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Uncertainty > Risk: Lessons For Legal Thought From The Insurance Runoff Market, Tom Baker 2020 University of Pennsylvania Carey Law School

Uncertainty > Risk: Lessons For Legal Thought From The Insurance Runoff Market, Tom Baker

Faculty Scholarship at Penn Law

Insurance ideas inform legal thought: from tort law, to health law and financial services regulation, to theories of distributive justice. Within that thought, insurance is conceived as an ideal type in which insurers distribute determinable risks through contracts that fix the parties’ obligations in advance. This ideal type has normative appeal, among other reasons because it explains how tort law might achieve in practice the objectives of tort theory. This ideal type also supports a restrictive vision of liability-based regulation that opposes expansions and supports cutbacks, on the grounds that uncertainty poses an existential threat to insurance markets.

Prior work ...


Women’S Employment And Fertility In A Global Perspective (1960-2015), Juila Behrman, Pilar Gonalons-Pons 2020 Northwestern University

Women’S Employment And Fertility In A Global Perspective (1960-2015), Juila Behrman, Pilar Gonalons-Pons

Population Center Working Papers (PSC/PARC)

Background: Scant research explores the association between women’s employment and fertility on a truly global scale due to limited cross-national comparative standardized information across contexts.

Methods: The paper compiles a unique dataset that combines nationally representative country-level data on women’s wage employment from the International Labor Organization with fertility and reproductive health measures from the United Nations and additional information from UNESCO, OECD and the World Bank. This dataset is used to explore the linear association between women’s employment and fertility/reproductive health around the world between 1960 and 2015.

Results: Women’s wage employment is negatively ...


Appraisal Waivers, Jill E. Fisch 2020 University of Pennsylvania Carey Law School

Appraisal Waivers, Jill E. Fisch

Faculty Scholarship at Penn Law

A judicial determination of fair value in a private company can be a difficult and imprecise process. This difficulty coupled with variations in way mergers are negotiated and structured and the potential for conflicts of interest lend uncertainty to appraisal proceedings. As a result, corporate participants have powerful reasons to seek to limit the uncertainty associated with an appraisal proceeding ex ante. The response has been the growing use of shareholder agreements that limit appraisal rights.

Appraisal waivers also offer a potentially attractive solution to a somewhat different concern, the growth of appraisal litigation in publicly traded companies. As with ...


We Can Use Machine Learning To Determine Which Financial Ratios Are Best For Investors, Collin Butterfield 2020 Utah State University

We Can Use Machine Learning To Determine Which Financial Ratios Are Best For Investors, Collin Butterfield

All Graduate Plan B and other Reports

This study develops and tests the hypothesis that the machine learning algorithm, Random Forests, can be used to systematically pick financial ratios that would be best for indicating market trends and be used subsequently to perform comparable analysis to speculate whether a firm is over- or under-valued. Results show that financial ratio selection differs depending on the market sector to which a firm pertains. We examine the 11 financial sectors representing the key areas of the economy. We also look at four possible trading strategies that an investor could have: month-long, quarter-long, semi-annual, and annual to capture differing trading horizons.


Synthetic Governance, Byung Hyun Anh, Jill E. Fisch, Panos N. Patatoukas, Steven Davidoff Solomon 2020 UC Berkeley

Synthetic Governance, Byung Hyun Anh, Jill E. Fisch, Panos N. Patatoukas, Steven Davidoff Solomon

Faculty Scholarship at Penn Law

Scholars, practitioners and policymakers continue to debate what constitutes “good” corporate governance. Academic efforts to evaluate the effect of governance provisions such as dual class voting structures, staggered boards of directors and separating the positions of CEO and Chairman of the Board, have produced inconsistent or inconclusive results. The consequence is that the debate over corporate governance is increasingly political and discordant.

We offer a way to address this debate. The rise of index-based investing provides a market-based alternative to governance regulation. Through the creation of bespoke governance index funds, asset managers can offer investors the opportunity to choose an ...


