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Articles 1 - 18 of 18
Full-Text Articles in Social and Behavioral Sciences
Are Financing Constraints Binding For Investment? Evidence From A Natural Experiment, Katarzyna Anna Bilicka
Are Financing Constraints Binding For Investment? Evidence From A Natural Experiment, Katarzyna Anna Bilicka
Economics and Finance Faculty Publications
This paper shows that the availability of cash flows dominates the effects of cost of capital for investment at the firm level. Using an exogenous tax reform in Canada as a quasi-natural experiment, I find that a temporary and unexpected increase in the cost of capital for firms with low availability of retained earnings has no effect on investment of those firms. A subsequent direct increase in the availability of cash flows has large effects on investment. This suggests that internal financing constraints are binding for firms, as they prefer to use low cost retained earnings to finance their investment.
Profit Shifting And Corruption, Katarzyna Anna Bilicka, André Seidel
Profit Shifting And Corruption, Katarzyna Anna Bilicka, André Seidel
Economics and Finance Faculty Publications
This paper introduces heterogeneous profit shifting costs induced by corrupt tax officials to the analysis of profit shifting of multinationals. Using a theoretically derived corruption weighted tax differential, we show that corruption increases profit shifting of European firms. We use our estimates to calculate the implied tax revenue elasticities for European countries and find that countries with otherwise similar tax rates face lower tax revenue elasticities when they are more corrupt. This means that corruption negatively affects the revenue gains that countries could have from increasing their tax rates.
Comovement In The Cryptocurrency Market, Benjamin M. Blau, Todd Griffith, Ryan J. Whitby
Comovement In The Cryptocurrency Market, Benjamin M. Blau, Todd Griffith, Ryan J. Whitby
Economics and Finance Faculty Publications
This study examines the comovement between 17 of the most active cryptocurrencies. We are unable to statistically reject the presence of perfect comovement between Bitcoin and six of the 16 non-Bitcoin cryptocurrencies. Consistent with the friction-based explanation for the presence of comovement, once the CBOE introduced futures contracts on Bitcoin, we find that all 16 cryptocurrencies comove with Bitcoin. These results suggest that introducing futures contracts improves the informational environment of the entire cryptocurrency market, which helps explain the unusual comovement in the cryptocurrency market.
Comparing Uk Tax Returns Of Foreign Multinationals To Matched Domestic Firms, Katarzyna Anna Bilicka
Comparing Uk Tax Returns Of Foreign Multinationals To Matched Domestic Firms, Katarzyna Anna Bilicka
Economics and Finance Faculty Publications
In this paper, I use confidential UK corporate tax returns data to explore whether there are systematic differences in the amount of taxable profits that multinational and domestic companies report. I find that the ratio of taxable profits to total assets reported by foreign multinational subsidiaries is one-half that of comparable domestic standalones. The majority of the difference is attributable to the fact that a higher proportion of foreign multinational subsidiaries report zero taxable profits. I document how the estimated difference is related to profit shifting and show that using accounting data leads to much smaller estimates of the difference.
The Introduction Of Bitcoin Futures: An Examination Of Volatility And Potential Spillover Effects, Benjamin M. Blau, Ryan J. Whitby
The Introduction Of Bitcoin Futures: An Examination Of Volatility And Potential Spillover Effects, Benjamin M. Blau, Ryan J. Whitby
Economics and Finance Faculty Publications
Theory in Stein (1987) suggests that introducing derivative contracts, such as futures, can destabilize underlying asset prices if the contracts attract enough speculative traders. This paper examines how the introduction of Bitcoin futures influences the underlying Bitcoin market. Consistent with Stein (1987), we find that that Bitcoin's volatility increases significantly during the post-introduction period. Perhaps more importantly, however, we observe significant spillover effects into related markets. For instance, in other cryptocurrencies, the increase in volatility in these markets is greater than the post-introduction increase in Bitcoin.
