investigate whether firms led by married chief executive officers (CEOs) are associated with better corporate social responsibility (CSR). Our analysis of 2163 U.S. public corporations from 1993 to 2008 shows that firms led by married CEOs are associated with significantly higher scores on a popular CSR index, after controlling for a wide range of firm characteristics and CEO attributes. Further, the observed positive relation is particularly sharper with the diversity and employee relations components of CSR. Our findings highlight CEO marital status as an important driver of socially responsible corporate decision making.