Research Lab

We use a matched sample of individual loans, borrowers, and banks to investigate the effect of banks' financial health on the cost of loans, controlling for borrower risk and information costs. Our principal finding is that low-capital banks tend to charge higher loan rates than well-capitalized banks. This effect is primarily associated with firms for which information costs are likely to be important, and, when borrowing from weak banks, these firms tend to hold more cash.

The earnings—or rather losses—reported during the bubble were a good predictor of outcomes for dot.com firms. But are earnings the fundamental on which we should focus? The title of my talk suggests dividends as an alternative. Some analysts focus on cash flows, distrusting earnings. In the last ten years, alternative concepts like "comprehensive income," "residual income," and "abnormal earnings" have been advanced. There have been more references to book value. In addition to the profusion of new age techniques, an increasing number of fundamental attributes have been advanced.

This paper analyzes a social insurance system that integrates unemployment insurance with a pension program, allowing workers to borrow against their future wage income to finance consumption during an unemployment episode and thus improving search incentives while reducing the risks arising from unemployment. This paper identifies the conditions under which integration improves welfare and the factors which determine the optimal degree of integration.

In this paper, we develop an approach for filtering state variables in the setting of continuous-time jump-diffusion models. Our method computes the filtering distribution of latent state variables conditional only on discretely observed observations in a manner consistent with the underlying continuous-time process. The algorithm is a combination of particle filtering methods and the "filling-in-the-missing-data" estimators which have recently become popular. We provide simulation evidence to verify that our method provides accurate inference.

As more firms adopt a customer asset management approach to their business, it has become increasingly important to understand how customer management efforts relate to the financial performance of the firm. Of specific interest to shareholders is the relationship between traditional financial measures and customer-centric measures. The customer-centric measure that has received the most attention is customer lifetime value (CLV).

I focus on the valuation of the shares of a firm that has intangible assets. As most firms have some form of intangible asset that is not on the balance sheet, my talk deals with the general principles of vaulation when balance sheets are imperfect.

We report on a panel discussion at the 2001 CMU Accounting MiniConference under the title "Intellectual Foundations of Accounting." We provide a background and the motivation for the discussion and present the remarks by the four panelists. A number of perspectives are taken. Professor Sunder emphasizes dualities in accounting. Professor Demski stresses the endogeneity of accounting measurement activities. Professor Fellingham examines the core and superstructure of accounting. Professor Ijiri observes the microcosmos in accounting and its philosophical connection.

In this study we investigate the valuation implications of managerial actions undertaken by 57 Internet firms engaged in Business-to-Business (B2B) e-commerce.

In this paper we develop a measure of liquidity, price impact, which quantifies the change in a firm's stock price associated with its observed trading volume. For a large set of institutional trades we compare out-of-sample, characteristic-based estimates of price impact to actual price impacts.