RCFS News

The determinants of executive compensation packages are fraught with empirical difficulties due to unobserved firm-level, CEO-level, and assortative matching characteristics. In the paper “Managerial Attributes, Incentives, and Performance,” just published in the August 2020 issue (Volume 9, Issue 2), Jeff Coles and Frank Li examine the relative importance of observable and unobservable firm- and manager-specific characteristics in determining two fundamental attributes of executive incentives, delta and vega. They find that… Read More »Paper Spotlight: Managerial Attributes, Incentives, and Performance

“The Macroeconomics of Corporate Debt” by Markus K. Brunnermeier  and Arvind Krishnamurthy “The risk of being a fallen angel and the corporate dash for cash in the midst of COVID” by Viral Acharya and Sascha Steffen “The COVID-19 Shock and Equity Shortfall: Firm-level Evidence from Italy” by Elena Carletti, Tommaso Oliviero, Marco Pagano, Loriana Pelizzon, and Marti G. Subrahmanyam

In the RCFS blog, Professor Ellul discusses Boris Vallée‘s paper “Banks’ Contingent Capital Trigger Effects,” which won the RCFS’s 2020 Rising Scholar Award. Vallée finds that liability management exercises, a type of contingent capital trigger used by banks, are effective at improving banks’ capitalization levels. This finding is particularly important during the COVID-19 pandemic, when economic downturn is likely to put pressure on banks. Read the full post on the blog.

The Editor’s Choice paper for 9(2) is “Banks’ Non-interest Income and Systemic Risk” by Markus K. Brunnermeier, Gang Nathan Dong, and Darius Palia. You can read the paper free online.

              The impact of COVID-19 has driven many firms into financial distress, and policymakers around the world have responded with various emergency measures to support the business sector. While the immediate priority has been to get support out quickly to firms, over time more active decisions will have to be made on which firms should be supported. A potential danger that arises is that… Read More »Paper Spotlight: Identifying the Real Effects of Zombie Lending

“Institutional Investors and Hedge Fund Activism” by Simi Kedia, Laura  Starks, and Xianjue Wang

“Wages and Firm Performance: Evidence from the 2008 Financial Crisis” by Paige Parker Ouimet and Elena Simintzi “Short-termism, Managerial Talent, and Firm Value” by Richard T. Thakor “Resiliency of environmental and social stocks: an analysis of the exogenous COVID-19 market crash” by Rui Albuquerque, Yrjo Koskinen, Shuai Yang, and Chendi Zhang “Identifying the Real Effects of Zombie Lending” by Fabiano Schivardi, Enrico Sette, and Guido Tabellini

                The COVID-19 pandemic induced an unprecedented “stress test” on the financial system and the ability of banks to supply liquidity to the real economy. A new paper by Lei Li, Phil Strahan, and Song Zhang entitled “Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis” starts with the following important observation: In the last three weeks of March 2020, banks… Read More »Paper Spotlight: Banks as Lenders of First Resort: Evidence from the COVID-19 Crisis

One major lesson from the 2008-09 financial crisis that subsequently shaped in part the regulatory framework that emerged in the last decade was that downgrades of securities occurring in an interconnected financial system create a need for capital relief for regulated entities. This happens because banks’ and insurers’ capital requirements are based on credit ratings. The question is what kind of short-term and long-term incentives arise from such relief programs.… Read More »Paper Spotlight: Rethinking the Use of Credit Ratings in Capital Regulations: Evidence From the Insurance Industry

The video of Thomas Philippon’s keynote presentation at Cavalcade North America 2020 can now be viewed on the Cavalcade web site.