Leadership & Organizational Behavior

We study optimal team design. In our model, a principal assigns either heterogeneous agents to a team (a diverse team) or homogenous agents to a team (a specialized team) to perform repeated team production. We assume that specialized teams exhibit a productive substitutability (e.g., interchangeable efforts with decreasing returns to total effort), whereas diverse teams exhibit a productive complementarity (e.g., cross-functional teams).

We follow a representative panel of millions of consumers in the U.S. from 2007 to 2017 and document several facts on the long-term effects of the Great Recession. There were about six million foreclosures in the ten-year period after Lehman's collapse. Owners of multiple homes accounted for 25% of these foreclosures, while comprising only 13% of the market. Foreclosures displaced homeowners, with most of them moving at least once. Only a quarter of foreclosed households regained homeownership, taking an average four years to do so.

We extract aggregate supply and aggregate demand shocks for the US economy from macroeconomic data on inflation, real GDP growth, core inflation and the unemployment gap. We first use unconditional non-Gaussian features in the data to achieve identification of these structural shocks while imposing minimal economic assumptions. We find that recessions in the 1970s and 1980s are better characterized as driven by supply shocks while later recessions were driven primarily by demand shocks. The Great Recession exhibited large negative shocks to both demand and supply.

The Covid-19 pandemic crisis is ongoing, and it its wake has brought tremendous loss of life and economic loss, disruption and uncertainty. It has simultaneously brought to the surface important challenges about global healthcare systems, political systems and institutions and their response to the multi-faceted crisis, the connectedness and dependencies of modern economies through global supply chains, and issues of inequity, as manifested in segments of the population that have been most affected in terms of health and economic outcomes through the crisis.

We propose a parsimonious model of leverage and investment dynamics featuring a diffusion-jump cash-flow process, retained earnings, short-term debt, and external equity. Crucially equity issuance is costly. We show that firms' efforts to avoid incurring equity issuance costs generate empirically plausible target leverage and nonlinear leverage dynamics. Paradoxically, it is the high cost of equity issuance that causes the firm to keep leverage low, in contrast to the predictions of Modigliani-Miller and Leland tradeoff and Myers' pecking-order theories.

Day trading coverage perpetuates myths about the ‘real job’ of investment management.

This study uses advanced natural language processing methods to identify companies that are aligned with the UN SDGs based on the text in their sustainability disclosures. Using CSR reports of Russel 1000 companies between 2010-2019 we apply a logistic classifier, support vector machines (SVM) and a fully-connected neural network to predict alignment with the SDGs. Specifically, we use word embeddings to augment dictionary-based input features as well as use the embeddings as features themselves based on Word2Vec and Doc2Vec models to classify companies’ alignment with the SDGs over time.

The initial phase of the COVID-19 pandemic was characterized by voluminous, highly negative news coverage. Markets overreacted to uninformative news, and reacted more to news during high volatility periods. News coverage responded to lagged market activity, and causally impacted contemporaneous returns. The early part of the pandemic was characterized by pronounced feedback between news and markets. I propose a structural break test to identify the presence and end of such feedback episodes. This one ended in March 2020, which was knowable by the end of April.

We predict and find that regulated firms' mandatory disclosures crowd out unregulated firms' voluntary disclosures. Consistent with information spillovers from regulated to unregulated firms, we document that unregulated firms reduce their own disclosures in the presence of regulated firms' disclosures. We further find that unregulated firms reduce their disclosures more the greater the strength of the regulatory information spillovers.