Guest Seminar Series
Friday, September 16th, 2016
Xiaoyun Yu, Indiana
Where: CSOM 2-215
Transporting Transparency: Director Foreign Experience and Corporate Information Environment
This paper examines how board directors’ foreign experience affects a firm’s informationenvironment in emerging markets. Using the staggered introduction of a policy in China to attract overseas returnees as a natural experiment, we document a positive, causal effect of directors’ foreign experience on the informativeness of the firm’s stock price. We examine potential channels, and find that after individuals with foreign experience join the board, earnings transparency increases, and firms are more likely to hire high-quality auditors and to engage in voluntary disclosure. Furthermore, the information benefit brought by directors with foreign experience spills over to peer firms. These findings provide direct evidence on how board directors help shape corporate transparency in emerging markets.
October 7th, 2016
Nobu Kiyotaki, Princeton
Where: CSOM L-110
The Great Escape? A Quantitative Evaluation of the Fed's Liquidity Facilities
We introduce liquidity frictions into an otherwise standard DSGE model with nominal and real rigidities and ask: Can a shock to the liquidity of private paper lead to a collapse in short-term nominal interest rates and a recession like the one associated with the 2008 U.S. financial crisis? Once the nominal interest rate reaches the zero bound, what are the effects of interventions in which the government provides liquidity in exchange for illiquid private paper? We find that the effects of the liquidity shock can be large, and show some numerical examples in which the liquidity facilities prevented a repeat of the Great Depression in 2008-2009.
November 11th, 2016
Ohad Kadan, Washington
Where: CSOM 2-219
Estimating the Value of Information
We derive a general expression for the value of information to a small price-taking investor in a dynamic environment and provide a framework for its estimation from index options. We apply this framework and estimate that a consumer-investor with commonly-used preference parameters would pay 1 to 4 percent of her wealth to preview and act on key macroeconomic in-
dicators (GDP, unemployment, etc.). The value of information increases with the time discount factor, decreases with risk aversion, and increases with the elasticity of intertemporal substitution. Rational expectations (or lack thereof) play an important role in the value of information.
November 18th, 2016
Nicolas Crouzet, Northwestern
Where: CSOM L-114
Default, Debt Maturity and Investment Dynamics
This paper studies the optimal maturity structure of debt in a dynamic investment model with financial frictions. External financing is costly because firms have limited liability, and default entails deadweight output losses. Firms operate long-term assets, and may thus want to issue long-term debt in order to reduce short-term refinancing risk. However, lack of commitment on the firms’ part makes long-term debt issuance costly, relative to short-term debt. In theory, the optimal maturity structure of debt should trade off these two forces. In numerical calibrations of the model, however, short-term financing strongly dominates. Optimal borrowing policies in fact often involve active maturity shortening, in particular via debt repurchases. The optimality of short-term financing suggests that none of the benefits traditionally associated with long-term financing — such as adressing maturity mismatch — are quantitatively significant in “neo-classical” models of the firm.
December 9th, 2016
David Sraer, Berkeley
Where: CSOM 2-213
Aggregating Well-Identified Estimates of Capital Constraints
This paper develops a framework to compute the aggregate effect of financing fric-
tions by aggregating well-identified estimates of the effect of these frictions on firm-leveloutcomes. We consider a general equilibrium model with imperfect competition and heterogeneous firms facing frictions in the capital market. We derive a set of statisticssufficient to compute the aggregate effect of these frictions. These sufficient statistics can all be consistently estimated from the same valid experiment. We apply these formulas in two contexts – a simulated dataset where firms invest dynamically subject to a collateral constraint; an actual empirical setting where the effect of collateral values is identified through variations in local real estate prices – and offer in both cases a decomposition of how firm-level estimates translate into aggregate effects. This framework can be applied to other frictions affecting firms’ input choices, such as taxes, regulation or imperfect competition.
March 10th, 2017
David Yermack, NYU
Where: CSOM 2-213
Ambiguity and The Trade Off Theory of Capital Structure
We examine the importance of ambiguity, or Knightian uncertainty, in the capital structure
decision. We develop a static tradeoff theory model in which agents are both risk averse and
ambiguity averse. The model confirms the usual idea that increased risk-the uncertainty over
known possible outcomes-leads rms to use less leverage. Conversely, greater ambiguity-the
uncertainty over the probabilities associated with the outcomes-leads firms to increase leverage.
Our empirical analysis provides results consistent with these predictions.
March, 31st, 2017
Stijn Van Nieuwerburgh, NYU
April 7th. 2017
Brent Neiman, Chicago
April 14th, 2017
Manuel Adelino, Duke
April 28th, 2017
Stefano Giglio, Chicago
May 5th, 2017
Lorenzo Garlappi, UBC