This course focuses on recent empirical research on the behavior of firms in the economy. This research is diverse and lively.
The standard neoclassical model assumes that the typical firm maximizes its profits.
The research discussed in this class documents deviations from this behavior:
- capital-labor conflict,
- corporate social responsibility,
- the irrationality of managers,
- financing constraints, and the subtleties of the tax system.
The methodological challenge consists of showing that firm behavior sometimes cannot be described by pure profit maximization.
- Boucly, Sraer and Thesmar, 2011, “Growth LBOs”, Journal of Financial Economics.
- Chodorow-Reich, 2014, “The Employment Effects of Credit Market Disruptions: Firm-level Evidence from the 2008-2009 Financial Crisis”, Quarterly Journal of Economics
- (*) Kaplan, 1989, “The Effect of Managements Buyouts on Operating Performance and Value”, Journal of Financial Economics
- Lichtenberg and Siegel, 1990, “The Effects of LBOs on Productivity and Related Aspects of Firm Behavior”, Journal of Financial Economics
- (*) Perotti and Spier, 1993, “Capital Structure as a Bargaining Tool: The Role of Leverage in Contract Renegotiation”, American Economic Review
Micro and Macro Effects of Financial Frictions :
- (*) Chaney, Sraer and Thesmar, 2012, The Collateral Chanel: How Real Estate Shocks Affect Corporate Investment'', American Economic Review
- Fazzari, Hubbard and Petersen (1988), "Financing Constraints and Corporate Investment", Brookings Papers on Economic Activity
- (*) Hiseh and Klenow, 2009, “Misallocation and Manufacturing TFP in China and India”, Quarterly Journal of Economics
- Midrigan and Xu, 2014, “Finance and Misallocation: Evidence from Plant-Level Data”, American Economic Review
- Sraer and Thesmar, 2023, “A sufficient statistics Approach for Aggregating Firm-level Experiments”, American Economic Review
- Kaplan and Zingales, 1997, “Do Investment-Cash-flows sensitivities Provide Useful Measures of Financing Constraints?”, Quarterly Journal of Economics
- Lamont, Owen (1997), Cash Flow and Investment: Evidence from Internal Capital Markets, Journal of Finance, 52:83-109
- Rauh, Joshua (2006), "Investment and financing constraints: Evidence from the Funding of Corporate Pension Plans", Journal of Finance
- Schmalz, M., D. Sraer, and D. Thesmar (2017): "Housing Collateral and Entrepreneurship," Journal of Finance
Manager Irrationality I: Rules of Thumb
- Anderson, R. C., & Reeb, D. M. (2003). Founding‐family ownership and firm performance: evidence from the S&P 500. Journal of Finance, 58(3), 1301-1328.
- Bennedsen, M., Nielsen, K. M., Pérez-González, F., & Wolfenzon, D. (2007). Inside the family firm: The role of families in succession decisions and performance . - - The Quarterly Journal of Economics, 122(2), 647-691.
- Ben-David, I., Graham, J. R., & Harvey, C. R. (2013). Managerial miscalibration. The Quarterly Journal of Economics, 128(4), 1547-1584.
- Cooper, A. C., Woo, C. Y., & Dunkelberg, W. C. (1988). Entrepreneurs' perceived chances for success. Journal of Business Venturing, 3(2), 97-108.
- Dessaint, Olivier, Otto and Thesmar, 2021, “CAPM-based Company (Mis)Valuation”, Review of Financial Studies
- Graham, J. R., Harvey, C. R., & Puri, M. (2013). Managerial attitudes and corporate actions. Journal of Financial Economics, 109(1), 103-121.
- Hommel, Landier and Thesmar, 2023, “Corporate Valuation: An Empirical Comparison of Discounting Methods”, mimeo
- Landier and Thesmar (2009). Financial contracting with optimistic entrepreneurs, Review of Financial Studies.
- Krüger, Landier and Thesmar (2015). The WACC fallacy: the real effects of using a single discount rate, Journal of Finance.
- (*) Malmendier, Ulrike and Geoff Tate (2005). CEO Overconfidence and Corporate Investment, Journal of Finance 60(6), 2661–2700.
- Malmendier, U., & Tate, G. (2008). Who makes acquisitions? CEO overconfidence and the market's reaction. Journal of Financial Economics, 89(1), 20-43.
- Sraer, D., & Thesmar, D. (2007). Performance and behavior of family firms: Evidence from the French stock market. Journal of the European Economic Association, 5(4), 709-751.
Manager Irrationality II: Expectations :
- Afrouzi, Kwon, Landier, Ma and Thesmar, 2023, “Overreaction in Expectations: Evidence and Theory”, Quarterly Journal of Economics
- Coibion and Gorodnichenko, 2015, “Information Rigidity and the Expectations Formation Process”, American Economic Review
- Bouchaud, Krüger, Landier and Thesmar, 2019, "Sticky Expectations and the Profitability Anomaly", Journal of Finance
-Bordalo, Gennaioli, La Porta and Shleifer, 2019, “Diagnostic Expectations and Stocks Returns”, Journal of Finance
- Bordalo, Gennaioli, Ma and Shleifer, 2020, “Overreaction in Macroeconomic Expectations”, American Economic Review
- De Silva and Thesmar, 2023, “Noise in Expectations: Evidence from Analyst Forecasts”, NBER WP 28963
- Ma, Ropele, Sraer and Thesmar, 2023, “A Quantitative Analysis of Distortions in Managerial Forecasts”, NBER WP 26830
Taxes :
- Chetty and Saez, 2003, “Dividend Taxes and Corporate Behavior: Evidence from the 2003 Dividend Tax Cut", Quarterly Journal of Economics
- Giroud and Rauh, 2019, “State Taxation and the Reallocation of Business Activity: Evidence from Establishment-Level Data", Journal of Political Economy
- Nimier-David, Sraer et Thesmar, 2023, “The Effects of Mandatory Profit-Sharing on Workers and Firms: Evidence from France”, mimeo
- Yagan, 2015, “Capital Tax Reform and the Real Economy: Eects of the 2003 Tax Cut", American Economic Review
- Zwick and Mahon, 2017, “Tax Policy and Heterogeneous Investment Behavior", American Economic Review
The Social Responsibility of Firms :
- Bonnefon, Landier, Sastry and Thesmar, 2023, “The Moral Preferences of Investors: Experimental Evidence”, NBER WP 29647
- Broccardo, Hart, and Luigi Zingales, 2022, “Exit vs. voice,” Journal of Political Economy
- Edmonds, 2014, “Would you kill the fat man?”, Princeton University Press
- Haidt 2012, “The Righteous Mind: Why Good People are Divided by Politics and Religion”, Penguin
- Hart and Zingales, 2017, “Companies Should Maximize Shareholder Welfare Not Market Value,” Journal of Law, Finance, and Accounting
- Hart, Thesmar and Zingales, 2023, “Private Sanctions”, Economic Policy
- Landier and Thesmar, 2024, “The Price of Our Values”, University of Chicago Press
- Paine, Schoar and Thesmar, 2023, “Moral Attitudes to Debt”, mimeo
- Riedl and Smeets, 2017, “Why do investors hold socially responsible mutual funds?”, The Journal of Finance
- Rubinstein, 2006, “A skeptic's comment on the study of economics”, Economic Journal