Effective policymakers must balance the demands of formulating a corporate tax system that spurs economic activity while promoting a “level playing field” across firms. However, tax systems have become more complex over time, increasing firms’ difficulty in understanding and complying with tax regulations. We explore the role of corporate tax system complexity in both objectives, using an international sample and measuring tax system complexity based on the average time firms spend to comply with the country’s tax regulations. Examining both capital and labor investment, we document two key findings. First, firm-level investment is less sensitive to changes in corporate income tax rates when tax system complexity is higher, suggesting that such complexity can undermine the ability of tax policy to stimulate investment. Second, the impact of complexity on the sensitivity of investment to the tax rate varies significantly across firms, with domestic-owned, smaller, and private firms being more negatively affected by tax system complexity.
We study the impact of widespread adoption of work-at-home technology using an equilibrium model where people choose where to live, how to allocate their time between working at home and at the office, and how much space to use in production. A key parameter is the elasticity of substitution between working at home and in the office that we estimate using cross-sectional time-use data.
We use textual analysis of mandatory accounting filings to develop firm-level, time-varying measures of exposure to individual government agencies. The measures vary predictably across industries and with broad regulatory interventions that expanded the scope and power of different government agencies, but also include substantial firm-specific, time-varying components.
Many organizations employ interpersonal feedback processes as a structured means of informing and motivating employee improvement. Ample evidence suggests that these feedback processes are largely ineffective, and despite a wealth of prescriptive literature, these processes often fail to lead to employee motivation or improvement.
We study competition and collaboration between a bank and a shadow bank that lend in the same market plagued by adverse selection. The bank has cheaper funding, whereas the shadow bank is endowed with a better screening technology. Our innovation is to allow the bank to lend to the shadow bank, i.e., to finance its competitors.
In this paper, we provide a theoretical and empirical framework that allows us to synthesize and assess the burgeoning literature on CEO overconfidence. We also provide novel empirical evidence that overconfidence matters for corporate investment decisions in a framework that explicitly addresses the endogeneity of firms' financing constraints.
Cryptocurrency has its critics, but it’s becoming an increasingly mainstream option for retail and institutional investors alike. In this Kenan Insight, we share some thoughts from former Co-president of Morgan Stanley Zoe Cruz and Rethinc. Labs Faculty Director Eric Ghysels on whether crypto has reached a tipping point for adoption by individual investors.
This paper provides a first look at newly available data on the holdings of private equity (PE) funds. Because research has been hampered by the lack of comprehensive, high-quality data on portfolio companies, this new source offers the potential for a wide range of research.
This paper documents a set of stylized facts about leverage and financial fragility in the non-financial corporate sector in emerging markets since the Global Financial Crisis (GFC). Corporate debt vulnerability indicators prior to the Asian Financial Crisis (AFC) attributed to corporate financial roots provide a benchmark for comparison. The firm-level data suggest that emerging markets post-GFC have lower leverage ratios than the five Asian crisis countries (Asian Five) in the run-up to the AFC.
We analyze why firms use non-intermediated short-term debt by studying the commercial paper (CP) market. Using a comprehensive database of CP issuers and issuance activity, we show that firms use CP to provide start-up financing for capital investment.
This paper documents macroeconomic forecasting during the global financial crisis by two key central banks: the European Central Bank and the Federal Reserve Bank of New York.
The paper evaluates the performance of several recently proposed tests for structural breaks in the conditional variance dynamics of asset returns. The tests apply to the class of ARCH and SV type processes as well as data‐driven volatility estimators using high‐frequency data.
In various forms, research on stress and well-being has been a part of the Journal of Applied Psychology (JAP) since its inception. In this review, we examine the history of stress research in JAP by tracking word frequencies from 606 abstracts of published articles in the journal.
Even before the COVID-19 pandemic, finding affordable housing was a persistent problem in the U.S. In this Kenan Insight, we look at the factors driving the nationwide affordable housing crunch, particularly for those most affected by it — low income, single-parent families.
In this paper, we compare several approaches of producing multi-period-ahead forecasts within the GARCH and RV families – iterated, direct, and scaled short-horizon forecasts. We also consider the newer class of mixed data sampling (MIDAS) methods.
Our findings suggest that the influence of precautionary savings on interest rates is elevated during bad-environment economic times, with interest rates responding much more negatively to time-varying perceptions of uncertainty.
Many recent corporate scandals have been described as resulting from a slippery slope in which a series of small infractions gradually increased over time (e.g., McLean & Elkind, 2003). However, behavioral ethics research has rarely considered how unethical behavior unfolds over time.
Many time series are sampled at different frequencies. When we study co-movements between such series we usually analyze the joint process sampled at a common low frequency.
We examine the link between endowment investment performance and the expertise of university board members. Harnessing detailed information on 11,019 members for 579 universities, we find that expertise in alternatives and larger professional networks are associated with higher allocations to alternatives and better investment results.
The Kenan Institute announces the publication of “The New Oxford Handbook of Economic Geography,” edited by Gordon L. Clark, Maryann P. Feldman, Meric S. Gertler and Dariusz Wójcik. Feldman is the S.K. Heninger Distinguished Professor of Public Policy at the UNC College of Arts & Sciences, and a professor of finance at Kenan-Flagler Business School.