We study how relationship lending and transaction lending vary over the business cycle. We develop a model in which relationship banks gather information on their borrowers, which allows them to provide loans for profitable firms during a crisis. Due to the services they provide, operating costs...

We develop a q theory of investment with endogenous leverage, payout, hedging, and risk-taking dynamics. The key frictions are costly equity issuance and incomplete markets. We show that the marginal source of external financing on an on-going basis is debt. The firm lowers its debt when making...

We estimate institutional investor preferences based on their proxy voting records in publicly listed Russell 3000 firms. We employ a spatial model of proxy voting, the W-NOMINATE method for scaling legislatures, and map institutional investors onto a left-right dimension based on their votes...

This paper explores whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, after controlling for size, book-to-market, momentum, and other factors that predict returns....

We propose a dynamic theory of banking where the role of deposits is akin to that of productive capital in the classical Q-theory of investment for non-financial firms. As a key source of leverage, deposits create value for well-capitalized banks. However, unlike productive capital of...

Companies are exposed to carbon-transition risk as the global economy transitions away from fossil fuels to renewable energy. We estimate the market-based premium associated with this transition risk at the firm level in a cross-section of over 14,400 firms in 77 countries. We find a widespread...

A growing fraction of companies globally have made commitments to reduce their carbon emissions by a certain date. While the companies that make commitments subsequently reduce their emissions, the effect on overall emissions of companies (including those that do not commit) has been small; the...

In some markets, such as the market for drugs or for financial services, sellers have better information than buyers regarding the matching between the buyer's needs and the good's actual characteristics. Depending on the market structure, this may lead to conflicts of interest and/or the...

The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most...

The period after the Global Financial Crisis (GFC) was characterized by a considerable risk migration within global liquidity flows, away from cross-border bank lending towards international bond issuance. We show that the post-GFC shifts in the risk sensitivities of global liquidity flows are...