We ask why we observe multiple layers of decision-making in fund management with investors, sponsors, fund managers, and consultants, even if additional decision-makers are costly and do not contribute to superior performance. In our model, an investor hires a wealth manager (“sponsor”), who...

We study the mandated introduction of a supervised auction for the primary bond market in China. The regulatory intervention significantly reduced the cost of debt for Chinese issuers. We show that the majority of the benefits flow from reduced agency conflict between underwriters and issuers....

The conflict of interest between shareholders in insider-dominated firms generates the agency problem of profit diversion, which intensifies when the controlling shareholder is the CEO. In a theoretical model, we show that incentive contracts can be employed to discipline diversion, and how they...

Despite growing investor reliance on environmental, social, and governance (ESG) ratings, we know relatively little about how such ratings are constructed. Recent evidence of disagreement across ESG ratings raises concerns about their credibility. We note that while reputational concerns likely...

Despite the importance of internal decision-making for corporate tax outcomes, we know little about the role of within-firm delegation of decision rights. Using confidential survey data, we examine the relation between corporate tax effectiveness and the extent to which capital investments,...

This study investigates how brokerage revenue sources influence analysts’ compensation. Using unique Swedish datasets, I reveal several insights on how decreasing investment banking support to research departments increases the sensitivity of analyst’s pay to trading revenues. The link...

In this study, we explore the hedge fund activist influence on managerial decisions in opaque banking industry. Focusing on loan loss provisions (LLPs), a discretionary item that is subject to managerial manipulations as well as pressures from various regulatory agencies, we find that hedge fund...

This article identifies a profound and previously overlooked incentive for excessive risk- taking by infrastructure providers. The magnitude and critical nature of infrastructure implies that negative externalities potentially far exceed the net assets of the infrastructure provider. The...

We develop a continuous-time dynamic contracting model where a risk-neutral principal hires a risk-averse agent to manage a project. The project risk is controlled by the principal or agent, and there is a trade-off between risk premium and a value-destroying effect of risk. No-saving selection...

When individuals have questions about federal benefits, services, and legal rules, they increasingly seek help from government chatbots, virtual assistants, and other automated tools. Most scholars who have studied artificial intelligence and federal government agencies have not focused on the...