We provide a model and empirical tests showing how an active acquisition market affects firm incentives to innovate and conduct R&D. Our model shows that small firms optimally may decide to innovate more when they can sell out to larger firms. Large firms may find it disadvantageous to engage in...

This paper studies the information content and consequences of third-party voting advice issued during proxy contests. We document significant abnormal stock returns around proxy vote recommendations and develop an estimation procedure for disentangling stock price effects due to changes in...

We use data from the Groningen Growth and Development Centre (GGDC) database to perform preliminary empirical analysis of the interplay between quality and quantity of finance in accounting for the output growth of ten sectors. We review the existing literature and some salient open questions...

We find that active mutual funds perform better after trading more. This time-series relation between a fund’s turnover and its subsequent benchmark-adjusted return is especially strong for small, high-fee funds. These results are consistent with high-fee funds having greater skill to identify...

Using unique data on Canadian households, we assess the impact of financial advisors on their clients' portfolios. We find that advisors induce their clients to take more risk, thereby raising expected returns. On the other hand, we find limited evidence of customization: advisors direct clients...

Since the 2008 global financial crisis, and after decades of relative neglect, the importance of the financial system and its episodic crises as drivers of macroeconomic outcomes has attracted fresh scrutiny from academics, policy makers, and practitioners. Theoretical advances are following a...

This paper analyzes the joint responses of commodity futures prices and traders' futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial...

We provide a theory of the determination of exchange rates based on capital flows in imperfect financial markets. Capital flows drive exchange rates by altering the balance sheets of financiers that bear the risks resulting from international imbalances in the demand for financial assets. Such...

Monetary policy affects the real economy in part through its effects on financial institutions. High frequency event studies show the introduction of unconventional monetary policy in the winter of 2008-09 had a strong, beneficial impact on banks and especially on life insurance companies. I...

Using the dollar-value a mutual fund manager adds as the measure of skill, we find that not only does skill exist (the average mutual fund manager adds about $2 million per year), but this skill is persistent, as far out as 10 years. We further document that investors recognize this skill and...