We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause arbitrage crashes and failure of systemically important intermediaries during the global financial crisis. Intermediaries pledge productive capital as repo collateral to fund the...

While acquisitions are a popular form of investment, the link between firms' financial constraints and acquisition policies is not well-understood. We develop a model in which financially-constrained bidders decide when to approach the target, how much to bid, and whether to bid in cash or...

There exist capital constraints in many distribution channels. We examine a channel consisting of one manufacturer and one retailer, where the retailer is capital constrained. The retailer may fund its business by borrowing credit either from a competitive bank market or from the manufacturer,...

This paper studies the relationship between firms' innovation activities, financial constraints and corporate tax reform in China. A firm-level proxy for financial constraints is derived using cash-flow analysis and subsequently linked to various innovation activities of the firm. As an...

China's M2/GDP ratio keeps rising, although it is already in the highest tier throughout the world. In this paper, we investigate empirically this puzzle using different levels of data. We first provide a quantitative approach to estimate the degree of China's excess liquidity based on...

At present, there are two main explanations for market anomalies, namely, risk-based and behavioral. While the risk-based perspective states that abnormal returns arise owing to investors undertaking financial risks, the behavioral perspective states that abnormal returns arise owing to investor...

Some of the most visible causes for booms and busts in a small, open, financially developing economy include a fragile financial market, exchange rate shocks, and asset price volatility that often result in credit constraints. Because these shocks tend to exaggerate the credit cycles of...

When institutional investors rearrange their portfolios, they should consider both the temporary and the permanent price impacts. After a temporary price impact the order book fully recovers, whereas a permanent price impact changes the equilibrium price, having effects on the resulting...