We show that wrongful discharge laws - laws that protect employees against unjust dismissal - spur innovation and new firm creation. Wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability to hold up innovating employees...

The global imbalance explanation of the financial crisis of 2007-09 suggests that demand for riskless assets from countries with current account surpluses created fragility in countries with current account deficits, most notably, in the United States. We examine this explanation by analyzing...

The global imbalance explanation of the financial crisis of 2007-09 suggests that demand for riskless assets from countries with current account surpluses created fragility in countries with current account deficits, most notably, in the United States. We examine this explanation by analyzing...

We study how government policies and corporate commitments to decarbonize interact under two externalities: environmental damages and green innovation spillovers. Unconstrained carbon taxes and innovation subsidies could achieve first-best outcomes, but when government policies face constraints,...

We argue that when bankruptcy code is creditor-friendly, excessive liquidationscause levered firms to shun innovation, whereas by promoting continuation upon failure,a debtor-friendly code induces greater innovation. We provide empirical support for thisclaim by employing patents as a proxy for...

We argue that when bankruptcy code is creditor-friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing patents as a proxy...

Separation between CEO and Chairman of the Board is typically viewed as evidence of good corporate governance. Surprisingly, the literature has failed so far to uncover any significant relation between CEO/Chairman duality and firm performance. By distinguishing between periods with and without...

Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient 'pet' projects and consuming perquisites that yield private benefits). The privately...

This paper examines the relationship between innovation and firms' dependence on external capital by analyzing the innovation activities of privately-held and publicly-traded firms. We find that public firms in external finance dependent industries generate patents of higher quantity, quality,...

In spite of mounting losses banks continued to pay dividends during the crisis. We present a model that addresses this behavior. By paying out dividends, a bank transfers value to its shareholders away from creditors, among whom are other banks. This way, one bank's dividend payout policy...