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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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How Social Entrepreneurs Can Increase Their Investment Impact

by Rachel Layne

Grants or investments? Philanthropic organizations have multiple funding tools available, but choosing the wrong one can dilute the benefits, according to research by Benjamin N. Roth. Open for comment; Comment(s) posted.

Free Riding in Loan Approvals: Evidence From SME Lending in Peru

by Irani Arraiz, Miriam Bruhn, Benjamin N. Roth, Claudia Ruiz-Ortega, and Rodolfo Stucchi

Using data from a large Peruvian bank trying to expand credit access to small and medium enterprises, this study shows that competing lenders use one another’s loan approvals as an input into their own approval process. Such “free riding” has great impact on market outcomes and might warrant policy intervention.

How Small Businesses Can Survive the Coronavirus Outbreak

by Danielle Kost

COVID-19 will put many small businesses on life support. Karen G. Mills, who has been advising policymakers on aid options, offers guidance to owners on the brink of ruin. Open for comment; Comment(s) posted.

Impact Investing: A Theory of Financing Social Entrepreneurship

by Benjamin N. Roth

The author provides a formal definition of organizational sustainability and characterizes the situations in which a social enterprise should be sustainable. The analysis then delineates when an investment in a social enterprise delivers superior impact to a grant.

Warring Algorithms Could Be Driving Up Consumer Prices

by Kristen Senz

Companies increasingly use software to conduct rapid price changes. Alexander MacKay explains why firms might benefit but consumers should be worried. Open for comment; Comment(s) posted.

How Best Business Practices Can Improve Health Care

by Sean Silverthorne

Why do Harvard Business School scholars spend so much time and money analyzing health care delivery? Open for comment; Comment(s) posted.

A Preliminary Framework for Product Impact-Weighted Accounts

by George Serafeim, Katie Trinh, and Robert Zochowski

Although there is growing interest in environmental, social, and governance measurement, the impact of company operations is emphasized over product use. A framework like this one that captures a product’s reach, accessibility, quality, optionality, environmental use emissions, and end of life recyclability allows for a systematic methodology that can be applied to companies across many industries.

Why Backstage Capital Invests in ‘Underestimated’ Entrepreneurs

Re: Laura Huang

Laura Huang discusses VC Arlan Hamilton’s strategy of backing entrepreneurs who have been ignored because of stereotypes, biases, and preconceptions. Open for comment; Comment(s) posted.

Competition in Pricing Algorithms

by Zach Y. Brown and Alexander MacKay

The adoption of pricing technology can lead to higher prices, by increasing the frequency of price changes and/or encoding pricing strategies in algorithms. This raises new antitrust questions for policymakers, as firms do not need to coordinate or collude to raise prices.

Do Private Equity Buyouts Get a Bad Rap?

by Michael Blanding

Elizabeth Warren calls private equity buyouts "Wall Street looting," but a recent study by Josh Lerner and colleagues shows they have both positive and negative impacts. Open for comment; Comment(s) posted.

Can Capitalism Be Fixed by Making Companies More Just?

Re: Ethan C. Rouen, Charles C.Y. Wang

JUST Capital seeks to make public companies more "just" by measuring and ranking their overall impact on society, based on priorities most important to average Americans. Ethan Rouen and Charles Wang explore whether JUST Capital's performance evaluation methodology can improve corporate behavior. Open for comment; Comment(s) posted.

Taking on the Taboos That Keep Women Out of India's Workforce

by Julia Hanna

Giving women in rural India more control over household finances reduces the social stigma of working, says research by Natalia Rigol. Open for comment; Comment(s) posted.

Why CalSTRS Chooses to Engage with the Gun Industry

Should large institutional investors divest or engage if they have an issue with a company? In a recent case study, Vikram Gandhi discusses how CalSTRS, the $200 billion pension plan for California public school teachers, chose to engage with gun makers and retailers. Open for comment; Comment(s) posted.

Gender Bias Complaints against Apple Card Signal a Dark Side to Fintech

by Karen G. Mills

The possibility that Apple Card applicants were subject to gender bias opens a new frontier for the financial services sector in which regulators are largely absent, argues Karen Mills. Open for comment; Comment(s) posted.

Shareholder Activism and Firms’ Voluntary Disclosure of Climate Change Risks

by Caroline Flammer, Michael W. Toffel, and Kala Viswanathan

Shareholder resolutions typically fail, and often by a wide margin. So why do active investors bother? It turns out that resolutions nonetheless can influence corporate transparency. Specifically, after being targeted with shareholder resolutions on environmental topics, this research shows that companies are more likely to publicly disclose their climate change risks—and that such disclosure increases these companies’ valuation.

The Economic Effects of Private Equity Buyouts

by Steven J. Davis, John Haltiwanger, Kyle Handley, Ben Lipsius, Josh Lerner, and Javier Miranda

Private equity buyouts are a major financial enterprise that critics see as dominated by rent-seeking activities with little in the way of societal benefits. This study of 6,000 US buyouts between 1980 and 2013 finds that the real side effects of buyouts on target firms and their workers vary greatly by deal type and market conditions.

Decarbonization Factors

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

This paper contributes to a growing knowledge base about how climate change impacts investor expectations, capital allocations and thereby pricing and returns. It provides actionable insights into how to decarbonize portfolios and evaluate the likely performance and carbon exposure differences across strategies.

Core Earnings? New Data and Evidence

by Ethan Rouen, Eric So, and Charles C.Y. Wang

Using a novel dataset of earnings-related disclosures embedded in the 10-Ks, this paper shows how detailed financial statement analysis can produce a measure of core earnings that is more persistent than traditional earnings measures and forecasts future performance. Analysts and market participants are slow to appreciate the importance of transitory earnings.

Undisclosed Debt Sustainability

by Laura Alfaro and Fabio Kanczuk

Presenting a scenario in which non-Paris Club lending and borrowing is fully disclosed, this study illustrates that transparency has potential effects of decreased debt sustainability for investors such as China, and significant welfare gains for recipient countries. Effects are particularly strong if the debt is large.

WeWork—The IPO That Shouldn’t?

by Nori Gerardo Lietz

WeWork's IPO has been one of the most debated in recent memory. But the real controversy, says Nori Gerardo Lietz, is what is contained in the company's prospectus. Open for comment; Comment(s) posted.