This paper examines the role of bond ratings and the effects of rating-based regulations in thecorporate bond market. Exploiting an unanticipated mechanical change in how the benchmarkLehman bond indices are constructed in 2005, we show that rating-induced market segmentationof the bond market...

This paper documents a new channel for rating-based bond market segmentation which, in contrast to prior research, is based on non-regulatory asset management practices. A 2005 Lehman Brothers index redefinition provides a quasi-natural experiment in which a number of previously high-yield...

How much of a loan should a lender dynamically retain and how does retention affect loan performance? We address these questions in a dynamic agency model in which a lender originates loans that it can sell to investors. The lender reduces default risk through screening at origination and...

We build a dynamic agency model in which the agent controls both current earnings via short-term investment and firm growth via long-term investment. Under the optimal contract, agency conflicts can induce short- and long-term investment levels beyond first best, leading to short- or...

We develop a model in which a startup firm issues tokens to finance a digital platform, which creates agency conflicts between platform developers and outsiders. We show that token financing is generally preferred to equity financing, unless the platform expects strong cash flows or faces severe...