Smoothing, Discounting, And Demand For Intra-Household Control For Recipients Of Conditional Cash Transfers, Diego Aycinena, Szabolcs Blazsek, Lucas Rentschler, Betzy Sandoval
Smoothing, Discounting, And Demand For Intra-Household Control For Recipients Of Conditional Cash Transfers, Diego Aycinena, Szabolcs Blazsek, Lucas Rentschler, Betzy Sandoval
Economics and Finance Faculty Publications
Inter-temporal preferences are important determinants of investment decisions, including investments in human capital. Yet, little is known about these preferences for recipients of conditional cash transfers (CCTs). We simultaneously estimate utility curvature (preference for consumption smoothing), discounting, and present biasedness for such recipients. We also introduce a financially motivated method of measuring willingness to forgo funds to control household finances. We find that female participants in a CCT program in Guatemala have very high degrees of utility curvature and low discount factors, which may lead to low levels of investment by participants in the human capital of the household. We …
Bounded Rationality And The Choice Of Jury Selection Procedures, Martin Van Der Linden
Bounded Rationality And The Choice Of Jury Selection Procedures, Martin Van Der Linden
Economics and Finance Faculty Publications
A peremptory-challenge procedure allows the parties to a jury trial to dismiss some prospective jurors without justification. Complex challenge procedures offer an unfair advantage to parties who are better able to strategize. I introduce a new measure of strategic complexity based on level-k thinking and use this measure to compare challenge procedures often used in practice. In applying this measure, I overturn some commonly held beliefs about which jury selection procedures are strategically simple.
Is Uber A Substitute Or Complement For Public Transit?, Jonathan D. Hall, Craig Palsson, Joseph Price
Is Uber A Substitute Or Complement For Public Transit?, Jonathan D. Hall, Craig Palsson, Joseph Price
Economics and Finance Faculty Publications
How Uber affects public transit ridership is a relevant policy question facing cities worldwide. Theoretically, Uber’s effect on transit is ambiguous: while Uber is an alternative mode of travel, it can also increase the reach and flexibility of public transit’s fixed-route, fixed-schedule service. We estimate the effect of Uber on public transit ridership using a difference-in-differences design that exploits variation across U.S. metropolitan areas in both the intensity of Uber penetration and the timing of Uber entry. We find that Uber is a complement for the average transit agency, increasing ridership by five percent after two years. This average effect …
Range-Based Volatility, Expected Stock Returns, And The Low Volatility Anomaly, Benjamin M. Blau, Ryan J. Whitby
Range-Based Volatility, Expected Stock Returns, And The Low Volatility Anomaly, Benjamin M. Blau, Ryan J. Whitby
Economics and Finance Faculty Publications
One of the foundations of financial economics is the idea that rational investors will discount stocks with more risk (volatility), which will result in a positive relation between risk and future returns. However, the empirical evidence is mixed when determining how volatility is related to future returns. In this paper, we examine this relation using a range-based measure of volatility, which is shown to be theoretically, numerically, and empirically superior to other measures of volatility. In a variety of tests, we find that range-based volatility is negatively associated with expected stock returns. These results are robust to time-series multifactor models …
The Influence Of Height On Academic Outcomes, Devon Haskell Gorry
The Influence Of Height On Academic Outcomes, Devon Haskell Gorry
Economics and Finance Faculty Publications
This paper examines whether the height premium for academic outcomes is driven by unequal opportunities for tall individuals. Using data from the National Longitudinal Survey of Adolescent Health, this paper shows that taller individuals typically earn higher grades and attain more schooling, but the associations are not uniform across school size. Height is only associated with better outcomes for students attending large schools and these improvements are concentrated among males. Data suggest that height contributes more to sports participation and school satisfaction in large schools where resources are more scarce. Thus, differential opportunities or treatment across height in large schools …
The Impact Of Grade Ceilings On Student Grades And Course Evaluations: Evidence From A Policy Change, Devon Haskell Gorry
The Impact Of Grade Ceilings On Student Grades And Course Evaluations: Evidence From A Policy Change, Devon Haskell Gorry
Economics and Finance Faculty Publications
This paper analyzes the effects of a grade ceiling policy on grade distributions and course evaluations. Results show that the effects vary based upon the level of the grade ceiling. A ceiling set at 2.8 decreased overall grade point average (GPA) by reducing the number of As and Bs and increasing the number of lower grades given. This low ceiling also increased the number of withdrawals and significantly lowered course evaluations. A ceiling set at 3.2 decreased overall GPA by reducing the number of As and increasing the number of Bs given, but the effects on course evaluations were smaller …
Experience And Worker Flows, Aspen Gorry
Experience And Worker Flows, Aspen Gorry
Economics and Finance Faculty Publications
