Decision Making & Negotiations

Corporate bond market participants are increasingly worried about liquidity. However, bid-ask spreads and other standard measures indicate liquidity has not deteriorated significantly. This paper proposes a potential reconciliation. We show the sensitivity of credit yields to bid-ask spreads increased fourfold from 2005 to 2019. We then provide a model that connects this change to the rapid growth of mutual funds in the corporate bond market. The model features heterogeneous investors with different trading needs who choose between a risk-free asset and illiquid bonds.

We study how small and medium enterprise (SME) lenders react to information about their competitors’ contracting decisions. To isolate this learning from lenders’ common reactions to unobserved shocks to fundamentals, we exploit the staggered entry of lenders into an information-sharing platform. Upon entering, lenders adjust their contract terms toward what others offer. This reaction is mediated by the distribution of market shares: lenders with higher shares or that operate in concentrated markets react less.

We study the effects of evaluating asset managers against a benchmark on corporate decisions, e.g., investments, M&A, and IPOs. We introduce asset managers into an otherwise standard model and show that firms inside the benchmark are effectively subsidized by the asset managers. This “benchmark inclusion subsidy” arises because asset managers have incentives to hold some of the equity of firms in the benchmark regardless of their risk characteristics. Due to the benchmark inclusion subsidy, a firm inside the benchmark values an investment project more than the one outside.

We designed and fielded a survey of New York and Pennsylvania firms to study the impacts of New York's 2018 Paid Family Leave policy on employer outcomes. We match each NY firm to a comparable PA firm and use difference-in-difference models to analyze within-match-pair changes in outcomes. We find that PFL leads to an improvement in employers' rating of their ease of handling long employee absences, concentrated in the first policy year and among firms with 50-99 employees. We also find an increase in employee leave-taking in the second policy year, driven by smaller firms.

We construct a new measure of voluntary disclosure based on firms’ websites. Using the Wayback Machine, we create a standardized measure of disclosure capturing the quantity of information on firms’ websites. We validate our measure by documenting that it is positively associated with established measures of firms’ voluntary disclosure and liquidity. Importantly, we document that our measure, while correlated with established disclosure measures, is not subsumed by those measures. It complements existing measures in three important ways.

We study the classical newsvendor problem in which the decision-maker must trade-off underage and overage costs. In contrast to the typical setting, we assume that the decision-maker does not know the underlying distribution driving uncertainty but has only access to historical data. In turn, the key questions are how to map existing data to a decision and what type of performance to expect as a function of the data size.

There is no known method for determining the minimum number of beds in hospital inpatient units (IPs) to achieve patient waiting-time targets. This study aims to determine the relationship between patient waiting time–related performance measures and bed utilization, so as to optimize IP capacity decisions. The researchers simulated a novel queueing model specifically developed for the IPs. The model takes into account salient features of patient-flow dynamics and was validated against hospital census data.

Using high-frequency transaction-level income, spending, balances, and credit limits data from an online financial service, we show that many consumers fail to stick to their self-set debt paydown plans and argue that this behavior is best explained by a model of present bias. Theoretically, we show that (i) a present-biased agent's sensitivity of consumption spending to paycheck receipt reflects his or her short-run impatience and that (ii) this sensitivity varies with available resources only for agents who are aware (sophisticated) rather than unaware (naive) of their future impatience.

The use of order flow information by financial firms has come to the forefront of the regulatory debate. A central question is: Should a dealer who acquires information by taking client orders be allowed to use or share that information? We explore how information sharing affects dealers, clients and issuer revenues in U.S. Treasury auctions. Because one cannot observe alternative information regimes, we build a model, calibrate it to auction results data, and use it to quantify counter-factuals. The model's key force is that sharing information reduces uncertainty about future value.