Implicit Communication And Enforcement Of Corporate Disclosure Regulation, Ashiq Ali, Michael T. Durney, Jill E. Fisch, Hoyoun Kyung 2020 University of Texas at Dallas

Implicit Communication And Enforcement Of Corporate Disclosure Regulation, Ashiq Ali, Michael T. Durney, Jill E. Fisch, Hoyoun Kyung

Faculty Scholarship at Penn Law

This study examines the challenge of implicit communication -- qualitative statements, tone, and non-verbal cues -- to the effectiveness of enforcing corporate disclosure regulation. We use a Regulation Fair Disclosure (Reg FD) setting, given that the SEC adopted the regulation recognizing that managers can convey non-public information privately not just through explicit quantitative disclosures but also through implicit communication. In a high-profile enforcement action, however, the court focused on a literal examination of the manager’s language rather than his positive spin to conclude that the SEC had been “too demanding” in examining the manager’s statements and that its enforcement policy ...


Pricing Climate Change Risk In Corporate Bonds, Elsa Allman 2020 CUNY Bernard M Baruch College

Pricing Climate Change Risk In Corporate Bonds, Elsa Allman

Publications and Research

This paper examines whether corporate bondholders price climate change risk. I find that firms exposed to higher sea level rise (SLR) across U.S. branch locations pay a premium when issuing bonds. Specifically, a one standard deviation increase in a firm’s SLR exposure is associated with a 2% increase of average yield spreads equivalent to 4 basis points. This effect is more pronounced for firms in industries vulnerable to extreme weather conditions, which are less spatially diversified, and issuing bonds with maturities ranging from 5 to 10 years. In addition, I find no evidence that credit rating agencies account ...


Changes In Couples’ Earnings Following Parenthood And Trends In Family Earnings Inequality, Pilar Gonalons-Pons, Christine R. Schwartz, Kelly Musick 2020 University of Pennsylvania

Changes In Couples’ Earnings Following Parenthood And Trends In Family Earnings Inequality, Pilar Gonalons-Pons, Christine R. Schwartz, Kelly Musick

Population Center Working Papers (PSC/PARC)

The growing economic similarity of spouses has contributed to rising income inequality across households. Explanations have typically centered on assortative mating, but recent work has argued that changes in women’s employment and spouses’ division of paid work have played a more important role. We expand this work to consider the critical turning point of parenthood in shaping couples’ division of employment and earnings. Drawing on three U.S. nationally representative surveys, we examine the role of parenthood in spouses’ earnings correlations between 1968-2015 and ask to what extent changes in spouses’ earnings correlations are due to: (1) changes upon ...


Lessons Learned: A Conversation With Paul A. Volcker, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard 2020 Yale University

Lessons Learned: A Conversation With Paul A. Volcker, Andrew Metrick, Rosalind Z. Wiggins, Kaleb B. Nygaard

Journal of Financial Crises

On March 26, 2019, Andrew Metrick, the Janet Yellen Professor of Finance at the Yale School of Management and Founder and Director of the Yale Program on Financial Stabilitysat down with Paul A. Volcker to discuss his perspectives on the Federal Reserve, central banking autonomy, “too big to fail,” and how his perspectives on these topics have changed over the decades.It turned out to be one of the last interviews given by the former Chairman of the Federal Reserve System who passed away on December 8, 2019, at the age of 92.


The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick 2020 Yale Program on Financial Stability

The Federal Reserve’S Financial Crisis Response E: The Term Asset-Backed Securities Loan Facility, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Securitization is a process that allows banks and other lenders to package loans and sell them as bonds called asset-backed securities (ABS), removing them from their balance sheets and immediately generating cash for new loans. ABS are an important component of the financing cycle for many types of loans to households and small businesses, including mortgages. In the fall of 2008, financial markets began experiencing disturbances as the effects of the U.S. subprime market meltdown spread. The ABS market froze decreasing the volume of new loans to households and small businesses. The Federal Reserve became very concerned about the ...


