This paper presents an industry equilibrium model where firms can choose to engage in corporate social responsibility (CSR) activities. We model CSR activities as an investment in customer loyalty and show that CSR decreases systematic risk. This e§ect is stronger for firms producing di§erentiated goods and when consumers’ expenditure share on CSR goods is small. We find supporting evidence for...

Paralleling regulatory developments, we devise value-at-risk and expected shortfall type risk measures for the potential losses arising from using misspecified models when pricing and hedging contingent claims. Essentially, losses from model risk correspond to losses realized on a perfectly hedged position. Model uncertainty is expressed by a set of pricing models, relative to which potential l...

We solve the credit spread puzzle with a structural model of firms policies that endogenously replicates the empirical cross–section of credit spreads. Structural estimation of the model’s parameters reveals that the model cannot be rejected by the data, and that endogenous investment decisions are major determinants of CDS spreads. We also verify that controlling for financial leverage, CDS sp...

Contingent ownership structures are prevalent in joint ventures. This paper o ers an explanation based on the investment incentives provided by such an arrangement. We consider a hold-up problem in which two parties make relationshipspeci c investments sequentially in order to generate a joint surplus in the future. In our model, the following ownership structure implements rst best investments...

We use mutual fund flows as a measure of individual investor sentiment for different stocks, and find that high sentiment predicts low future returns. Fund flows are dumb money–by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is related to the value effect: high sentiment stocks tend to be growth stocks. High sentiment a...

I study how strategic alliances and their impact on future competitive incentives can motivate interfirm equity sales. In the model, an alliance between an entrepreneurial firm and an established firm improves efficiency for both. However, the requisite knowledge transfer heightens the established firm’s incentive to enter one of its partner’s markets. I show that equity can eliminate the entry...

SYNOPSIS In this study, we propose a reciprocal rent-seeking game between politicians and individual auditors with political connections examine how these auditors' influence their audit quality. Using hand-collected data from China 2008 2013, find that politically connected have significantly lower tendency to issue modified opinions (MAOs). We also politicians' career prospects are adversely ...

Using arguments from the behavioral theory of firm, agency theory, and literature on internal capital markets, this article investigates relationship between financial slack firms’ profitability in standalone versus business group–affiliated firms. a large sample French privately held firms, we show that there is quadratic, inverse U-shape for We observe relation steeper group affiliated firms ...

This study investigates the market valuation effect of ownership concentration, financial policy and profitability in a sample 109 non-family over period 2012 to 2019. Hence, we used balance panel data investigate value possible variables identified using General Method Moment (GMM) estimator. The results is dynamic nature, implying that last year's significantly affects current value. Although...

We implement a lab-in-the-field experiment with 334 Turkish loan officers to document gender discrimination in small business lending and unpack mechanisms. Officers review multiple real-life applications which we randomize applicant gender. While unconditional approval rates are the same, 26 percent more likely require guarantor when present same application as coming from female instead of ma...