Decision Making & Negotiations

Current accounting practice expenses many investments in intangible assets to the income statement, confusing earnings from current revenues with investments to gain future revenues. This has led to increasing calls to book those investments to the balance sheet. Drawing on the relevant research, this paper proposes solutions for the accounting for intangible assets that contrast with balance sheet recognition, and compares them to current practice and the IFRS standards that dictate practice.

The largest economic cost of the COVID-19 pandemic could arise from changes in behavior long after the immediate health crisis is resolved. A potential source of such a long-lived change is scarring of beliefs, a persistent change in the perceived probability of an extreme, negative shock in the future. We show how to quantify the extent of such belief changes and determine their impact on future economic outcomes. We nd that the long-run costs for the U.S. economy from this channel is many times higher than the estimates of the short-run losses in output.

This paper estimates a structural model of unconventional monetary policy transmission through bank balance sheets using cross-sectional instruments for loan and deposit demand. We estimate the demand for banking at a branch-specific level from the response of a bank's quantities at one branch to interest rate changes caused by demand shocks at other branches. Depositors are considerably less sensitive to interest rates than corporate or mortgage borrowers.

Using a novel dataset of over 3,500 public and private firms, we construct the network of firm connections through executives and directors on the eve of the 1929 financial market crash. We find that more connected firms have 17% higher 10-year survival rates on average. Consistent with a role in facilitating access to working capital, the results are particularly strong for small firms, private firms, cash-poor firms, and firms located in counties with high bank suspension rates during the crisis.

The Great Recession was a deep downturn with long-lasting effects on credit, employment and output. While narratives about its causes abound, the persistence of GDP below pre-crisis trends remains puzzling. We propose a simple persistence mechanism that can be quantified and combined with existing models. Our key premise is that agents don't know the true distribution of shocks, but use data to estimate it non-parametrically. Then, transitory events, especially extreme ones, generate persistent changes in beliefs and macro outcomes.

"Big data" financial technology raises concerns about market inefficiency. A common concern is that the technology might induce traders to extract others' information, rather than to produce information themselves. We allow agents to choose how much they learn about future asset values or about others' demands, and we explore how improvements in data processing shape these information choices, trading strategies and market outcomes. Our main insight is that unbiased technological change can explain a market-wide shift in data collection and trading strategies.

How does access to public equity markets affect real outcomes? We examine the human capital of IPO-filing firms and how going public affects their labor force. While IPO-filing ?rms have high average wages and limited industrial diversification, a successful IPO increases departures of high-wage employees to startups and triggers industrial diversification through employment growth in non-core industries. Surprisingly, IPOs do not significantly affect earnings growth of pre-IPO workers. Instead, post-IPO hires receive larger earnings increases upon joining.

The Centers for Medicare & Medicaid Services (CMS) and the National Quality Forum have endorsed the 30-day mortality rate as an important indicator of hospital quality. Concerns have been raised, however, as to whether post-discharge mortality rates are reasonable measures of hospital quality as they consider the frequency of an event that occurs after a patient is discharged and no longer under the watch and care of hospital staff. Estimating the causal effect of length-of-stay (LOS) on post-discharge mortality from retrospective data introduces a number of econometric challenges.

This paper shows that when the bankruptcy code protects the creditors' rights with no impairments to secured creditors, issuance of debt such as repo with exemption from automatic stay adds no value. When the bankruptcy process admits violations of absolute priority rules or results in collateral impairments to secured creditors, the liability structure includes short-term debt, with safe harbor protection when the pledged collateral satisfies a minimum liquidity threshold.