The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick 2020 Yale Program on Financial Stability

The Federal Reserve’S Financial Crisis Response D: Commercial Paper Market Facilities, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

During the summer of 2007, the U.S. residential mortgage market began to decline sharply negatively impacting the asset-backed commercial paper (ABCP) market, which often relied on mortgages as underlying support. Money Market Mutual Funds (MMMFs), significant investors in commercial paper (CP), quickly retreated from the market, causing a substantial decline in outstanding ABCP. In September 2008, pressures on the markets severely escalated again, when the Reserve Primary Fund MMMF “broke the buck” and prompted run-like redemption requests by many MMMF investors. These disruptions resulted in higher rates and shorter maturities, practically freezing the market for term CP. Concerned about ...


The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick 2020 Yale Program on Financial Stability

The Federal Reserve’S Financial Crisis Response C: Providing U.S. Dollars To Foreign Central Banks, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

The financial crisis that began in late 2007 with the decline in the United States (U.S.) subprime mortgage markets quickly spread to other markets and eventually disrupted the interbank funding markets in the U.S. as well as overseas. To address the strain in the U.S. dollar (USD) funding markets, the Federal Reserve worked with foreign central banks around the world to provide USD liquidity to affected overseas markets by entering into currency swap agreements. Following the bankruptcy of Lehman Brothers in September 2008, and the resulting further destabilization of the world’s financial systems, the size and ...


The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick 2020 Yale Program on Financial Stability

The Federal Reserve’S Financial Crisis Response B: Lending & Credit Programs For Primary Dealers, Rosalind Z. Wiggins, Patricia C. Mosser, Andrew Metrick

Journal of Financial Crises

Beginning in the summer 2007 the Federal Reserve (the Fed) deployed numerous conventional and innovative programs to address the credit crisis occurring in the wholesale lending markets that was beginning to affect the broader financial markets and threaten the economy at large. Two of those programs, the Term Securities Lending Facility (TSLF) and the Primary Dealer Credit Facility (PDCF) were aimed at providing liquidity to primary dealers and required the Fed to rely on its authority under Section 13(3) of the Federal Reserve Act. Section 13(3) is a Depression Era amendment that permits the Fed expanded powers in ...


The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick 2020 Yale Program on Financial Stability

The Federal Reserve’S Financial Crisis Response A: Lending & Credit Programs For Depository Institutions, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in summer 2007, the Federal Reserve (the Fed) was called upon to address a severe disruption in the interbank lending markets sparked by a downturn in the subprime mortgage market. As these developments began to impact the ability of banks to raise adequate funding, the Fed encouraged them to utilize the Discount Window (DW), its standing facility for lending to depository institutions, and repeatedly decreased the lending rate to make the facility more accessible. Despite the Fed’s efforts, for a number of reasons, including historical perceptions of stigma, banks were reluctant to utilize the DW. In December 2007 ...


The Promises And Perils Of Insurtech, Lin LIN, Christopher C. H. CHEN 2020 Singapore Management University

The Promises And Perils Of Insurtech, Lin Lin, Christopher C. H. Chen

Research Collection School Of Law

The insurance sector, in riding the wave of the FinTech phenomenon, has been rapidly expanding, with a slew of firms having emerged to provide so-called “InsurTech” services. These services incorporate concepts such as blockchain, artificial intelligence, digitalisation and the sharing economy to various aspects of the insurance industry. This profusion of technology brings with it the promise of various benefits including increasing efficiency and lowering costs for not only insurers and intermediaries, but also businesses or consumers as end-users of insurance. However, the development of InsurTech comes with corresponding risks and regulatory concerns not currently accounted for by the traditional ...


