We propose and analyze an equilibrium model of money management in which the asset allocation decisions of money managers affect the production decisions of firms. The model produces two main results. First, comparing the performance of money managers to that of the overall market portfolio...

This paper provides evidence that the conflict of interest caused by the issuer-pays rating model leads to inflated corporate credit ratings. Comparing the ratings issued by Standard & Poor's Ratings Services (S&P) which follows this business model to those issued by the Egan-Jones Rating...

This paper develops a dynamic rational expectations model of the credit rating process, incorporating three critical elements of this industry: (i) the rating agencies' ability to misreport the issuer's credit quality, (ii) their ability to issue unsolicited ratings, and (iii) their reputational...

This article studies how relative wealth concerns, in which a person's satisfaction with their own consumption depends on how much others are consuming, affect investors' incentives to acquire information. We find that such externalities can generate complementarities in information acquisition...

This paper investigates how the presence of a large institutional shareholder affects the complexity of corporate investments. Our analysis is based on the observation that the blockholder’s planning horizon does not necessarily coincide with the time it takes for the market to correctly...

This paper investigates the relationship among a firm's managerial incentive scheme, the informativeness of its stock price, and its investment policy. It shows that the shareholders' concerns about the effectiveness of stock-based compensation can lead to overinvestment. However, unlike other...