Financial Institutions

We provide evidence that banks classify fixed-rate debt investment securities as held to maturity (HTM) rather than as available for sale (AFS) when HTM classification provides preferred financial accounting and regulatory capital treatments, not because they have a distinct economically motivated intent and ability to hold the securities to maturity.

How do venture capital investors react to social movements, especially those that relate to historical underrepresentation in their funding decisions? We use image and name algorithms combined with clerical review to classify race for 150,000 founders and 30,000 investors. Our new data allow us to assess the impact of George Floyd's murder on VC funding of Black entrepreneurs and identify which VCs were most responsive. Although VCs responded swiftly, investment in Black-owned startups reverted to prior levels within two years.

Under standard assumptions, individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. Adding investment fees to this benchmark, individuals are still indifferent but the government is not. We show that under weak conditions firms charge equal percent fees under both systems, yielding higher dollar fees under Traditional. We estimate that tax deferral increases demand for asset management services by $3.8 trillion, costing the government $23.4 billion in annual fees.

This paper theoretically and empirically investigates the effects of liquidity regulation on the banking system. We document that the current quantity-based liquidity rule has reduced banks’ liquidity risks. However, the mandated liquidity buffer appears to crowd out bank lending and lead to a migration of liquidity risks to banks that are not subject to liquidity regulation. These findings motivate a model of liquidity regulation with endogenous liquidity premiums and heterogeneous banks.