The International Spread Of Covid-19 Stock Market Collapses, Silvio Contessi, Pierangelo De Pace 2020 Monash Business School

The International Spread Of Covid-19 Stock Market Collapses, Silvio Contessi, Pierangelo De Pace

Pomona Economics

We identify periods of mildly explosive dynamics and collapses in the stock markets of 18 major countries during the COVID-19 pandemic of 2020. We find statistical evidence of instability transmission from the Chinese stock market to all other markets. The recovery is heterogeneous and not explosive in all markets.


Shareholder Litigation Rights And Capital Structure Decisions, Nam H. Nguyen, Hieu V. Phan, Eunju Lee 2020 The University of Texas Rio Grande Valley

Shareholder Litigation Rights And Capital Structure Decisions, Nam H. Nguyen, Hieu V. Phan, Eunju Lee

Economics and Finance Faculty Publications and Presentations

We exploit the staggered adoption of the universal demand (UD) laws across U.S. states, which impedes shareholder rights to initiate derivative lawsuits, as a quasi-natural experiment to examine the relation between shareholder litigation rights and firm capital structures. We find that weaker shareholder litigation rights due to the UD laws adoption lead to higher financial leverage, which enhances firm value. Furthermore, the positive relation between the UD laws adoption and financial leverage is more pronounced for firms exposed to higher shareholder litigation risk ex ante or financially constrained firms. Our evidence is consistent with lower shareholder litigation threats motivating ...


Shareholder Litigation Rights And Corporate Acquisitions, Chune Young Chung, Incheol Kim, Monika K. Rabarison, Thomas Y. To, Eliza Wu 2020 The University of Texas Rio Grande Valley

Shareholder Litigation Rights And Corporate Acquisitions, Chune Young Chung, Incheol Kim, Monika K. Rabarison, Thomas Y. To, Eliza Wu

Economics and Finance Faculty Publications and Presentations

We examine the effect of shareholder litigation rights on managers’ acquisition decisions. Our experimental design exploits a U.S. Ninth Circuit Court of Appeals ruling on July 2, 1999 that resulted in a reduction in shareholder class actions. We find that, since the ruling, firms in Ninth Circuit states acquire larger targets. Furthermore, acquirers’ returns are lower in these states, especially for those with weaker corporate governance. Further analysis shows that value destruction is the result of managers’ freedom to conduct empire-building acquisitions using overvalued equity. Overall, our findings indicate the importance of shareholder litigation as an external governance mechanism.


Estimating The Benefits And Costs Of Forming Business Partnerships, Jungho LEE 2020 Singapore Management University

Estimating The Benefits And Costs Of Forming Business Partnerships, Jungho Lee

Research Collection School Of Economics

I estimate a matching model of business‐partnership formation to quantify the relative importance of productivity gains, financing gains, and the coordination failure of effort provision (moral hazard) among partners. Productivity gains account for 61% of the gain from the observed partnerships. For partners in the first quartile of the wealth distribution, however, financing accounts for 93% of the gain. The cost of moral hazard corresponds to 42% of the entire gain from partnerships. A loan policy specifically targeting partnerships is less effective in improving welfare than a conventional loan policy that provides loans to individual entrepreneurs.


Unknown Latent Structure And Inefficiency In Panel Stochastic Frontier Models, Levent Kutlu, Kien C. Tran, Mike G. Tsionas 2020 The University of Texas Rio Grande Valley

Unknown Latent Structure And Inefficiency In Panel Stochastic Frontier Models, Levent Kutlu, Kien C. Tran, Mike G. Tsionas

Economics and Finance Faculty Publications and Presentations

This paper extends the fixed effect panel stochastic frontier models to allow group heterogeneity in the slope coefficients. We propose the first-difference penalized maximum likelihood (FDPML) and control function penalized maximum likelihood (CFPML) methods for classification and estimation of latent group structures in the frontier as well as inefficiency. Monte Carlo simulations show that the proposed approach performs well in finite samples. An empirical application is presented to show the advantages of data-determined identification of the heterogeneous group structures in practice.


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