We develop a q theory of investment with endogenous leverage, payout, hedging, and risk-taking dynamics. The key frictions are costly equity issuance and incomplete markets. We show that the marginal source of external financing on an on-going basis is debt. The firm lowers its debt when making...

We estimate institutional investor preferences based on their proxy voting records in publicly listed Russell 3000 firms. We employ a spatial model of proxy voting, the W-NOMINATE method for scaling legislatures, and map institutional investors onto a left-right dimension based on their votes...

This paper explores whether carbon emissions affect the cross-section of U.S. stock returns. We find that stocks of firms with higher total CO2 emissions (and changes in emissions) earn higher returns, after controlling for size, book-to-market, momentum, and other factors that predict returns....

We propose a dynamic theory of banking where the role of deposits is akin to that of productive capital in the classical Q-theory of investment for non-financial firms. As a key source of leverage, deposits create value for well-capitalized banks. However, unlike productive capital of...

Companies are exposed to carbon-transition risk as the global economy transitions away from fossil fuels to renewable energy. We estimate the market-based premium associated with this transition risk at the firm level in a cross-section of over 14,400 firms in 77 countries. We find a widespread...

We study the resolution of global banks by national regulators. Single-point-of-entry (SPOE) resolution, where loss-absorbing capital is shared across jurisdictions, is efficient but may not be implementable. First, when expected transfers across jurisdictions are too asymmetric, national...

The promise of contingent convertible capital securities (CoCos) as a "bail-in" solution has been the subject of considerable theoretical analysis and debate, but little is known about their effects in practice. In this paper, we undertake the first comprehensive empirical analysis of bank CoCo...

We study a dynamic-contracting problem involving risk sharing between two parties -- the Proposer and the Responder -- who invest in a risky asset until an exogenous but random termination time. In any time period they must invest all their wealth in the risky asset, but they can share the...

Commentators have raised concerns about the empty creditor problem that arises when a debtholder has obtained insurance against default but otherwise retains control rights in and outside bankruptcy. We analyze this problem from an ex-ante and ex-post perspective in a formal model of debt with...

This paper examines the relation between ownership, corporate form, and innovation for a cross-section of private and publicly traded innovating firms in the US and 15 European countries. A striking novel observation emerges from our analysis: while most innovating firms in the US are publicly...