The patent system grants inventors temporary monopoly rights in exchange for a public disclosure detailing their innovation. These disclosures are meant to allow others to recreate and build on the patented innovation. We examine how the quality of these disclosures affects follow-on innovation.
Global risk and risk aversion shocks have distinct distributional impacts on capital flows with salient consequences for tail risk in emerging markets. Open-end mutual fund trading provides a key mechanism linking shocks facing global investors to extreme capital flow realizations. The effects are heterogeneous across asset classes and fund types.
We find that equity loan fees are the best predictor of cross-sectional returns. When compared to 102 other anomalies, the loan fee anomaly has the highest monthly long-short return (1.17%), has the highest monthly Sharpe Ratio (0.40), and unlike other anomalies, exhibits strong persistence throughout the sample.
We analyze the contribution of returns around earnings announcements to typical estimates of the “prices lead earnings” relation. We find that prior returns' ability to explain earnings is concentrated disproportionally in returns on earnings announcement dates, suggesting that a substantial portion of the estimated timeliness of returns in previous studies is empirically indistinguishable from the information content of earnings.
We examine the human capital of IPO-filing firms and how going public affects their labor force. IPO-filing firms have high average wages and limited industrial diversification. Moreover, we document that a successful IPO increases departures of high-skilled employees to startups and diversification though employment growth in non-core industries.
We use unique data on employee decisions in the employee stock purchase plans (ESPPs) of U.S. public firms to measure the influence of networks on investment decisions. Comparing only employees within a firm during the same election window and controlling for a metro area fixed effect, we find that the local choices of coworkers to participate in the firm’s ESPP exert a significant influence on employees’ own decisions to participate.
We demonstrate the need to view in a dynamic context any decision based on limited information. We focus on the use of product costs in selecting the product portfolio. We show how ex post data regarding the actual costs from implementing the decision leads to updating of product cost estimates and potentially trigger a revision of the initial decision. We model this updating process as a discrete dynamical system (DDS). We define a decision as informationally consistent if it is a fixed-point solution to the DDS.
Beginning with Anderson, Banker, and Janakiraman (2003), a rapidly growing literature attributes the short-run asymmetric cost response to activity changes (i.e., sticky costs) as resulting from short-run managerial choices. In this paper, we are agnostic on the theory of sticky costs. Rather, we focus on empirical tests of cost stickiness.
Many authors have suggested that situational judgment tests (SJTs) are useful tools for assessing applicants because SJT items can be written to assess a number of job-related knowledges, skills, abilities and other characteristics (KSAOs). However, SJTs may not be appropriate for measuring certain KSAOs for some applicants.
We introduce the concept of chronotype diversity to the team diversity literature. Chronotype diversity is defined as the extent to which team members differ in their biological predispositions towards the optimal timing of daily periods of activity and rest. To explain the effects of chronotype diversity on team outcomes, we develop a theory of team energetic asynchrony.
In modern work teams, successful performance requires adaptation to changing environments, tasks, situations, and role structures. Although empirical studies of team adaptive performance have generated key inferences about team adaptation in specific contexts, there are important conceptual differences across the adaptive stimuli examined in the literature (e.g., novel environments vs. downsizing).
We document that the first and third cross-sectional moments of the distribution of GDP growth rates made by professional forecasters can predict equity excess returns, a finding that is robust to controlling for a large set of well-established predictive factors.
Focusing on data from the United States and the United Kingdom, we document that both the anomaly identified by Backus and Smith, which concerns the low correlation between consumption differentials and exchange rates, and the forward premium anomaly, which concerns the tendency of high interest rate currencies to appreciate, have become more severe over time.
Although weather has been shown to affect financial markets and financial decision making, a still open question is the channel through which such influence is exerted. By employing a multiple price list method, this paper provides direct experimental evidence that sunshine and good weather promote risk-taking behavior.
In this paper, we empirically examine differences in subprime borrower default decisions by Census tract characteristics in order to clarify how the subprime foreclosure crisis played out in minority areas. An innovation in our modeling approach is that we do not constrain the impact of neighborhood composition to be identical across diverse decision-making settings.
Over 1960 to 2017, we show that a positive risk premium from holding high-beta stocks (versus low-beta stocks) and small-cap stocks (versus large-cap stocks) is reliably earned only after the expected stock-market volatility breaches an approximate top-quintile threshold. The high conditional average returns with this nonlinear risk-return phenomenon are persistently evident over months t+1 to t+6 following a volatility-threshold breach in month t-1.
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.
Why are downturns following high valuations of firms long and severe? Why do firms choose high debt when they anticipate high valuations, and underperform subsequently? We propose a theory of financing cycles where the importance of creditors’ control rights over cash flows (“pledgeability”) varies with industry liquidity.
The behavioral response to public disclosure of income tax returns figures prominently in policy debates about its advisability. Although supporters stress that disclosure encourages tax compliance, policy debates proceed in the absence of empirical evidence about this, and any other, claimed behavioral impact.
Auditors are expected by the public and to find all financial statement fraud, even though Generally Accepted Auditing Standards (GAAS) have long held that auditors may not be able to detect all frauds. In this article, we use examples from the experience of an expert witness in numerous major fraud cases where auditors were sued for not detecting fraud to illustrate situations in which auditors can, and cannot, reasonably be expected to detect fraud.