Sky Blog
A tremendous amount of capital has already been committed to environmental, social, and governance (ESG). With it has come mounting concern over monitoring and guiding the proper integration of ESG into firms. ESG integration is not straightforward due to the …
The progress and promise realized and presented by artificial intelligence in finance has been remarkable. It has made finance cheaper, faster, larger, more accessible, more profitable, and more efficient in many ways. Yet for all the significant progress and promise …
Fifty years ago, banking was a relationship business. Bank managers collected information about depositors and borrowers from all sorts of sources, formal and informal. In recent decades, credit decisions have become far more data-driven, with companies like Amazon and the …
Calls to dismantle the legal framework that was developed in response to the financial crisis have begun to multiply and gain momentum. Pursuant to a Trump Administration executive order, the Treasury Department has released a series of reports that undertakes …
Lending in China is a risky proposition. When a U.S. bank needs to decide whether to approve a loan to a U.S. customer, it simply accesses the customer’s credit report, which is often the deciding factor. The bank can thus …
Over the last half century, finance has made remarkable progress explaining the pricing of financial assets. In relying on portfolio theory, however, mainstream pricing models tend to ignore investor preferences for certain asset types. This is a mistake. In a …
Public firms are increasingly connected through institutional investors’ stock ownership, largely due to individual investors who invest excess cash and retirement savings through financial institutions. Firms with institutional cross-ownership have institutional stockholders with significant stakes in other firms within the …
An important and long-standing question in the economics of information is whether voluntary disclosure leads to full disclosure. A compelling and intuitive argument, often described as the “unraveling” argument (see Milgrom, 1981), suggests that the answer is, yes. In brief, …
June 2018 will mark the 60th anniversary of the publication of Franco Modigliani and Merton Miller’s classic article, The Cost of Capital, Corporation Finance, and the Theory of Investment. Widely hailed as the foundation of modern finance, their …
Securities and Exchange Commission (“SEC”) Chairman Jay Clayton recently discussed the uncertainties surrounding token offerings and other forms of distributed ledger-based financing.[1] Mr. Clayton cautioned that the lack of information regarding online platforms that list and trade virtual coins …
In a world of “alternative facts” and political rhetoric crafted to mislead, it is easy to forget that idealized visions can at times illuminate more than they obfuscate. In a book review recently published in Harvard Law Review and available …
“Culture, more than rule books, determines how an organization behaves.” – Warren Buffet[1]
In recent years, there have been ongoing occurrences of serious professional misbehavior, ethical lapses and compliance failures at financial institutions. It was the crisis that exposed …
Herd behavior is a widely used notion met in different contexts and disciplines, from neurology and zoology to sociology, psychology, economics and finance. In economics and finance the term herd behavior usually suggests the process where agents tend to imitate …
Culture is a potent force in shaping individual and group behavior, yet it has received scant attention in the context of financial risk management and the recent financial crisis. In my paper, The Gordon Gekko Effect: The Role of Culture …
Intermediation is a fundamental fact of finance. Investment banks underwrite stock offerings for companies. Commercial banks safeguard the savings of workers. Fund managers invest the pensions of retirees. Exchanges match orders of buyers and sellers. Brokers facilitate trades of investors. …
There are few types of debt as internationally issued and traded as the debt securities issued in securitisation (in the United States, spelled securitization) transactions. European investors commonly invest in securities issued in U.S. securitisation transactions, and vice versa.
It …
Let me begin by thanking the organizers for inviting me to participate in this important dialogue on the role of finance in society. The financial sector is vital to the economy. A well-functioning financial sector promotes job creation, innovation, and …
Following a familiar historical pattern, policy responses to the latest global financial crisis and subsequent economic and political dysfunction can be divided into three sequenced but overlapping phases. The first phase was a period of “wartime”-style emergency measures hastily fashioned …
The article, The Custom-to-Failure Cycle, which I wrote with my research assistant Lucy Chang (Duke Law School class of 2012), examines how reliance on heuristic-based customs can lead to financial failures. In areas of complexity, people often rely on …