In November 2021, the President’s Working Group on Financial Markets (PWG) issued a report analyzing the rapid expansion and growing risks of the stablecoin market.[1] Stablecoins are digital assets that claim to maintain a “stable” value with reference to a designated currency (typically the U.S. dollar) or some other asset, index, or formula. PWG’s report concluded that… Read More »
A definition of materiality offers preparers and users of financial statements guidance about what are unimportant (immaterial) misrepresentations and what are important (material) misrepresentations. The U.S. Supreme Court defines information as material if there is “a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’… Read More »
Corporate alliances and mergers and acquisitions (M&As) are the alternative strategies for external growth that expand firms’ boundaries. A recent report by KPMG suggests that about half of the responding CEOs said they plan to form a new alliance to enhance their corporate performance and growth, while four out of ten plan to make a new acquisition.… Read More »
The Federal Deposit Insurance Corporation (FDIC or Corporation) has recently made news in typical Washington, DC fashion: a fight over power. A conflict between the FDIC Chairperson, a Trump Administration holdover, and the three members of the FDIC board – appointed by Democratic Administrations – over bank merger review protocols led to the Chairperson’s resignation.[1] Accordingly, the… Read More »
Institutional loans have risen dramatically over the past couple of decades and have become one of the most important avenues for firms to obtain credit. The amount of new issuance of institutional loans increased from less than $100 billion in the early 2000s to over $600 billion in recent years. Underwriters (i.e., lead banks) play… Read More »
Many of the central banks pursuing the goal of developing a Central Bank Digital Currency (CBDC), including early leaders, such as the Swedish Riksbank, are finding that designing a workable CBDC is proving extremely difficult. Many solutions would introduce significant changes, and thus considerable operational risks, into their respective banking systems; so much so, that the Bank for… Read More »
Renegotiation is a crucial element in private debt contracting. Unlike public bonds, whose vast dispersed ownership structure makes renegotiation impossible to coordinate, private loans are typically issued by either one lender or a coterie of lenders (also known as a loan syndicate)—so renegotiating these contracts is a lot easier. Indeed, loan contracts are frequently amended… Read More »
In our recent paper[1], we robustly document that firms have strong incentives to do good by serving a social purpose, as they not only perform well financially, but they also attract financially sophisticated investors with long-term orientation. What is important, however, is not only to do good by engaging in environmental, social, and governance (“ESG”) activities, but also… Read More »
Taxation of multinational companies (MNCs) has received increasing attention from politicians, the media, regulators, and academics. While the popular press provides considerable anecdotal evidence that large MNCs pay lower taxes than their domestic counterparts, academic research provides mixed evidence on how multinationality affects taxation. Although foreign operations provide additional cross-border tax avoidance opportunities, such as… Read More »
Everyone seems to be a fan of transparency, these days. Politicians of every stripe are keen to preach their belief in it, and transparency has become a watchword for everything from marketing, to healthcare, to journalism. In debates around content moderation, calls for transparency are a ubiquitous feature. Online platforms, for their part, are keen to tout their own belief in the importance of… Read More »
