Thu 01 Jun 13:00: ‘The Behavioral Policy Uncertainty Channel and Fiscal Analysis: Theory and Evidence’
We show that the behavioural drivers of the equilibrium asset prices pose as a significant uncertainty channel to policymakers. Whilst policymakers maintain an information superiority based on the supply side operations, their decisions often lead to suboptimal welfare implications particularly due to the behavioural information constraints. This study presents a formal macro-finance framework where asset prices are determined due to both physical and behavioural drivers where the society’s behavioural responses to policies remain uncertain. We show that failure to incorporate an accurate account over the behavioural drivers lead to heighted risk premia, significant financial market drawbacks and negative real economic implications.
- Speaker: Hormoz Ramian (University of Glasgow)
- Thursday 01 June 2023, 13:00-14:00
- Venue: CJBS, room W201.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 18 May 12:45: Distressed Investment, Corporate Debt Liquidity, and Capital Structure
We examine liquidity of corporate debt and capital structure of the firm run by inefficient management in the presence of a distressed investor in the secondary debt market. In addition to having superior information about the firm’s future cash flows, the distressed investor can install a more efficient management and restructure the firm in bankruptcy. An unexpected arrival of the investor negatively impacts liquidity of existing debt claims. However, liquidity is more nuanced when firms choose their capital structure in expectation of the distressed investor. In particular, if value added from restructuring is sufficiently high in deep default states, liquidity of senior claims optimally issued by the firm can still be low. We derive testable implications and examine the impact of various Bankruptcy Code provisions on liquidity and capital structure of the firm.
- Speaker: Alex Gorbenko (UCL)
- Thursday 18 May 2023, 12:45-14:00
- Venue: CJBS, room W202.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 04 May 13:00: Taxes and Equity Risk and Return: The case of Tax-Loss Carry Forwards
How do taxes affect equity risk and return? In this paper, we examine the relationship between corporate taxes and equity risk and return with a focus on tax-loss carry forwards. Tax-loss carry forward (TLCF), the accumulated corporate losses that can be applied to future taxable income, forms an important and risky corporate asset. We first show theoretically that a firm’s TLCF is a complex contingent claim that has a non-monotonic effect on equity risk: at a high level of TLCF , equity risk is increasing in TLCF because firms are more likely to see their TLCF left deferred or unused after negative cash flow shocks. On the other hand, if TLCF is so low that it will be used with near certainty, then equity risk is decreasing with TLCF since TLCF represents a safe cash flow. Empirically, TLCF positively and significantly forecasts various measures of equity risk, as well as future returns controlling for standard risk measures. The positive relationship indicates that TLCF is risky for the typical firm.
- Speaker: Ron Giammarino (University of British Columbia)
- Thursday 04 May 2023, 13:00-14:00
- Venue: CJBS, room W201.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 15 Jun 13:00: Title to be confirmed
Abstract not available
- Speaker: Enrichetta Ravina (Chicago Fed)
- Thursday 15 June 2023, 13:00-14:00
- Venue: CJBS, room W201.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 18 May 12:45: Title to be confirmed
Abstract not available
- Speaker: Alex Gorbenko (UCL)
- Thursday 18 May 2023, 12:45-14:00
- Venue: CJBS, room W202.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 04 May 13:00: Title to be confirmed
Abstract not available
- Speaker: Ron Giammarino (University of British Columbia)
- Thursday 04 May 2023, 13:00-14:00
- Venue: CJBS, room W201.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 01 Jun 13:00: Title to be confirmed
Abstract not available
- Speaker: Hormoz Ramian (University of Glasgow)
- Thursday 01 June 2023, 13:00-14:00
- Venue: CJBS, room W201.
- Series: CERF and CF Events; organiser: Daniel Simmons.
Thu 09 Mar 13:00: Misfortune and Mistake: The Financial Conditions and Decision-Making Ability of High-Cost Loan Borrowers
The appropriateness of many high-cost loan regulations depends on whether demand is driven by financial conditions (“misfortunes”) or imperfect decisions (“mistakes”). Bank records from Iceland show borrowers have especially low liquidity just before getting a loan. Borrowers exhibit lower decision-making ability (DMA) in linked choice experiments: 45% of loan dollars go to the bottom 20% of the DMA distribution. Standard determinants of demand do not explain this relationship, which is also mirrored by the relationship between DMA and an unambiguous “mistake.” Both “misfortune” and “mistake” thus appear to drive demand.
- Speaker: Arna Olafsson (Copenhagen Business School)
- Thursday 09 March 2023, 13:00-14:00
- Venue: Zoom only.
- Series: CERF and CF Events; organiser: Daniel Simmons.