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How Politics Drives Business Decisions in a Polarized Nation

by Jay Fitzgerald

As the US heads toward a presidential election, political polarization is influencing personal relationships, living choices, and even corporate decision-making. Research by Elisabeth Kempf reveals how partisan divides are shaping businesses, with significant implications for investment returns, credit ratings, and economic growth.

Watching for the Next Economic Downturn? Follow Corporate Debt

by Rachel Layne

Rising household debt alone isn't enough to predict looming economic crises. Research by Victoria Ivashina examines the role of corporate debt in fiscal crashes since 1940.

Supervisor of Sandwiches? More Companies Inflate Titles to Avoid Extra Pay

by Scott Van Voorhis

What does an assistant manager of bingo actually manage? Increasingly, companies are falsely classifying hourly workers as managers to avoid paying an estimated $4 billion a year in overtime, says research by Lauren Cohen.

Keep or Cut Workers? How Companies Reacted to the COVID-19 Crisis

by Lane Lambert

Analysis by Ethan Rouen and colleagues reveals the true factors behind leaders' choices during the pandemic's painful early months, when survival was at stake for many businesses. Open for comment; 0 Comments.

Cruising in Crisis: How Carnival Is Riding Out the COVID-19 Storm

by Michael Blanding

COVID-19 has devastated the cruise industry, but one company may emerge stronger: Carnival. A case study by Stuart Gilson reveals how the cruising juggernaut is navigating the pandemic. Open for comment; 0 Comments.

Many Executives Are Afraid of Finance. Here's How They Can Gain Confidence

by Dina Gerdeman

Mihir Desai explains how managers can increase their understanding of how finance works. EXCERPT: Three valuation mistakes to avoid. Open for comment; 0 Comments.

Lazy Prices

by Lauren Cohen, Christopher J. Malloy, and Quoc Nguyen

The most comprehensive information windows that firms provide to the markets—in the form of their mandated annual and quarterly filings—have changed dramatically over time, becoming significantly longer and more complex. When firms break from their routine phrasing and content, this action contains rich information for future firm stock returns and outcomes.

Lessons Unlearned? Corporate Debt in Emerging Markets

by Laura Alfaro, Gonzalo Asis, Anusha Chari, and Ugo Panizza

Emerging markets are contending with a worrisome slowdown in economic growth accompanied by the build-up of corporate debt. Understanding this and other potential vulnerabilities requires knowing more about the state of emerging market corporate balance sheets, the drivers of debt accumulation, and the effects of both on the macroeconomy.

The Stock Market and Bank Risk-Taking

by Antonio Falato and David Scharfstein

It is clear that risk-taking by financial institutions is one of the main causes of financial crises and severe recessions. Yet we know relatively little about what gives rise to such risk-taking in the first place. This paper presents evidence that a focus on short-term stock prices induces publicly-traded banks to increase risk relative to privately-held banks. The findings provide support for the view that compensation schemes should require management to hold stock for longer periods to mitigate their incentives to pump up short-term earnings and the short-term stock price.

Corporate Tax Strategies Mirror Personal Returns of Top Execs

by Roberta Holland

Top executives who are inclined to reduce personal taxes might also benefit shareholders in their companies, concludes research by Gerardo Pérez Cavazos and Andreya M. Silva. Open for comment; 0 Comments.

The Risk Anomaly Tradeoff of Leverage

by Malcolm Baker, Mathias F. Hoeyer, and Jeffrey Wurgler

This paper develops a tradeoff theory of capital structure, testing the idea that firms with low risk assets—and hence underpriced equity—may want to rely disproportionately on debt. The model accommodates both corporate finance and asset pricing evidence, renewing a fruitful connection between asset pricing and corporate finance research.

Why Corporate Budgeting Needs To Be Fixed

by Michael C. Jensen

Not to mince words, but corporate budgeting is a joke, argues HBS professor emeritus Michael C. Jensen in this Harvard Business Review excerpt. The problem isn't with the budget process—it's when budget targets are used to determine compensation. Closed for comment; 0 Comments.