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New research on finance from Harvard Business School faculty on issues including corporate investment, governance, and accounting management.
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The Dark Side of Fintech Borrowing

by Rachel Layne

Fintechs have revolutionized the banking industry, but some customers end up worse for the experience, according to research by Marco Di Maggio and colleagues. Open for comment; Comment(s) posted.

Estimating Causal Effects in the Presence of Partial Interference Using Multivariate Bayesian Structural Time Series Models

by Fiammetta Menchetti and Iavor Bojinov

A case study of an Italian supermarket introducing a new pricing policy—in which it reduced prices on some brands—offers managers a new approach to reduce uncertainty. The approach is flexible and can be applied to different business problems.

Bankruptcy and the COVID-19 Crisis

by Jialan Wang, Jeyul Yang, Benjamin Iverson, and Ray Kluender

Analyzing the impact of the COVID-19 crisis on bankruptcy filing rates in the United States, this study finds that large businesses, small businesses, and consumers experience very different effects of the crisis.

Fencing Off Silicon Valley: Cross-Border Venture Capital and Technology Spillovers

by Ufuk Akcigit, Sina T. Ates, Josh Lerner, Richard Townsend, and Yulia Zhestkova

This study of foreign corporate investment transactions from 32 countries between 1976 and 2015 finds these investments pose a trade-off: While they support young firms in pursuing innovations they could not otherwise afford, they also generate knowledge for the foreign investors.

Many Small-Business Employees May Be Close to Losing Health Insurance

by Rachel Layne

Small-business owners have delayed rent payments and other bills to protect health benefits for employees. Now, financial pressure is mounting, according to research by Leemore Dafny, Yin Wei Soon, Zoë Cullen, and Christopher Stanton. Open for comment; Comment(s) posted.

Why American Health Care Needs Its Own SEC

by Regina E. Herzlinger

The United States needs a health care equivalent of the Securities and Exchange Commission to increase transparency and competition, argues Regina Herzlinger. Open for comment; Comment(s) posted.

The Pass-Through of Uncertainty Shocks to Households

by Marco Di Maggio, Amir Kermani, Rodney Ramcharan, Vincent Yao, and Edison Yu

A firm’s stock price volatility during times of uncertainty can significantly reduce workers’ consumption and savings decisions. This paper sheds light on the economic effects of uncertainty, and in particular, how firms provide insurance to their workers during periods of turmoil.

Best Ideas

by Miguel Antón, Randolph B. Cohen, and Christopher Polk

The “best ideas” in investment managers’ portfolios generate statistically and economically significant risk-adjusted returns over time, and they systematically outperform other positions in the portfolios. Investors can gain substantially if managers choose less-diversified portfolios that tilt more towards their best ideas.

Why Investors Often Lose When They Sue Their Financial Adviser

by Danielle Kost

Forty percent of American investors rely on financial advisers, but the COVID-19 market rollercoaster may have highlighted a weakness when disputes arise. The system favors the financial industry, says Mark Egan. Open for comment; Comment(s) posted.

Two Case Studies on the Financing of Forest Conservation

by Andrew Baxter, Connor Cash, Josh Lerner, and Ratnika Prasad

Case studies about The Conservation Fund and Sonen Capital highlight three broad lessons about fresh approaches to the ownership and management of forestland.

The Evolution of CEO Compensation in Venture Capital-Backed Startups

by Michael Ewens, Ramana Nanda, and Christopher Stanton

Resolving uncertainty related to market demand—so called “product-market” fit—marks a key inflection point in the compensation contract for CEOs of venture-capital backed firms.

Sticky Capital Controls

by Miguel Acosta-Henao, Laura Alfaro, and Andrés Fernández

One of the legacies of the 2007–2008 global financial crisis has been a reassessment of the potential for restriction of capital flows policies. This paper documents a set of stylized facts on capital controls along their intensive and extensive margins for emerging markets and document them to be “sticky.” We then rationalize them through a model that includes fixed cost of implementing such policies, which lower the welfare gains of implementation.

Making Economics More Useful: How Technological Eclecticism Could Help

by Amar Bhidé

This paper shows how tools, such as simulations used to design new technologies, can facilitate collaborative economic policy judgments. The paper forms part of a broader, ongoing study of knowledge in practical fields such as engineering, medicine, and business.

Market Investors Pay More for Resilient Companies

by Kristen Senz

During a market collapse, investors will pay up for companies considered resilient in their response, according to George Serafeim. Open for comment; Comment(s) posted.

The Right Way to Manage Customer Churn for Maximum Profit

by Michael Blanding

Many companies actively manage customer churn but aren't seeking out the best customers to retain, warns Sunil Gupta. Open for comment; Comment(s) posted.

Inflation with COVID Consumption Baskets

by Alberto Cavallo

Examining the impact that changes in expenditure patterns are having on the measurement of consumer price indices (CPI) inflation in 17 countries, this study finds that the cost of living for the average consumer is higher than estimated by the official CPI. This implies that real consumption is falling more quickly over time.

Measuring the Perceived Liquidity of the Corporate Bond Market

by Sergey Chernenko and Adi Sunderam

The liquidity of corporate bond markets is crucial to their functioning. This paper proposes a novel measure of bond market liquidity based on portfolio holdings instead of transaction data. The measure can be applied to asset-backed securities, syndicated loans, and municipal securities for which publicly available data on transactions are not available.

Weak Credit Covenants

by Victoria Ivashina and Boris Vallée

Prior to the 2020 pandemic, the leveraged loan market experienced an unprecedented boom, which came hand in hand with significant changes in contracting terms. This study presents large-sample evidence of what constitutes contractual weakness from the creditors’ perspective.

Corporate Resilience and Response During COVID-19

by Alex Cheema-Fox, Bridget LaPerla, George Serafeim, and Hui (Stacie) Wang

Investors look for evidence during a market crisis that a company is resilient. This study includes findings that challenge the notion that companies need to adopt practices that hurt their employees because investors want them to do so.

Aggregate and Firm-Level Stock Returns During Pandemics, in Real Time

by Laura Alfaro, Anusha Chari, Andrew Greenland, and Peter K. Schott

This paper explains the seemingly conflicting narratives from the stock and labor market about the underlying state of the economy. We show that day-to-day changes in the predictions of standard models of infectious disease forecast changes in aggregate stock returns in pandemics.