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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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Going Digital: Implications for Firm Value and Performance

by Wilbur Chen and Suraj Srinivasan

More and more nontechnology companies are adopting digital technologies like AI, data analytics, and machine learning. This study of the economic performance of nontech firms adopting new digital technologies finds a persistent future increase in valuation. However, investors only slowly incorporate the value implications of digital activities into prices. Nontech companies with senior executives with tech talent improve performance more than those without.

Reflexivity in Credit Markets

by Robin Greenwood, Samuel G. Hanson, and Lawrence J. Jin

Investors’ biases and market outcomes affect each other in a two-way feedback loop. This study develops a model of a credit market feedback loop, finding that when investors become more bullish this can predict positive returns in the short run, even if expected returns become more negative at longer horizons.

If Your Customers Don't Care What You Charge, What Should You Charge?

by Kristen Senz

Consumer inertia is the tendency of some customers to buy a product, even when superior options exist. Alexander J. MacKay discusses how that habit affects competitive strategy and even regulatory oversight. Open for comment; Comment(s) posted.

Investor Lawsuits Against Auditors Are Falling, and That's Bad News for Capital Markets

by Martha Lagace

It's becoming more difficult for investors to sue corporate auditors. The result? A weakening of trust in US capital markets, says Suraj Srinivasan. Open for comment; Comment(s) posted.

Forgiving Student Loan Debt Leads to Better Jobs, Stronger Consumers

by Dina Gerdeman

Without the burden of student loan debt, people seek higher-paying careers, stabilize their finances, and contribute to the economy, says Marco Di Maggio. Open for comment; Comment(s) posted.

Activist CEOs Are Rising Up—and Their Customers Are Listening

by Michael Blanding

Are product sales affected by the CEO's stance on political and social issues? Michael Toffel and Aaron Chatterji study how consumers react to vocal chief executives. Open for comment; Comment(s) posted.

Bank Boards: What Has Changed Since the Financial Crisis?

by Shiva Rajgopal, Suraj Srinivasan, and Forester Wong

Since the 2008 financial crisis, bank boards have not improved their cultural or gender diversity compared to other companies, nor are they better qualified than before the crisis. Outside directorships of bank directors and the extent of CEOs also being Chairman also remains the same. However, there is some evidence of better risk oversight both from managers and the board.

Is the Digital Age Making Us Petty?

by Kristen Senz

Mobile payment apps help us keep track of shared costs but may also frustrate personal relationships. Research into perceived pettiness by Tami Kim, Ting Zhang, and Michael I. Norton. Open for comment; Comment(s) posted.

The 'Amazon Effect' Is Changing Online Price Competition—and the Fed Needs to Pay Attention

by Roberta Holland

Amazon's power in the retail sector puts price pressure on what competitors charge, with implications for how federal regulators govern inflation, says Alberto F. Cavallo. Open for comment; Comment(s) posted.

How Entrepreneurs Can Turn Lead Into Gold

by Michael Blanding

Innovative about creating new products, entrepreneurs often lose imagination when it comes to funding their dreams. Andy Wu reveals alternatives beyond friends and family. Open for comment; Comment(s) posted.

Fintech's Game-Changing Opportunities for Small Business

by Martha Lagace

In the new book Fintech, Small Business, & the American Dream, Karen Mills describes how technology is opening up new capital for entrepreneurs. Around the corner: The transformative benefits of AI and big data. Open for comment; Comment(s) posted.

Does Our Bias Against Federal Deficits Need Rethinking?

by James Heskett

SUMMING UP. Readers lined up to comment on James Heskett's question on whether federal deficit spending as supported by Modern Monetary Theory is good or evil. Open for comment; Comment(s) posted.

The Impacts of Increasing Search Frictions on Online Shopping Behavior: Evidence from a Field Experiment

by Donald Ngwe, Kris J. Ferreira, and Thales Teixeira

This paper challenges the logic that making it easier for consumers to search across a wide assortment of products is the best strategy for online retailers. Experiments show that adding extra search costs to find discounted items can improve gross margins and sales by increasing the number of items inspected and serving as a self-selecting price discrimination mechanism among customers.

Diagnostic Bubbles

by Pedro Bordalo, Nicola Gennaioli, Spencer Yongwook Kwon, and Andrei Shleifer

The financial crisis of 2007-2008 revived academic interest in price bubbles but many conceptual questions remain open. This paper generates insights into the structure of asset price bubbles by modeling beliefs from fundamental psychological assumptions, and combining this with standard neoclassical mechanisms, such as learning from prices and speculation.

Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

by Rembrand Koning and John-Paul Ferguson

Going public has no effect on workforce diversity, according to this study comparing changes in firms’ ownership type with longitudinal data on employment. For workforce diversity, the time to make a difference is probably not after an initial public offering but rather in the years just after firm founding.

'Green Bonds' May Be Our Best Bet for Environmental Damage Control

by Michael Blanding

The popularity of green bonds as a way to finance environmentally friendly projects is on the upswing, say Malcolm Baker and George Serafeim. Open for comment; Comment(s) posted.

Corporate Sustainability: A Strategy?

by Ioannis Ioannou and George Serafeim

Between 2012 and 2017, companies within most industries adopted an increasingly similar set of sustainability practices. This study examines the interplay between common and strategic practices. This dynamic distinction helps for understanding whether and how sustainability practices can help companies establish a competitive advantage over time.

The Creation and Evolution of Entrepreneurial Public Markets

by Shai Bernstein, Abhishek Dev, and Josh Lerner

Since 1990, new stock exchanges geared toward fast-growing, entrepreneurial companies have proliferated around the world. This analysis shows that exchanges in countries with better shareholder protection allowed younger and less profitable companies to raise more capital. These markets alone cannot boost entrepreneurial activity but need enabling institutions.

Financing the Response to Climate Change: The Pricing and Ownership of US Green Bonds

by Malcolm Baker, Daniel Bergstresser, George Serafeim, and Jeffrey Wurgler

Green bonds are used for environmentally friendly purposes like renewable energy. Complementing previous research, this paper explores the US corporate and municipal green bond and shows that a subset of investors is willing to give up some return to hold green bonds.

Using Fintech to Disrupt Eastern Bank from Within

Re: Karen Mills

When Eastern Bank decided to battle a threat from new competitors, it hired a fintech executive to set up Eastern Labs and start innovating. Karen Mills discusses her case study on what happened next. Open for comment; Comment(s) posted.