RCFS News

“The Effect of Taxation on Corporate Financing and Investment” by Hong Chen and Murray Frank “How are Bankers Paid?” by Benjamin Bennett, Radhakrishnan Gopalan, and Anjan V. Thakor

It is not just managers that can have a short-term orientation—the forthcoming theoretical paper “Competition for Flow and Short-Termism in Activism,” by Mike Burkart and Amil Dasgupta, shows that activist funds too can focus on the short term. In the model, activists add value by preventing wastage by the manager. To signal their type to their own investors, they take a short-term action such as boosting leverage to make a… Read More »Paper Spotlight: Competition for Flow and Short-Termism in Activism

RCFS has a submission option for papers that were previously reviewed by other journals. The goal of such review process is to help the editors arrive at a quick and informed decision on a paper based on feedback received by the authors from previous submissions. A paper is eligible for this optional review process if it was previously submitted to a few select journals; please see Prior Review Policy for… Read More »Prior Review Process

Are managers too myopic, relative to what shareholders would want? In a forthcoming RCFS paper, “Short-termism, Managerial Talent, and Firm Value,” Richard Thakor provides a theoretical model in which the answer is “no,” with a surprising twist: In the model, managers prefer long-term projects, because it allows talented managers to earn higher rents. However, to reduce managerial rents, the firm may induce a manager to invest in a short-term project,… Read More »Paper Spotlight: Short-termism, Managerial Talent, and Firm Value

We are living through a pandemic-induced recession that has slashed many firms’ cash flows with a consequent negative impact on both employment and wage levels. Firms, fighting for survival, will be pressed to cut costs, and wages are an important budget line for the vast majority of firms. At the same time, workers are important assets for firms’ survival and prosperity. What are the effects of paying higher wages on… Read More »Paper Spotlight: Wages and Firm Performance: Evidence from the 2008 Financial Crisis

“Efficient Programs to Support Businesses during Crises” by Thomas Philippon

In the new entry on the RCFS blog, the RCFS editorial team discusses the new special issue of RCFS on the COVID-19 pandemic crisis and corporate finance. Editors Andrew Ellul, Isil Erel, and Uday Rajan talk about why they decided to publish a special issue on COVID, and the themes they decided to tackle in the issue, including financing of firms, equity shortfall and zombie lending, and firm characteristics and… Read More »RCFS Blog Series IV: The COVID-19 Pandemic Crisis and Corporate Finance

The market reactions to the 2019 novel Coronavirus event, a truly exogenous shock, can help our understanding of how real economic shocks and financial policies drive firm value. In “Feverish Stock Price Reactions to COVID-19,” Stefano Ramelli and Alexander F. Wagner find strong causal evidence for the role of international trade and global value chains for corporate value. Initially, internationally-oriented firms, especially those more exposed to China, underperformed. As the… Read More »Paper Spotlight: Feverish Stock Price Reactions to COVID-19