This article investigates the effect of bank lending frictions on employment outcomes. I construct a new data set that combines information on banking relationships and employment at 2,000 ...nonfinancial firms during the 2008–9 crisis. The article first verifies empirically the importance of banking relationships, which imply a cost to borrowers who switch lenders. I then use the dispersion in lender health following the Lehman crisis as a source of exogenous variation in the availability of credit to borrowers. I find that credit matters. Firms that had precrisis relationships with less healthy lenders had a lower likelihood of obtaining a loan following the Lehman bankruptcy, paid a higher interest rate if they did borrow, and reduced employment by more compared to precrisis clients of healthier lenders. Consistent with frictions deriving from asymmetric information, the effects vary by firm type. Lender health has an economically and statistically significant effect on employment at small and medium firms, but the data cannot reject the hypothesis of no effect at the largest or most transparent firms. Abstracting from general equilibrium effects, I find that the withdrawal of credit accounts for between one-third and one-half of the employment decline at small and medium firms in the sample in the year following the Lehman bankruptcy.
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Multi-market banks reallocate capital when local credit demand increases after natural disasters. Using property damage as an instrument for lending growth, we find credit in unaffected but connected ...markets declines by a little less than 50 cents per dollar of additional lending in shocked areas. However, banks shield their core markets because most of the decline comes from loans in areas where banks do not own branches. Moreover, banks increase sales of more-liquid loans and they bid up the rate on deposits in the connected markets. These actions help lessen the impact of the demand shock on credit supply.
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Do Director Elections Matter? Fos, Vyacheslav; Li, Kai; Tsoutsoura, Margarita
The Review of financial studies,
04/2018, Volume:
31, Issue:
4
Journal Article
Peer reviewed
Using a hand-collected sample of election nominations for more than 30,000 directors over the period 2001–2010, we construct a novel measure of director proximity to elections called ...Years-to-election. We find that the closer directors of a board are to their next elections, the higher CEO turnover-performance sensitivity is. A series of tests, including one that exploits variation in Years-to-election that comes from other boards, supports a causal interpretation. Further analyses show that other governance mechanisms do not drive the relation between board Years-to-election and CEO turnover-performance sensitivity. We conclude that director elections have important implications for corporate governance.
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This article aims to contribute to recent debates on research methods in public administration by examining the use of quantitative methods in public administration research. We analyzed 1,605 ...articles published between 2001-2010 in four leading journals: Journal of Public Administration Research and Theory (JPART), Public Administration Review, Governance, and Public Administration (PA). Results show that whereas qualitative methods are still predominant compared to quantitative methods (56% versus 44%), the field is becoming increasingly quantitative. Of quantitative methods used, surveys are most dominant, while a combination of methods is used far less often. In general, very few studies use a mixed methods design. As to the areas of research, we found that the use of quantitative methods is unequally distributed; some subfields (public management) use quantitative methods more often than others (policy and politics), and some journals (JPART, PA) publish articles on quantitative research more than others (Governance). Implications for public administration research are discussed.
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5.
Explaining Charter School Effectiveness Angrist, Joshua D.; Pathak, Parag A.; Walters, Christopher R.
American economic journal. Applied economics,
10/2013, Volume:
5, Issue:
4
Journal Article
Peer reviewed
Open access
Lottery estimates suggest Massachusetts' urban charter schools boost achievement well beyond that of traditional urban public schools students, while nonurban charters reduce achievement from a ...higher baseline. The fact that urban charters are most effective for poor nonwhites and low-baseline chievers contributes to, but does not fully explain, these differences. We therefore link school-level charter impacts to school inputs and practices. The relative efficacy of urban lottery sample charters is accounted for by these schools' embrace of the No Excuses approach to urban education. In our Massachusetts sample, Non-No-Excuses urban charters are no more effective than nonurban charters.
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For two decades, risk management has been gaining ground in banking. In light of the recent financial crisis, several commentators concluded that the continuing expansion of risk measurement is ...dysfunctional (
Power, 2009; Taleb, 2007). This paper asks whether the expansion of measurement-based risk management in banking is as inevitable and as dangerous as Power and others speculate. Based on two detailed case studies and 53 additional interviews with risk-management staff at five other major banks over 2001–2010, this paper shows that relentless risk measurement is contingent on what I call the “calculative culture” (
Mikes, 2009a). While the risk functions of some organizations have a culture of
quantitative enthusiasm and are dedicated to risk measurement, others, with a culture of
quantitative scepticism, take a different path, focusing instead on
risk envisionment, aiming to provide top management with alternative future scenarios and with expert opinions on emerging risk issues. In order to explain the dynamics of these alternative plots, I show that risk experts engage in various kinds of boundary-work (
Gieryn, 1983, 1999), sometimes to expand and sometimes to limit areas of activity, legitimacy, authority, and responsibility.
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We explore the link between a firm's stock returns and credit risk using a simple insight from structural models following Merton (1974): risk premia on equity and credit instruments are related ...because all claims on assets must earn the same compensation per unit of risk. Consistent with theory, we find that firms' stock returns increase with credit risk premia estimated from CDS spreads. Credit risk premia contain information not captured by physical or risk-neutral default probabilities alone. This sheds new light on the "distress puzzle"—the lack of a positive relation between equity returns and default probabilities—reported in previous studies.
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Using a unique and rich database of high-technology firms in China, we show that effective enforcement of intellectual property rights at the provincial level is critical in encouraging financing and ...investing in R& D. Better enforcement of intellectual property (IP) rights positively affects firms' ability to acquire new external debt and allows firms to invest in more R&D, generate more innovation patents, and produce more sales from new products. Our results suggest that facilitating financing and investing in R&D are the channels through which better IP rights enforcement can affect economic growth.
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We document that women are less represented on corporate boards in Finance and more traditional STEM industry sectors. Even after controlling for differences in firm and country characteristics, ...average diversity in these sectors is 24% lower than the mean. Our findings suggest that well-documented gender differences in STEM university enrolments and occupations have long-term consequences for female business leadership. The leadership gap in Finance and STEM may be difficult to eliminate using blanket boardroom diversity policies. Diversity policies are also likely to have a different impact on firms in these sectors than in non-STEM sectors.
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On Bounding Credit-Event Risk Premia Bai, Jennie; Collin-Dufresne, Pierre; Goldstein, Robert S. ...
The Review of financial studies,
09/2015, Volume:
28, Issue:
9
Journal Article
Peer reviewed
Open access
Reduced-form models of default that attribute a large fraction of credit spreads to compensation for credit-event risk typically preclude the most plausible economic justification for such risk to be ...priced, namely, a contemporaneous drop in the market portfolio. When this "contagion" channel is introduced within a general equilibrium framework for an economy comprising a large number of firms, credit-event risk premia have an upper bound of a few basis points, and are dwarfed by the contagion premium. We provide empirical evidence that indicates credit-event risk premia are less than 1 bp, but contagion risk premia are significant.
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