Beyond Dividing the Pie: Multi-Issue Bargaining in the Laboratory
Abstract:We design a laboratory experiment to study bargaining behaviour when negotiations involve multiple issues. Parties must discover both trading prices and agreement scopes, giving rise to unexplored information structures and bargaining strategies. We find that bargainers often trade the efficient set of issues despite lacking information about individual aspects. However, beneficial agreements ...
Olivier Bochet*, Manshu Khanna, Simon Siegenthaler
ARTICLE | Review of Economic Studies| 2024、91、1
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The Technical Default Spread
Abstract:We study the quantitative impact of lender control rights on corporate investment, asset prices, and the aggregate economy. We build a general equilibrium model in which the breaching of a loan covenant (technical default) entails a switch in investment control rights from borrowers to lenders. Lenders optimally choose low-risk projects, thus mitigating borrowers’ risk-taking incentives and ...
Emilio Bisetti, Kai Li*, Jun Yu
ARTICLE | Review of Financial Studies | 2024、37、11
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Financial Constraints, Cash Flow Timing Patterns and Asset Prices
Abstract:We show that firms collect almost 70% of their cash flows in the second half of the fiscal year, and that firms that collect more cash by year-end earn a 6.8% higher per annum risk premium and save more cash. We rationalize these facts in a quantitative investment-based asset pricing model. Immediate cash payments negatively affect profitability, but reduce equity financing costs by increasing ...
Weiping Hu, Kai Li*, Xiao Zhang
ARTICLE |Journal of Financial Economics| 2024、157
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Intermediary-Based Equity Term Structure
Abstract:We demonstrate that a financial intermediary-based asset pricing model offers a compelling explanation for a new set of conditional moments of equity term structure and convenience yields. The model’s key mechanism is that the time-varying tightness of intermediaries’ leverage constraints drives significant mean reversion in the price of risk. This model guides us in devising a novel empirical ...
Kai Li*, Chenjie Xu
ARTICLE | Journal of Financial Economics| 2024、157
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Motivating Collusion
Abstract:We examine how executive compensation can be designed to facilitate product market collusion. We look at the 2013 decision to close several regional offices of the U.S. Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue this made collusion more appealing to shareholders, and find that these firms increased the sensitivity of executive ...
Sangeun Ha, Fangyuan Ma, Alminas Žaldokas*
ARTICLE |Journal of Financial Economics| 2024、154
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Local Effects of Global Capital Flows: A China Shock in the U.S. Housing Market
Abstract:This paper studies the real effects of foreign real estate capital inflows. Using transaction-level data, we document (i) a “China shock” in the U.S. housing market characterized by surging foreign Chinese housing purchases after 2008, and (ii) “home bias” in these purchases, as they concentrate in neighborhoods historically populated by ethnic Chinese. Exploiting their temporal and spatial ...
Zhimin Li, Leslie Sheng Shen*, Calvin Zhang
ARTICLE | Review of Financial Studies | 2024、37、3
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Learning about the Consumption Risk Exposure of Firms
Abstract:We structurally estimate an investment-based asset pricing model, in which firms' exposure to macroeconomic risk is unknown. Bayesian beliefs about this parameter are updated from firms' and industry peers' comovement between their productivity and consumption growth. The model implies that discount rates rise endogenously with the perceived risk exposure of firms, thereby depressing investment ...
Yongjin Kim, Lars-Alexander Kuehn*, Kai Li
ARTICLE | Journal of Financial Economics | 2024、152
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Delayed Crises and Slow Recoveries
Abstract:We present a rational expectations model of credit-driven crises, providing a new perspective to explain why credit booms can lead to severe financial crises and aftermath slow economic recoveries. In our model economy, banks can operate in two types of business. They are sequentially aware of the deterioration of fundamentals of the speculative business and decide whether to continue credit ...
Xuewen Liu*, Pengfei Wang, Zhongchao Yang
ARTICLE | Journal of Financial Economics| 2024、152
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Peer Versus Pure Benchmarks in the Compensation of Mutual Fund Managers
Abstract:We examine the role of peer (e.g., Lipper manager indices) versus pure (e.g., S&P 500) benchmarks in fund manager compensation. We model their impact on manager incentives and then test those predictions using novel data. We find that 71% of managers are compensated based on peer benchmarks. Consistent with the model, peer-benchmarked fund managers exhibit higher effort generating higher gross ...
Richard Evans, Juan-Pedro Gómez, Linlin Ma*, Yuehua Tang
ARTICLE | Journal of Financial and Quantitative Analysis| 2024、59、7
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Guilty by Political Association: The Impact of Political Scandals on Connected Firms
Abstract:Over the period 1992–2018, we investigate the economic impact of scandal-tainted congresspersons on politically connected firms. Following the first media report of a scandal, firms connected to the scandal-tainted congressperson experience a relative loss in market value. The loss manifests through both a reputational spillover and a reduced effectiveness of the congressperson in granting ...
April Knill, Baixiao Liu*, John J. McConnell, Cayman Seagraves
ARTICLE |Journal of Law & Economics | 2024、67、4
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