Theoretical work in financial economics suggests that payoff complementarities lead to financial fragility. Indeed, phenomena like bank runs and currency attacks are often attributed to the feature that investors are better off taking the same action taken by other investors. Due to data...

Stock prices and real investments are highly correlated. Previous literature has offered two main explanations for this high correlation. The first explanation relies on price being informative about investment opportunities, the second one is based on financing constraints. In this paper we...

In this paper, we study a setting where a firm (principal) is privately informed of the firm's potential and contracts with an agent to supply unobservable effort. We show it can be optimal for the firm to have loose monitoring in the sense that the monitoring system is less perfect than what is...

This paper studies the role of conservative accounting standards in alleviating rational yet dysfunctional unobservable earnings manipulation. We show that when accounting numbers serve both the valuation role (in which potential investors use accounting reports to assess a firm's expected...

Bayesian learning implies decreasing weights on prior beliefs and increasing weights on track records, as the latter become more precise. We test whether investors learn about analyst predictive ability in this manner by examining market reactions to analysts' forecasts. Consistent with...

The political environment, legal system, and culture of China differ from that of most mature economies in the western world. Consequently, Chinese real estate markets should behave differently from the markets of the mature economies such as the United States and the United Kingdom. The rapid...

This paper explores the impact of private sector participation on industrial performance of urban water supply by using panel data for 35 major cities in China over the period 1998 to 2008. We find that the introduction of private sector participation is significantly correlated with improvement...