This article examines whether and to what extent private firms learn from the stock market. Using a large panel data set for the UK, I find that private firms’ investment responds positively to the valuation of public firms in the same industry. The sensitivity increases with price informativeness. To further pin down the information channel, I construct a price noise measure based on public firms’ unrelated minor segments and show that it positively affects the investment of private firms in the major-segment industry. The results are consistent with models featuring learning from noisy signals and are not driven by alternative channels in the absence of learning. My findings suggest that the stock market can have real effects on private firms through an information-spillover channel, even when these firms do not list their shares on the stock exchanges.

Blockchain is a ground-breaking technology with potential applications in fundraising. In this study, we analyze the blockchain-based fundraising data from 2019 to 2021 to investigate the differences between various fundraising models (i.e., ICO, IEO, IDO, and MIX). More specifically, in Study 1, we conduct ANCOVA and ANOVA to examine differences in fundraising success and token performance after listing between different fundraising models. In Study 2, we first explore the factors that affect fundraising success and token performance, and then verify whether the impact of these factors varies between fundraising models. The findings of our research have implications for both firms and investors, assisting firms in selecting the most effective fundraising models and aiding investors in identifying tokens with the greatest potential.

We show that callable bonds have both higher yields and lower market prices than matched non-callable bonds of the same issuer-time, reflecting the value of call features to issuers and investors. This “value of callability” as well as the inclusion and the exercise of call rights are jointly determined by issuer credit quality. Critically, our agency-based theoretical and empirical analyses show that callability reduces debt overhang in corporate mergers. Our results help explain the value and increasing prevalence of callable bonds in credit markets.

This paper examines the link between ownership concentration and corporate bond volatility. We show that more concentrated mutual fund ownership is associated with higher volatility of corporate bonds. This relation is stronger among more illiquid bonds, during periods of heightened bond market illiquidity, and among bonds held by corporate bond funds that invest in more illiquid bonds and experience higher or more correlated liquidity shocks. Using a sample of mutual fund mergers, we further show that increases in bond volatility are unlikely to be driven entirely by the endogenous ownership structure of corporate bonds. Our findings suggest that the concentrated ownership by corporate bond mutual funds provides another channel, apart from illiquidity, to help explain the excess volatility in corporate bonds.

We use the adoption of General Accounting Standards Board Statement No. 34 (GASB 34) to examine whether disclosing information in states' financial reports influences their investment decisions. GASB 34 requires governments to report on general infrastructure assets and permits either the standard depreciation approach or the modified approach. The modified approach requires additional disclosures, a step which we argue promotes greater transparency about a government's infrastructure and can potentially facilitate infrastructure investment decisions. We find a robust positive association between the modified approach and investment in infrastructure maintenance. Additional evidence demonstrates a more pronounced effect when external monitoring is likely higher and government officials are likely better informed as a result of the increased disclosure. We further find that states using the modified approach are less likely to cut or divert funds intended for infrastructure maintenance. Our study suggests that disclosing information in governments' financial reports can have real effects, such as mitigating underinvestment in infrastructure maintenance, which governments often defer to future periods in violation of the interperiod equity principle and to the detriment of society.

This paper formalizes a classic idea that in second-best environments trade can induce welfare losses: incremental income losses from distortions can outweigh trade gains. In a Melitz model with distortionary taxes, we derive sufficient statistics for welfare gains/losses and show departures from the efficient case (Arkolakis, Costinot, and Rodríguez-Clare 2012) can be captured by the gap between an input and output share and domestic extensive margin elasticities. The loss reflects an endogenous selection of more subsidized firms into exporting. Using Chinese manufacturing data in 2005 and model-inferred firm-level distortions, we demonstrate that a sizable negative fiscal externality can potentially offset conventional gains.

We study the impact of an urban land titling program on firm investment in Shenzhen, China. We find that this program increased the investment rate for titling firms, but this positive effect only holds for politically connected firms. Further analysis suggests that the titling effect is more pronounced for those titling firms associated with greater expropriation risk. During program implementation, the connected titling firms increased their investment perhaps because, as observed, they experienced fewer disputes than non-connected titling firms.

Emerging markets have experienced large human and economic costs from coronavirus disease 2019, and their tight fiscal space has limited the support extended to their citizens. We study the impact of an epidemic on economic and health outcomes by integrating epidemiological dynamics into a sovereign default model. The sovereign’s option to default tightens fiscal space and results in an epidemic with limited mitigation and depressed consumption. A quantitative analysis of our model accounts well for the dynamics of fatalities, social distancing, consumption, sovereign debt, and spreads in Latin America. We find that because of default risk, the welfare cost of the pandemic is about a third higher than it is in a version of the model with perfect financial markets. We study debt relief programs and find a compelling case for their implementation. These programs deliver large social gains, improving health and economic outcomes for the country at no cost to international lenders or financial institutions.