This paper studies the role of worker learning in a labor market where workers have incomplete information about the quality of their employment match. The amount of information about the quality of a new match depends on a worker’s past job experience. Allowing workers to learn from experience generates a decline in job finding probabilities with age that is consistent with patterns found in the data. Moreover, workers with more past experience will on average have less wage volatility on new jobs, which is also consistent with the data. In contrast to the fact that the cross-sectional wage distribution fans …
Hyperbolic Memory Discounting And The Political Business Cycle, T. Scott Findley
Hyperbolic Memory Discounting And The Political Business Cycle, T. Scott Findley
Economics and Finance Faculty Publications
The vintage political business cycle framework of Nordhaus (1975) represents the idea that the macroeconomic business cycle is manipulated opportunistically by an incumbent government to achieve re-election. A key assumption in this prototypical framework is that voters discount their memories about unemployment and inflation at a constant rate. Yet starting with Ebbinghaus (1885) and Jost (1897), a large body of research in psychology documents an empirical regularity that has come to be known as Jost's Second Law of Forgetting-individuals discount recent memories at a higher rate compared to the rate at which they discount older memories. I find that incorporating …
Numerical Simulations Of Competition In Quantities, Devon Haskell Gorry, John Gilbert
Numerical Simulations Of Competition In Quantities, Devon Haskell Gorry, John Gilbert
Economics and Finance Faculty Publications
We present a series of numerical simulation models built in Excel that can be used to explore the properties of various models of strategic competition in quantities and their economic implications. The resources incorporate both tabular and graphical data presentation formats and are built in such a way that they provide instant or ‘live’ feedback on the consequences of changes in the economic system. We discuss the theory behind the models, how they can be implemented as numerical simulations in Excel, and ways in which the simulations can be used to enhance student understanding of the material.
A Framework For Non-Drastic Innovation With Product Differentiation, Jeremy Jay Jackson, Jason Smith
A Framework For Non-Drastic Innovation With Product Differentiation, Jeremy Jay Jackson, Jason Smith
Economics and Finance Faculty Publications
We model non-drastic technological innovation in a duopoly model with differentiated products. We derive profit functions for both firms which depend on only one variable, the technological gap. As our model derives product demands directly from agent utility we are able to fully describe the welfare effects of innovation. We show that the welfare improvements from innovation come not only as firms accrue higher profits, by charging consumers higher prices, but also as consumers enjoy higher quality products.
Corporate Lobbying, Political Connections, And The Bailout Of Banks, Diana W. Thomas, Benjamin M. Blau, Tyler Brough
Corporate Lobbying, Political Connections, And The Bailout Of Banks, Diana W. Thomas, Benjamin M. Blau, Tyler Brough
Economics and Finance Faculty Publications
Political involvement has long been shown to be a profitable investment for firms that seek favorable regulatory conditions or support in times of economic distress. But how important are different types of political involvement for the timing and magnitude of political support? To answer this question, we take a comprehensive look at the lobbying expenditures and political connections of banks that were recipients of government support under the 2008 Troubled Asset Relief Program (TARP). We find that politically engaged firms were not only more likely to receive TARP support, but they also received a greater amount of TARP support and …
The Effect Of Right-To-Work Laws On Unionization In The United States, H. Craig Petersen, Keith Lumsden
The Effect Of Right-To-Work Laws On Unionization In The United States, H. Craig Petersen, Keith Lumsden
Economics and Finance Faculty Publications
State right-to-work laws, the subject of considerable controversy in the industrial relations field, typically state that no person will be required to become a union member or, conversely, be required to abstain from union membership as a condition of obtaining or retaining employment. Little hard evidence exists on the effect of right-to-work laws. Meyers (1955) concludes that in Texas the law does not appear to have had a noticeable impact on union strength. Kuhlman (1955) finds that the Virginia law has caused little change in hiring practices, and he cites lack of enforcement as a major cause. Novit (1969), in …
An Empirical Test Of Regulatory Effects, H. Craig Petersen
An Empirical Test Of Regulatory Effects, H. Craig Petersen
Economics and Finance Faculty Publications
Averch and Johnson have provided analytical support for the assertion that rate of return regulation causes inefficient production because of the overuse of capital. Empirical evidence in support or refutation of their thesis is just beginning to appear. This paper provides additional evidence. The regulated firm's objective is stated in terms of cost minimization subject to a regulatory constraint. The effect of changes in the allowed rate of return on capital are evaluated. It is shown that as the allowed return approaches the cost of capital, costs increase and the percentage of total costs paid to capital also increases. These …