I model an open-end mutual fund investing in illiquid assets and show that the fund's endogenous cash management can generate shareholder runs even with a flexible NAV. The fund optimally re-builds its cash buffers at time t 1 after outflows at t to prevent future forced sales of illiquid...

Marketplace lending relies on screening and information production by investors, a major deviation from the traditional banking paradigm. Theoretically, the participation of sophisticated investors improves screening outcomes but also creates adverse selection among investors. In maximizing loan...

We study arbitrage in ETFs holding illiquid corporate bonds, focusing on authorized participants (APs) and their balance sheet space constraints. As unique ETF arbitrageurs, most APs are also bond dealers, and they use their own balance sheet in both roles. We find that bond market illiquidity...

We examine voluntary disclosure when the firm (“sender”) is risk-averse and uncertain about audience preferences. We show that some firms stay silent in equilibrium, in contrast to classic “unravelling” results. Silence reduces the sensitivity of a firm's payoff to audiences'...

Using novel contract-level data, we study the recent trend in open-end mutual funds investing in unicorns—highly valued, privately held start-ups—and the consequences of these investments for corporate governance provisions. Larger funds and those with more stable funding are more likely to...

The past decade saw the rise of both “founder-friendly” venture financings and non-traditional investors, frequently with liquidity constraints. Using detailed contract data, we study open-end mutual funds investing in private venture-backed firms. We posit an interaction between the classic...

Index-tracking fixed-income ETFs have experienced an explosive growth spurt to reach $1 trillion in 2020. However, they suffered significant disruptions during the Covid-19 crisis. We show that bank balance sheet constraints were likely a contributing factor to these disruptions because bond...

We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the Covid-19 crisis. We show that mutual fund liquidity transformation led to pronounced investor outflows. In meeting redemptions, funds followed a pecking...

This study provides a new perspective on the rise of FinTech lending by uncovering an informational synergy with cashless payments. Theoretically, FinTech lenders screen borrowers more efficiently when borrowers use cashless payments that produce transferable and verifiable information. In turn,...

I model an open-end mutual fund investing in illiquid assets and show that the fund’s endogenous cash management can generate shareholder runs even with a flexible NAV. The fund optimally re-builds its cash buffers at time t + 1 after outflows at t to prevent future forced sales of illiquid...