IGM Annual Report by Chicago Booth

2009â&#x20AC;&#x201C;10 Annual Report

IGM Initiative on Global Markets

Executive Director

Brian Barry Clinical Professor of Economics BOARD Directors

Anil Kashyap, Co-director Edward Eagle Brown Professor of Economics and Finance and Richard N. Rosett Faculty Fellow Christian Leuz, Co-director Joseph Sondheimer Professor of International Economics, Finance, and Accounting and Richard N. Rosett Faculty Fellow Matthew Gentzkow Professor of Economics and Neubauer Family Faculty Fellow Tobias Moskowitz Fama Family Professor of Finance Luigi Zingales Robert C. McCormack Professor of Entrepreneurship and Finance and the David G. Booth Faculty Fellow Administration

Jennifer Williams, Assistant Director Janice Luce, Assistant Director Peggy Eppink, Research Professional

Our Purpose The massive global movements of capital, products, and talent in the modern economy have fundamentally changed the nature of business in the 21st century. They have also generated confusion among policymakers and the public. The University of Chicago Booth School of Business continues its role as a thought leader on how these markets work, their effects, and the way they interact with policies and institutions.

rapidly changing business environment, and fosters an exchange of ideas with policymakers and leading international companies about the biggest issues facing the global economy.

The Initiative on Global Markets organizes these efforts. It supports original research by Chicago Booth faculty, prepares our students to make good decisions in a

The Initiative on Global Markets spans three broad areas: (1) international business, (2) financial markets, and (3) the role of policies and institutions.

Thank You The Initiative on Global Markets is grateful for the generous support provided by the Chicago Mercantile Exchange (CME) Group Foundation; by our corporate partners, AQR Capital Management, Barclays, John Deere and Company, and Northern Trust; and by Myron Scholes, MBA ’64, PhD ’70; Eugene Fama, MBA ’63, PhD ’64; Ramsey Frank, ’86; and John Meriwether, ’73.

Letter from the Director More than 40 members of Chicago Booth’s faculty contribute significantly to the school’s Initiative on Global Markets (IGM). This extraordinary faculty effort allows us to devote substantial intellectual energy to the IGM’s core mission: fostering better understanding of markets worldwide, including the way they interact with public policies and institutions, and their role in shaping the movements of capital, goods, and people that drive so much of modern economic life.

Brian Barry Executive Director, IGM Clinical Professor of Economics

The IGM does this in two main ways. We support research that sheds light on the workings of international business, financial markets, and the role of public policies and institutions. And we host distinguished visitors and engage with the public to promote informed and constructive debate about how these markets and institutions work, and their effects on issues of importance to the public. Some of this activity relates directly to the financial crisis that struck in 2008. During this past year, for example, we sponsored public talks and debates in the Myron Scholes Global Markets Forum—our distinguished speakers series—on the Federal Reserve’s response to the crisis; on the sovereign-debt troubles afflicting the euro zone; and on some of the important ethical tradeoffs that a thoughtful manager must deal with in a financial crisis. Our U.S. Monetary Policy Forum—which brings together academic researchers, market economists, and policymakers for an annual gathering in New York—featured a panel discussion on financial regulatory reform with two members of the Federal Open Market Committee. To help policymakers look for ways to lower systemic financial

risks, the IGM also arranged a small high-level meeting in Miami in December 2009, in which academics, central bank officials, and senior managers of global financial institutions discussed systemic aspects of financial regulation. And many of our faculty members have continued to contribute enthusiastically to our credit crisis website, the IGM Forum. We encourage you to visit igmchicago.org, where we post new commentary and informed analysis. This ongoing attention to the credit crisis, however, is only one part of the IGMâ&#x20AC;&#x2122;s efforts. During the past year we also continued to focus much of our research activities and public engagement on many other important issues in global markets. On the research front, for example, we supported projects aimed at better understanding the contribution of firms to economic growth; the role of social capital in economic activity; the political factors that shape economic policy; and other important questions. In our Myron Scholes Forum, after focusing intently on the credit crisis in the previous year, we featured a broader set of talks and debates during this past year, and were delighted to see the same kinds of enthusiastic responses by our audiences. These events included a talk on the healthcare system in the United States; an analysis of factors that could trigger debt-driven inflation; a lecture comparing the merits of various strategies for lowering global carbon emissions; and a talk on the market for talent, which included a close look at how chief executives in the United States are paid compared with their counterparts in other countries and with successful people in other professions. This report summarizes all of these efforts, along with our other activities during the past year. It includes descriptions of our conferences, Myron Scholes Forum events, visiting scholars, and recent research projects. We also encourage you to visit research.chicagobooth.edu/igm.

Conferences Scholes Forum Visiting Fellows Research

The Initiative on Global Markets organizes and supports conferences for scholars doing high-quality research in their fields. Some of these gatherings also draw on the insights of leading practitioners. In 2009â&#x20AC;&#x201C;10, the IGM sponsored four conferences.

