This chapter surveys the literature on the political economy of finance. This field offers three main insights. First, it highlights the importance of the role of political institutions in financial development. Second, it shows how the distribution of political power in society drives the...

We study a UK fund that acts as a liquidity provider for investors in small-cap stocks. Investors tender their holdings in exchange for shares in the fund. The fund has no say in which stocks it receives and earns fees liquidating the portfolio and returning cash within a three-year period. We...

When firms compete in the managerial labor market, the choice of corporate governance by a firm affects, and is affected by, the choice of governance by other firms. Firms with weaker governance offer managers more generous incentive compensation, which induces firms with good governance to also...