We develop an asset-pricing model with endogenous corporate policies that explains how inflation jointly impacts real asset prices and corporate default risk. Our model includes two empirically grounded nominal frictions: fixed nominal coupons and sticky profitability. Taken together, these two...

Search frictions in the labor market help explain the equity premium in the financial market. We embed the Diamond-Mortensen-Pissarides search framework into a dynamic stochastic general equilibrium model with recursive preferences. The model produces a sizeable equity premium of 4.54% per annum...

We study bidder bahavior and performance in 53 main refinancing operations (repo auctions) of the European Central Bank (ECB). The data set starts with the first auctions after the ECB changed from fixed rate tenders to variable rate tenders. We find that private information and the winnner's...

We survey over 1,000 institutional and corporate venture capitalists (VCs) at more than 900 different firms to learn how their decisions and investments have been affected by the COVID-19 pandemic. We compare their survey answers to those provided by a large sample of VCs in early 2016 and...

We develop a valuation model for venture capital-backed companies and apply it to 135 U.S. unicorns - private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings and find reported unicorn post-money valuation average 50% above fair...

Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...

Random assignment is insufficient for measured treatment responses to recover causal effects (comparative statics) in dynamic economies. We characterize analytically bias probabilities and magnitudes. If the policy variable is binary there is attenuation bias. With more than two policy states,...

We study the relation between leverage and corporate tax rates using an extensive data set constructed from all corporate income tax returns filed with the IRS from 1926 to 2009. This data set includes financial statement data from millions of private and public corporations of all sizes. We...

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset volatility by an order of magnitude relative to that of...

This paper documents the puzzling evidence that a substantial number of large public non-financial US firms follow a zero-debt policy. Over the 1962-2009 period, on average 10.2% of such firms have zero debt and almost 22% have less than 5% book leverage ratio. Neither industry nor size can...