We derive the social optimum and optimal government debt in an intergenerational model of growth with fertility, elastic labor, human capital externalities and a non-convex feasible set. Debt through lump-sum taxation increases leisure and labor, reduces fertility, and can achieve the social...

We explore the roles of subsidies in the Matsuyama model (1999) of growth through cycles alternating perpetually between two phases featuring neoclassical investment and neo-Schumpeterian innovation respectively. Subsidies to R&D investment or to the purchase of newly invented intermediate goods...

We develop the stochastic Perron's method (see e.g. arXiv: 1212.2170) in the framework of stochastic target games (arXiv: 1307.5606), in which one player tries to find a strategy such that the state process almost-surely reaches a given target no matter which action is chosen by the other...

While aggregate earnings should affect aggregate stock returns, standard portfolio theory predicts that the cross-sectional dispersion in firm-level earnings would not affect aggregate stock returns. Nonetheless, this paper demonstrates a surprisingly robust relation between cross-sectional...

his paper develops a theoretical model to understand the contractual role of accounting conservatism in debt contracts. The optimal debt contract includes an accounting based covenant that gives the creditor the right to liquidate when accounting information reveals unfavorable news about the...

This study examines how accounting conservatism may affect the information environment of analysts’ earnings forecasts, taking into account the interaction between unconditional and conditional conservatism. Unconditional conservatism preempts conditional conservatism in the later period and...

This paper examines risk-taking incentives in banks under different accounting regimes with capital regulation. In the model the bank's decisions of capital issuance and investment policy are jointly determined. Given exogenous minimum capital requirement, the bank is more likely to issue equity...

Prior research documents that individual stock returns respond to earnings differently under new accounting standards, regulations, or changes in enforcement. This paper examines whether this result extends to the aggregate stock market. We take a macro perspective and study the properties of...