U.S. Monetary Policy Forum

The IGM held its fourth annual U.S. Monetary Policy Forum (USMPF) in New York in February 2010. The USMPF brings together academic researchers, market economists, and policymakers. A standing group of academic and private sector economists share rotating responsibility for reporting on a critical medium-term issue confronting the Federal Open Market Committee (FOMC). The topic of this year’s main USMPF report was “Financial Conditions Indexes: A New Look after the Financial Crisis”. Jan Hatzius (Goldman Sachs), Peter Hooper (Deutsche Bank), Frederic Mishkin (Columbia University), Kim Schoenholtz (NYU), and Mark Watson (Princeton University) wrote the report, which focused on the link between financial conditions and economic activity. The authors focused on improving the predictive capabilities of financial conditions indexes by: (1) expanding the data history; (2) expanding the data coverage; and (3) disentangling macroeconomic and policy influences from pure financial shocks. They found that given the nature of the recent financial and economic crisis, gauging the path of financial conditions overall as they bear on prospects for economic activity will be an especially important ingredient in the economic forecasts prepared for policymakers and investors alike. Two FOMC members presented their views on the report: President William Dudley, Federal Reserve Bank of New York, and President Narayana Kocherlakota, Federal Reserve Bank of Minneapolis. Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy at Harvard University, gave the lunch address, which was on

“Debt and the Aftermath of the Global Financial Crisis: Is This Time Different?” The conference ended with a panel discussion on financial regulatory reform. It featured two FOMC members—President Charles Evans, Federal Reserve Bank of Chicago, and Daniel Tarullo, Federal Reserve Board of Governors—as well as professor Anil Kashyap, Chicago Booth. David Wessel, of the Wall Street Journal, moderated the discussion. Political Economy in the Chicago Area (PECA)

In October 2009, the IGM continued its sponsorship of the Political Economy in the Chicago Area (PECA) conference for the third year. The conference was hosted at Chicago Booth’s Gleacher Center by the IGM and cosponsored by the Ford Motor Company Center for Global Citizenship at the Kellogg School of Management and by the University of Chicago Harris School of Public Policy’s Program on Political Institutions. The conference is an annual event with the goal of encouraging collaboration across political economy research groups. The one-day conference brought together academic researchers spanning business schools, law schools, policy schools, and political science and economics departments in the Chicago area. Some of the presenters included: professors Charles Kerwin (University of Chicago, Harris School), Matthew Gentzkow (University of Chicago Booth School of Business), and Daniel Diermeier (Kellogg School of Management).

Financial Crisis Meeting

In December 2009, the IGM organized a small high-level meeting on the financial crisis. This followed a similar gathering on “Saving the Financial System” the previous spring. Participants included professors Brian Barry, Anil Kashyap, and Luigi Zingales from Chicago Booth, other academics, central bank officials, and senior managers of global financial institutions. Topics included narrow banks, the shadow banking system, compensation design and regulation, systemic regulation, capital regulation, resolution mechanisms for insolvent financial institutions, and exit strategies for monetary policy in the wake of the crisis.

China Economics Summer Institute

The goal of the China Economics Summer Institute (CESI) is to foster high-quality economic research on China by building networks of researchers and by mixing formal and stimulating presentations with opportunities for collaborative research. An especially important aspect of these efforts is the CESIâ&#x20AC;&#x2122;s focus on helping promising young researchers in China to interact with experienced scholars who know the country and its institutions well. This approach is designed to encourage the best young Chinese researchers to work on topics that are important to understanding the Chinese economy. The CESI held its third annual conference in Beijing in July 2010, and is quickly becoming recognized as a crucial gathering for researchers studying China. One research project discussed during the 2010 CESI gathering looked at the connections between village democracy, accountability, and growth. Two other projects studied family ties and organizational design in Chinese private firms, and the economic risks facing Chinese households in an effort to shed better light on their savings patterns. Some of the other research projects that participants in the 2010 conference discussed included the sources of productivity growth in Chinaâ&#x20AC;&#x2122;s economy; the impact of the Cultural Revolution on the countryâ&#x20AC;&#x2122;s human capital; tax behavior and its relation to trade and investment patterns in greater China; the impact of retirement on health; and a look at son preference and early-childhood investments in China. Please visit the China Economics Summer Institute website, chinasummerinstitute.org

Conferences Scholes Forum Visiting Fellows Research

In the Myron Scholes Global Markets Forum, business leaders, policymakers, and distinguished scholars speak publicly on issues of current interest. These events take various forms, including discussion panels, political debates, and lectures by individuals. Featured speakers range from members of our faculty to global economic leaders. The talks, usually held at

Chicago Booth’s Gleacher Center downtown, are open to the public. They are generously sponsored by Myron Scholes, MBA ’64, PhD ’70.

