This article presents tests for the existence of common factors spanning two large panels/groups of macroeconomic and financial variables, and the estimation of common and group-specific factors. New analytical results are derived regarding (i) the difference in the asymptotic distribution of the test statistics when aggregating the data first and then extracting the principal components (PCs), or vice versa, as well as (ii) the estimation of the common factor and its asymptotic distribution, extending the work of Andreou et al. (2019).
Application Programming Interface (APIs) have increasingly become crucial to digital ecosystems, facilitating interconnectivity and data exchange essential for digital transformation and open innovation in today's business landscape. In this article, we introduce a perspective on how APIs can be viewed as a means of achieving a dynamic equilibrium between centralization and decentralization for value creation in business ecosystems.
We examine whether the contribution of firm-level accounting earnings to the informativeness of the aggregate is tilted towards earnings with specific financial reporting characteristics. Specifically, we investigate whether considering the smoothness of firm-level earnings increases the informativeness of aggregate earnings for future real GDP, and if so, whether macroeconomic forecasters use this information efficiently. Using recently-developed mixed data sampling methods, we find that the aggregate is tilted towards firms with smoother earnings and that this composition of aggregate earnings outperforms traditional weighting schemes.
Nonwage benefits have become increasingly important and now represent 30% of total compensation (BLS, 2021). Using administrative data on health insurance, retirement, and leave benefits, we find dramatically lower within-firm variation in benefits than in wages. We also document sharply higher between-firm variation in nonwage benefits, compared to wages. We argue that this pattern can be a consequence of nondiscrimination regulations and the high administrative burden of managing too many or complex plans
Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms.
We investigate the extent to which loan officers generate individual effects on the design and performance of syndicated loan deals. We construct a novel database containing the identities of 6,821 loan officers involved in structuring syndicated loan deals. This data allow us to exploit movement of loan officers across banks to disentangle loan officer effects from bank fixed effects and estimate loan officers’ influence on both lending terms and loan performance. We find that loan officers have a significant influence on loan terms and loan performance that is incremental to bank and borrower characteristics.
Short sellers are widely known to be informed, which would typically suggest that they demand liquidity. We obtain comprehensive transaction-level data to decompose daily short volume into liquidity-demanding and liquidity-supplying components. Contrary to conventional wisdom, we show that the most informed short sellers are actually liquidity suppliers, not liquidity demanders.
Short sellers are widely known to be informed, which would typically suggest that they demand liquidity. We obtain comprehensive transaction-level data to decompose daily short volume into liquidity-demanding and liquidity-supplying components. Contrary to conventional wisdom, we show that the most informed short sellers are actually liquidity suppliers, not liquidity demanders.
Traditional instruments of market analysis are no longer enough for the big markets of the 21st century. Data Science creates new opportunities to understand competitors as well.
This paper uses transaction-level import data at the shipment level to examine how multinational companies importing to the US have restructured their supply chains during the COVID-19 pandemic. We find that companies sourced from fewer locations, reduced the share of imports from China, and increased the share of imports from other Asian countries, such as India and Vietnam, and North American countries, such as Canada and Mexico. For managers, our results imply that a one-size-fits-all mentality regarding supply chain disruption responses is not appropriate, and companies’ disruption-response strategies need to be tailored to individual supply chains’ circumstances.
Retail stores are geographically dispersed as a part of a multiunit organization. In such a setting, store managers play an important role in driving store performance. To motivate them to exert effort, retailers have provided group incentives for store managers. Using data from 75 stores of a U.S.-based retail chain that changed its incentive plan for store managers from being purely dependent on store performance to being dependent upon both store and corporate performance, we investigate the effect of this change on store performance.
This study examines the relation between audit personnel salaries and office-level audit quality. We measure audit personnel salaries at the associate, senior, and manager ranks for Big 4 audit offices from 2004 to 2013, using unique individual-auditor-level data obtained from the U.S. Department of Labor.
Although subsidiary disclosures in firms’ filings with the Securities and Exchanges Commission (SEC; Exhibit 21) represent the most granular required public disclosure of a firm's geographic footprint, little is understood about the quality of the disclosure, and anecdotal evidence suggests firms may not fully comply with the disclosure requirements. We use data provided by multinational firms to the Internal Revenue Service regarding their foreign subsidiary locations to explore the accuracy of public subsidiary disclosures on Exhibit 21 of Form 10‐K per SEC rules.
Over the last two decades, executive compensation research has focused primarily on equity-based pay and incentives emanating from executives' firm-specific equity portfolios, while generally ignoring cash-based bonus plans as a second order effect. Exploiting access to new data sources, there has been a revival of interest by accounting researchers in more deeply understanding the value adding roles played by bonus plans.
Do founder-CEOs have an expiration date? In the wake of Jack Dorsey’s resignation from Twitter, some have begun asking whether the move could herald a new era, in which founders voluntarily step aside rather than sticking around for decades or waiting to be ousted. To explore the value added by a founder-CEO, the authors analyzed stock price and financial performance data from more than 2,000 publicly traded companies.
Regulating short selling is difficult and controversial. We review the academic literature on short selling regulation and provide insights for future policymakers and academics. We organize the complex history of short selling regulation into three areas: disclosure requirements, securities lending restrictions, and trading restrictions. We identify, analyze and discuss 45 distinct regulations promulgated during the period 1896 through 2021, primarily by reviewing the academic literature associated with each regulation, including a discussion of the data sources employed. In so doing, we provide several insights regarding the effectiveness of regulatory approaches as well as the wider impact on markets.
We examine the effects of an annual government social safety net payment on crime by leveraging geographic and intertemporal variation in the magnitude and timing of earned income tax credit (EITC) payments, combined with crime micro-data.
We construct a new data set tracking the daily value of life insurers’ assets at the security level. Outside of the 2008–2009 crisis, a $1 drop in the market value of assets reduces an insurer’s market equity by $0.10. During the financial crisis, this pass-through rises to $1.
This research paper develops a substantial, large-scale database of building energy use, energy audit reports, land use, and financial characteristics in New York City to empirically model the hurdle rate for energy retrofit investments, using actual audit data per permitted renovation work.
We analyze large-scale establishment-level data to evaluate how county-level commercial property taxes influence business location decisions. We find that the propensity to favor lower-taxed counties is increasing in the tax differential between adjacent counties, and is decreasing in the distance to the border.