Optimistic beliefs are a source of nonpecuniary benefits for entrepreneurs that can explain the "Private Equity Puzzle." This paper looks at the effects of entrepreneurial optimism on financial contracting. When the contract space is restricted to debt, we show the existence of a separating...

This article empirically relates the internal organization of a firm with decision making quality and corporate performance. We call "independent from the CEO" a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of...

This paper documents a steady increase in the average correlation of house price growth across US states over the 1976-2006 period and shows that this phenomenon can be explained in large part by the geographic integration of the banking market over this period. We theoretically derive an...

We show empirically that banks' exposure to interest rate risk, or income gap, plays a crucial role in monetary policy transmission. In a first step, we show that banks typically retain a large exposure to interest rates that can be predicted with income gap. Secondly, we show that income gap...

We show empirically that banks' exposure to interest rate risk, or income gap, plays a crucial role in monetary policy transmission. In a first step, we show that banks typically retain a large exposure to interest rates that can be predicted with income gap. Secondly, we show that income gap...

Using loan level data, we investigate the lending behavior of a large subprime mortgage issuer prior to its bankruptcy in the beginning of 2007. In 2004, this firm suddenly started to massively issue new loans contracts that featured deferred amortization ("interestonly loans") to high income...

We show that banks' cash flow exposure to interest rate risk, or income gap, plays a crucial role in their lending behavior following monetary policy shocks. In a first step, we show that the sensitivity of bank profits to interest rates increases significantly with their income gap, even when...

The correlation across US states in house price growth increased steadily between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first...

The authors study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is still formally a stationary solution of the...

The correlation across US states in house price growth increased dramatically between 1976 and 2000. This paper shows that the contemporaneous geographic integration of the US banking market, via the emergence of large banks, was a primary driver of this phenomenon. To this end, we first...