We examine the effect of CEO turnover on earnings management in banks. Since banking is intrinsically an opaque activity, we hypothesize that an incoming CEO of a bank is more likely to manage earnings than a counterpart in a non financial firm. To identify the hypothesized effects, we exploit...

Is privatization in a country related to the stringency of its employment protection laws (EPL) – and, if so, how? We address this question using privatization deals in fourteen European countries over three decades and all the changes in EPL within a country. Using traditional...

We show that wrongful discharge laws - laws that protect employees against unjust dismissal - spur innovation and new firm creation. Wrongful discharge laws, particularly those that prohibit employers from acting in bad faith ex post, limit employers' ability to hold up innovating employees...

We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing patents as a proxy...

Job rotation, where a principal routinely rotates agents among tasks, is argued to be a powerful antidote for agency problems inside an organization. However, when soft information dominates transactions inside a firm, verifying the information set that led to a particular decision becomes...

The financial crisis of 2008 highlighted the debilitating effect that a disruption in the banking sector can have on the macro-economy. Not surprisingly, therefore, preserving banking sector stability has occupied center stage in regulatory and policy making circles. As well, the popular...

We show that finance influences innovation by young private firms, an important source of long-term economic growth. We develop a simple theoretical model that predicts that a decrease (increase) in banks' bargaining power vis-a-vis entrepreneurs increases (decreases) both the volume and...

Venture Capitalists (VCs) differ from one another with respect to the non-financial resources they offer their portfolio firms. We develop a theoretical model to study the economic implications of this heterogeneity among VCs. We determine the optimal VC chosen by the entrepreneur, the...

Does deregulation of bank entry enhance bank stability or exacerbate bank fragility? Since the theoretically predicted effect of deregulation of bank entry on bank failures is ambiguous, this question has to be answered empirically. In this paper, we analyze the impact of deregulation of entry...

Venture Capitalists (VCs) differ significantly from one another with respect to the non-financial resources -- from business expertise to the network of contacts with potential suppliers, customers, employees and IPO underwriters -- they offer their portfolio firms. In this paper, I develop a...