This paper examines how the information quality of ratings from an issuer-paid rating agency (Standard and Poor's) responds to the entry of an investor-paid rating agency, the Egan-Jones Rating Company (EJR). By comparing S&P's ratings quality before and after EJR initiates coverage of each...

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...

We show that technology spillovers shift the composition of corporate research and development (R&D) by promoting innovation based on the exploitation of existing knowledge, while disincentivizing innovation that explores new areas and breaks new ground. Accordingly, firms facing large...

We show that installing stronger risk management into financial institutions – a proposal widely discussed following the 2008 financial crisis – is insufficient to constrain institutions' exposure to investment with lurking risk, such as asset-backed securities. Financial regulations affect...

It is increasingly common that institutional investors hold the equity of both industrial and financial firms. These cross-industry holdings link borrowers to banks that they have not borrowed from, creating “bank-firm ownership linkages.” We show that such linkages significantly lower...

With a license to use individually identifiable information, including college transcripts, we find that students who quit college courses are 13% more likely to default on student loans than their perseverant peers, controlling for conventional risk factors. This effect is especially strong...

We show that during corporate litigation, media companies that share common institutional blockholders with the defendant firms (i.e., cross-held media) cover the litigation events more favorably than non-cross-held media. The favorable news coverage boosts investor sentiment, mitigates negative...

We examine how credit ratings affect the public and private sectors differently by evaluating customer procurement decisions. Public-sector customers respond strongly to supplier rating changes: they increase purchases from upgraded firms and reduce purchases from downgraded firms. This response...

This paper examines how product market threats shape the use of performance pricing in loan contracts. Loan contracting faces a trade-off between financial markets and product markets: while using contractual terms that are linked to borrower performance -- such as performance pricing --...

We propose a theoretical framework, supplemented by empirical evidence, to study how household financial leverage affects labor skills acquisition and labor supply. Unlike labor income, acquired skills are inseparable from individuals and do not accrue to creditors at default, thus making them...