COVID-19 Market Protection: Close Down Stock Exchanges

Courtesy of Alexandra Andhov As COVID-19 continues to spread across continents, all economies begin to tremble and prepare for the worst. Companies, investors, and trading clients are turning to stock exchanges amid one of the most tumultuous periods in market history to borrow money, buy or sell assets, and limit losses in their holdings. Yet […]

Market Crashes and Merger Completions

Courtesy of Davidson Heath and Mark Mitchell* Recent movements in financial markets illustrate the proverb: “The market takes the stairs up and the elevator down.” After rising steadily through 2019 and reaching a new all-time high of 3,386 on February 19, 2020, over the next seven trading days the S&P 500 fell by 432 points, […]

Testimony of the Honorable Sarah Bloom Raskin Before the Senate Democrats’ Special Committee on the Climate Crisis

Courtesy of Sarah Bloom Raskin On Thursday, March 12, 2020, the Senate Democrats’ Special Committee on the Climate Crisis had a hearing on “The Economic Risks of Climate Change.” One of the witnesses, Sarah Bloom Raskin, provided the following testimony:   Chairman Schatz and members of the Committee, thank you for inviting me here to […]

Negative Interest Rates: Sharp Increase in Risk-Taking Behavior

Courtesy of Maren Baars, Henning Cordes, and Hannes Mohrschladt As a consequence of the global financial crisis and the European sovereign debt crisis, risk-free nominal interest rates have plummeted – in some countries, they even turned negative. These interest rate decreases lead to a systematically higher risk appetite by institutional investors, such as banks and […]

How Much Justice Can You Afford?

Courtesy of Elayne E. Greenberg and Noam Ebner It is one of the oldest lawyer jokes in the book, and its punchline is about to change. Remember the New Yorker cartoon, in which a lawyer and their client sit at a table, and the lawyer assesses the client’s legal problem? “You have a pretty good […]

What is the Value of an Innovation? Theory and Evidence on the Stock Market’s Reaction to Innovation Announcements

Courtesy of Thomas Chemmanur, Dongmei Li, Kevin Tseng, and Yu Wang Recently, there has been considerable interest among economists in stock market-based measures of the value of corporate innovations. For example, in a recent paper, Kogan, Papanikolaou, Seru, and Stoffman (2017) develop a new measure of the economic value of a corporate innovation by making […]

A Closer Look at CECL: What Can We Learn from the European Implementation of IFRS 9?

Courtesy of Arndt-Gerrit Kund and Daniel Rugilo Introduction The sub-prime crisis of 2008 drew attention to the fundamental drawbacks of the incurred loss accounting model, which determined the loan loss provisions for troubled exposures. The subsequent financial crisis revealed in particular that the recognition of impairments was not only too late, but also incomplete. As […]

Surviving the Perfect Storm: Exports, Fiscal Austerity, and Firm Heterogeneity

Courtesy of Manuel Adelino, Paulo Fagandini, Miguel Ferreira, and Francisco Queiro How do economically depressed areas recover following a recession? Our recent paper uses the 2010–2011 European sovereign debt crisis and a Euro area periphery country as a laboratory to answer this question. The 2010–2011 European sovereign debt crisis led to a severe recession in […]

The Unintended Consequences of Deregulation: Equity Markets under the JOBS Act

Courtesy of Anantha Divakaruni and Howard Jones Eugene Schieffelin was a Shakespeare fan determined to introduce to the New World every species of bird appearing in the works of The Bard. In 1890 he released 100 of the European starlings mentioned in Henry VI in New York’s Central Park. Schieffelin’s starlings multiplied quickly and spread across […]

Spillover Effects in Securities Litigation

Courtesy of Dain Donelson, Rachel Flam, and Christopher Yust When a firm is sued, do its peers respond to the litigation by changing their own behavior? In our recent paper, we examine the spillover effect of securities litigation on industry peers. We focus on investor reactions and changes in peers’ disclosure and financial reporting. We […]