I develop a normative theory of political influence on bank lending and capital structure. Legislators want banks to make politically-favored loans that reduce bank profits but generate social or political benefits. The regulator uses asset-choice regulation and capital requirements to induce the lending desired by legislators. There are four main results. First, if regulators dislike bank fragility, then credit-allocation regulation should be accompanied by higher capital requirements. Second, banks will resist higher capital requirements, which will be lower when banks have more bargaining power. Third, when politics matters more in bank regulation, the banking sector is larger and more competitive, with higher capital requirements. Fourth, the optimal reporting mechanism, in which banks report their privately-known profitability and the regulator endogenously determines capital requirements and stringency of credit-allocation regulation in response, shows that political influence is stronger when banks are more profitable.

The role of real estate during the global financial and economic crisis has prompted efforts to better incorporate housing and financial channels into macro models, improve housing models, develop macroprudential tools, and reform the financial system. This article provides an overview of major, recent contributions to the literature in relation to earlier research on what drives housing prices and how they affect economic activity. Particularly emphasized are studies, both theoretical and more strongly evidence-based, that connect housing markets with credit markets, house price expectations, financial stability, and the wider economy. The literature reveals much diversity in the international and regional behavior of house prices and the need to improve data tracking key housing supply and demand influences. Also reviewed are studies examining how monetary, macroprudential, and other policies affect house prices and access to housing. This survey is designed to help readers navigate the plethora of recent studies and understand the unsettled issues and avenues for further research. The findings should be of interest to policy makers concerned with financial stability as well as those dealing with the role of housing in the wider economy

The centrality of private information in the design of accounting institutions has been explored via agency models that address control concerns as well as disclosure models that amplify valuation issues. This paper derives disclosures by an entrepreneur‐owner when both control and valuation concerns are in play. In particular, the disclosures influence stock price not only via a direct impact on valuation of the firm's revenue but also via an indirect impact on the firm's cost of procuring inputs from a self‐interested and privately informed upstream supplier. In this setting, disclosures are judiciously designed to influence the supplier's decision to share cost information and to control information rents embedded in the procurement contract within the supply chain. Specifically, in order to convey that information rents are not in the offing and, thus, motivate information sharing by the supplier, the owner has incentives to convey a less “rosy” picture. In effect, when controlling supplier actions also becomes important, the owner discloses some unfavorable revenue news that she would have otherwise withheld and conceals some favorable revenue news that she would have otherwise revealed. Consequently, in our model, the disclosure region is either two‐tailed or intermediate, in contrast to the single‐tailed disclosure region implied by familiar valuation considerations alone.

Politics may color interpretations of facts, and thus perceptions of risk. We find that a higher share of Trump voters in a county is associated with lower perceptions of risk during the COVID-19 pandemic. Controlling for COVID-19 case counts and deaths, as Trump's vote share rises in the local area, individuals search less for information on the virus and its potential economic impacts, and engage in fewer visits to non-essential businesses. Our results suggest that politics and the media may play an important role in determining the formation of risk perceptions, and may therefore affect both economic and health-related reactions to unanticipated health crises.

Centralized markets reduce search for buyers and sellers. Their “thickness” increases the chance of order execution at nearly competitive prices. In spite of the incentives to consolidate, some markets, securities markets and on‐line advertising being the most notable, are fragmented into multiple trading venues. We argue that fragmentation is an inevitable feature of any centralized market except in special circumstances.

We study the association between environmental, social, and governance (ESG) government risk management and firm-level IPO underpricing between 2008 and 2018. Examining 7446 IPOs issued in 36 countries, we find that IPO underpricing tends to be lower in countries with higher ESG Government Ratings. When we uniquely examine the environmental, social, and governance pillars, we find that underpricing tends to be lower in countries with stronger risk management practices in each of these areas. Additional analysis indicates that the negative impact of ESG ratings on IPO underpricing is more pronounced in countries with more transparent financial disclosures, higher liability standards, and stronger shareholder protections.

We use the staggered adoption of Wrongful Discharge Laws (WDLs) by U.S. state courts as a quasi-natural experiment to examine the causal impact of firing costs and employment protection on corporate payouts. We find that the greater employment protection imposed by WDLs leads to higher share repurchases, and that this finding is more pronounced among firms with greater financial resources and better governance. Our results support the argument that as higher firing costs enhance employee entrenchment and encourage rent extraction behavior, firms have an incentive to increase share buybacks to mitigate a wealth transfer from shareholders to employees.

This paper investigates the wage returns to schooling and actual early work experiences and how these returns have changed over the past 20 years. Using the NLSY surveys, we develop and estimate a dynamic model of the joint schooling and work decisions that young men make in early adulthood and quantify how they affect wages using a generalized Mincerian specification. Our results highlight the need to account for dynamic selection and changes in composition when analyzing changes in wage returns. In particular, we find that ignoring the selectivity of accumulated work experiences results in overstatement of the returns to education.

We analyze government interventions in the eurozone banking sector during the 2008–2009 financial crisis. Using a novel data set, we document that fiscally constrained governments “kicked the can down the road” by providing banks with guarantees instead of fully-fledged recapitalizations. We econometrically address the endogeneity associated with bailout decisions in identifying their consequences. We find that forbearance prompted undercapitalized banks to shift their assets from loans to risky sovereign debt and engage in zombie lending, resulting in weaker credit supply, elevated risk in the banking sector, and, eventually, a greater reliance on liquidity support from the European Central Bank.

The SEC prohibits the presentation of non‐GAAP measures before corresponding GAAP measures; however, a large proportion of non‐GAAP reporters present non‐GAAP EPS before GAAP EPS in their earnings announcements. This noncompliance raises questions about whether firms use prominence to highlight higher or lower quality non‐GAAP information. For firms reporting non‐GAAP EPS between 2003 and 2016, prominent non‐GAAP EPS is associated with higher quality non‐GAAP reporting. Further tests reveal that nonregulatory incentives, rather than regulatory costs, explain this relation. Specifically, prominence is associated with higher quality non‐GAAP reporting in settings where prominence is not regulated, investors ignore prominence when non‐GAAP reporting quality is lower, and the minority of firms using prominence to mislead exhibit characteristics associated with weaker investor monitoring. Overall, we provide evidence that regulatory noncompliance can reflect an intent to inform, and that most firms use prominence to highlight higher quality non‐GAAP information despite prohibitive regulation.