Acknowledgments: We are grateful to Anat Admati, Ugo Albertazzi, Cindy Alexander,

We present a model in which issuers of asset backed securities choose to release coarse information to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity. The degree of transparency is inefficiently low if the social value of secondary market liquidity exceeds its private value. We show that various types of public intervention – mandatory transparency standards, provision of liquidit

Securitization, transparency, and liquidity

We present a model in which issuers of asset-backed securities choose to release coarse information to enhance the liquidity of their primary market, at the cost of reducing secondary market liquidity. The degree of transparency is inefficiently low if the social value of secondary market liquidity exceeds its private value. We show that various types of public intervention (mandatory transparency standards, provision of liquidity to distressed banks, or secondary market price support) have quite different welfare implications. Finally, we extend the model by endogenizing the private and social value of liquidity and the proportion of sophisticated investors

Credit ratings failures : causes and policy options

This paper examines the role of credit rating agencies in the subprime crisis, which was at the outset of the ongoing financial turmoil. The focus of the paper is on two aspects that contributed to the boom and bust of the market for asset-backed securities: rating inflation and coarse information disclosure. The paper discusses how regulation can be designed to mitigate these problems in the future. The suggestion is that regulators should require rating agencies to be paid by investors rather than by issuers (or at least constrain the way they are paid by issuers) and force greater disclosure of information about the underlying pool of securities

Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent

We present a model of labor market equilibrium in which managers are risk- averse, managerial talent (\alpha") is scarce, and rms seek alpha, that is, compete for this talent. Firms provide ecient long-term compensation, which allows for learning about managerial talent and assigning of managers to tasks based on their talent, when managers are not mobile across rms. In this case, rms can insure low-quality managers since high-quality managers have limited outside options. In contrast, when managers can move across rms, high-quality managers can fully extract ex post the rents due to their skill, which prevents rms from providing co-insurance among their employees. In anticipation, risk-averse managers may churn across firms before their perfor- mance is fully learnt and thereby prevent their efficient assignment to tasks. The result is excessive risk-taking with pay for short-term performance and build up of long-term risks. As the model is suited for the financial sector, we conclude with analysis of policies to address the externality in compensation among financial firms

Does family control matter? International evidence from the 2008-2009 financial crisis

We study whether and how family control affects valuation and corporate decisions during the 2008–2009 financial crisis using a sample of more than 8,500 firms from 35 countries. We find that family-controlled firms underperform significantly, they cut investment more relative to other firms, and these investment cuts are associated with greater underperformance. Further, we find that within family groups liquidity shocks are passed on through investment cuts across the group. Our evidence is consistent with families taking actions to increase the likelihood that the firms under their control and their control benefits survive the crisis, at the expense of outside shareholders

Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent,

Abstract We present a model of labor market equilibrium in which managers are riskaverse, managerial talent ("alpha") is scarce, and firms seek alpha, that is, compete for this talent. Firms provide efficient long-term compensation, which allows for learning about managerial talent and assigning of managers to tasks based on their talent, when managers are not mobile across firms. In this case, firms can insure low-quality managers since high-quality managers have limited outside options. In contrast, when managers can move across firms, high-quality managers can fully extract ex post the rents due to their skill, which prevents firms from providing co-insurance among their employees. In anticipation, risk-averse managers may churn across firms before their performance is fully learnt and thereby prevent their efficient assignment to tasks. The result is excessive risk-taking with pay for short-term performance and build up of long-term risks. As the model is suited for the financial sector, we conclude with analysis of policies to address the externality in compensation among financial firms. JEL classification: D62, G32, G38, J33

Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent,

Abstract We present a model of labor market equilibrium in which managers are riskaverse, managerial talent ("alpha") is scarce, and firms seek alpha, that is, compete for this talent. When managers are not mobile across firms, firms provide efficient long-term compensation, which allows for learning about managerial talent and insures low-quality managers. In contrast, when managers can move across firms, high-quality managers can fully extract the rents arising from their skill, which prevents firms from providing co-insurance among their employees. In anticipation, risk-averse managers may churn across firms before their performance is fully learnt and thereby prevent their efficient choice of projects. The result is excessive risk-taking with pay for short-term performance and build up of long-term risks. We conclude with analysis of policies to address the resulting inefficiency in firms' compensation. JEL classification: D62, G32, G38, J33

Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent,

Abstract We present a model in which managers are risk-averse and firms compete for scarce managerial talent ("alpha"). When managers are not mobile across firms, firms provide efficient compensation, which allows for learning about managerial talent and for insurance of low-quality managers. When instead managers can move across firms, firms cannot offer co-insurance among employees. In anticipation, risk-averse managers may churn across firms or undertake aggregate risks in order to delay the revelation of their true quality. The result is excessive risk-taking with pay for short-term performance and an accumulation of long-term risks. We conclude with a discussion of policies to address the inefficiency in compensation. JEL classification: D62, G32, G38, J33

Seeking Alpha: Excess Risk Taking and Competition for Managerial Talent,

Abstract We present a model in which managers are risk-averse and firms compete for scarce managerial talent ("alpha"). When managers are not mobile across firms, firms provide efficient compensation, which allows for learning about managerial talent and for insurance of low-quality managers. When instead managers can move across firms, firms cannot offer co-insurance among employees. In anticipation, risk-averse managers may churn across firms or undertake aggregate risks in order to delay the revelation of their true quality. The result is excessive risk-taking with pay for short-term performance and an accumulation of long-term risks. We conclude with a discussion of policies to address the inefficiency in compensation. JEL classification: D62, G32, G38, J33