Shareholder rights and bank loan contract terms

Shareholders and debtholders of a firm often have conflicting objectives. The root of  shareholder-debtholder conflict is the different nature of cash-flow claims they are each entitled to. The actual power possessed by shareholders depends upon the specific rules of corporate governance. For example, when governance discipline reserves more power for shareholders, the firm’s owners can more easily replace the board […]

The Time Has Come to Mandate ESG Disclosures: Where Should the SEC Start?

Sustainability-focused funds have seen an incredible boost in popularity since the proliferation of ESG roughly a decade ago. ESG—short for environmental, social, and governance—is a company-wide ethos aimed at implementing responsible policies based on these three factors. Sustainable (or ESG) funds select their constituent investments based on a firm-level analysis of these factors. At the […]


The result of corporate debt renegotiations between debtors and creditors is of great importance for aggregate productivity and employment, as it defines the distressed companies that can survive. From a policy perspective, it is desirable to have in place a bankruptcy system that facilitates renegotiations and allows companies—which create value for workers, costumers, and creditors—to […]

Horizontal Mergers, Investments, and Industry Evolution

During the past two decades, U.S. industries have been dramatically shaped by horizontal mergers. The deal value of an average horizontal merger has risen from $48.4 million in 1995 to $504 million in 2016 (See Figure 1). Over the years, academic studies have addressed the issue of whether horizontal mergers reduce industry competition. It is […]

ESG ETFs and the Costs of Information Synthesis

            Despite likely being the most successful investment product since the 2008 global financial crisis, exchange traded funds (ETFs) have a serious comparability problem. The problem is particularly acute in environmental, social, and governance (ESG) themed funds, which have benefited from a recent surge in investor interest. A post-crisis explosion in ETF product offerings, combined with extensive issuer discretion in the composition, replication and tracking […]

CBDC – How Dangerous is Programmability?

Among Central Bankers, the issuance of a Central Bank Digital Currency (CBDC) is a topic of great interest. The Bank for International Settlement (BIS) has recently published a report showing that many central banks are conducting research and experiments and a small number are already deploying pilot projects. Research projects have been set up by European Central Bank (ECB), […]

Corporate Investment and Stock Return Momentum

In their seminal study, Jegadeesh and Titman (1993) document the existence of the momentum effect in stock returns. Using data from 1965 to 1989, they show that when stocks are ranked in deciles based on their immediate past returns, the past winners (the best performing stocks in upper tenth decile) continue to outperform the past losers (the worst performing […]

Has Post-reorg Equity Outperformed in the Last Three Decades?

In the US, financially distressed firms use Chapter 11 of the Bankruptcy Code to restructure their liabilities and business operations under the supervision of the bankruptcy court. Many of the Chapter 11 firms successfully reorganize and emerge from bankruptcy. Upon emergence, they often cancel old equity interest and issue new stock (i.e., post-reorg equity) to […]

Digital Finance Platforms: Toward a New Regulatory Paradigm

The computers upon which we work all have operating systems that we generally ignore. We mainly deal with the apps that run on these systems. Email, ubiquitous as it is, is merely an app. Nothing works without the system in the background, and because it works so well, we tend to neglect it. The same […]


Special Purpose Acquisition Companies (SPACs) are simply enterprises that raise money from the public with the intention of purchasing an existing business and becoming publicly traded in the securities markets. If the SPAC is successful in raising money and the acquisition takes place, the target company takes the SPAC’s place on a stock exchange, in […]