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 »
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 »
There is ample evidence that some investors are inattentive and cause stock prices to fluctuate in ways that disagree with the rational framework. However, a less studied question in the behavioral finance literature is how firm managers respond to fluctuations in stock prices that stem from such irrational trading behaviors. In our recent paper, we exploit a… Read More »
Corporate syndicated loan contracts frequently include financial covenants, namely provisions that require a borrowing corporation to periodically achieve specified accounting-based performance objectives or maintain specified accounting-based capital requirements. Practitioners, academics, and policymakers are interested in these provisions because they mitigate costly agency frictions that arise between borrowers and lenders, thereby enhancing the flow of capital… Read More »
Under US securities laws, the Securities and Exchange Commission (SEC) regulates and monitors the financial reporting and disclosure of SEC registrants (companies) with the aims of increasing corporate transparency and protecting investors. Nonetheless, companies’ interests are also considered under the securities laws, which allow companies to make confidential treatment requests to redact certain information from… Read More »
Open banking is fast becoming a global phenomenon, promising to transform financial services by enabling the safe, swift sharing of personal data. The idea of open banking originated in Europe, and is gaining traction in the US, but Australia is well ahead of these countries and is now rolling out data sharing across other sectors… Read More »
A growing literature investigates how investors’ gambling behavior affects their investment decisions and asset returns. This literature shows that investors with a taste for gambling concentrate their trading in stocks with lottery-like payoffs, such as stocks with high volatility. In addition, prior studies show that in sports betting, such as racetrack gambling, bettors consistently over… Read More »