Myron Scholes Global Markets Forum Distinguished Speakers, 2009–10

After focusing heavily on the financial crisis in the previous year, the IGM turned to a wider range of issues in the Myron Scholes Forum during the 2009–10 academic year. In the autumn of 2009, we hosted four distinguished Scholes speakers, each focusing on a different policy issue that confronts the United States. In the first half of 2010, the Myron Scholes Forum hosted discussions on two issues with large global implications—the economics of climate change and the outlook for the euro area in light of Greece’s debt crisis—as well as a faculty panel on ethics in business and finance in the wake of recent events.

In Fed We Trust: Ben Bernanke’s War on the Great Panic David Wessel Economics Editor of The Wall Street Journal September 2009

It was clear, in September 2008, that something bad was happening to the United States economy and financial system, but it was not obvious what exactly was going on, said David Wessel (pictured) a year later. He argued that officials in the Federal Reserve—under Ben Bernanke and his predecessor, Alan Greenspan—and in the Treasury Department misread what was happening during the U.S. property boom and in the early stages of the crisis, and made mistakes that led to the calamitous events of September 2008 when Lehman Brothers collapsed. Some of their early miscalculations were understandable, said Wessel, and reflected mainly “a failure of imagination”. He was more critical, however, of U.S. officials’ failure—after they bailed out Bear Stearns in early 2008—to plan thoroughly for the possibility of problems at another big and interconnected financial institution. They were overconfident, he argued, and even as they tried to arrange a private rescue for Lehman, “they did not come in with a plan that said, ‘if we can’t sell it, we gotta save it’”. Still, following the failure of Lehman, Wessel argued, Ben Bernanke took many steps that do deserve praise. The Fed had to deal with a crisis in money-market funds, credit-driven stresses on industrial companies and extensive international complications among distressed financial firms, along with many other problems. By late 2009, though, it was possible to say that “the economy is better, the patient is out of intensive care…it’s not yet healthy, but we’re not at the cusp of another Great Depression”. It could have been much worse, Wessel believed, and one of the main reasons it was not was because of “the courage and skill of Ben Bernanke”.

Bernanke, he argued, acted quickly and aggressively, driven by lessons that he had learned from researching the Great Depression. “Confronted with a situation for which he really had no road map, a situation that continually surprised them on the downside, a situation where it must have felt like someone was throwing fastballs at him every day”, he was willing to stretch the rules and shatter precedents to avoid another depression. One danger, however, was that the Fed’s chairman had, in the process, exposed his institution to “extraordinary risk politically”. An important ongoing challenge for Bernanke, therefore, was “to save the Fed from the politicians”.

The Unrealized Opportunity in Health Care

David Cutler Otto Eckstein Professor of Applied Economics, Harvard University September 2009

As Congress considered new health care legislation in the autumn of 2009 —which led to the law signed by President Obama a few months later—David Cutler, a Harvard economist who had been a health-care adviser to the Obama presidential campaign, described his views on the issue in the Myron Scholes Forum. The debate over the proposed reforms, Cutler said, partly reflected “Americans’ ambivalence about the role of government in anything, and particularly the role of government in something so important to them as health care”. “The other thing that’s going on”, he argued, “is a good old-fashioned fight about money: How much money is it going to cost to do health-care reform and where are we going to get it from”. The first thing to consider, he argued, is what it would take to cover the people who did not have health insurance. If you make insurance coverage more affordable and accessible, he said, then “people will go out and buy it”. The important part, in his view, is making sure that such a coverage expansion is affordable on an ongoing basis. An “unrealized opportunity” exists, Cutler argued, because the system is so inefficient: far too many resources are devoted to administrative and clerical work; and doctors and nurses are not rewarded for behavior that would improve health outcomes in a cost-effective way. It is possible, therefore, in Cutler’s view, to save enough money through improvements in health-care delivery to pay for a large expansion of insurance coverage. One way to see the potential for huge savings, he said, is to consider the following question: “What would it take for health care to be, not a stellar industry, but a normal

industry?” He argued that the health-care industry is far less efficient than typical American industrial sectors, and that four types of improvement would bring it up to speed: making better use of information technology; tying compensation to productivity and good performance; having top people within health organizations pay more attention to quality and value; and empowering workers, such as nurses, to make changes that will improve performance. After describing how these reforms could change healthcare delivery, Cutler stated his own test for judging the health-care law that would eventually emerge: “Does the legislation, whatever we do, have a very serious commitment to systematically change the way medicine is delivered, in a way that produces more value for what we spend, that gets us better health outcomes and lower costs?”

Inflation or Deflation? John H. Cochrane AQR Capital Management Professor of Finance October 2009

As the United States economy suffered through a large recession, and following steep increases in fiscal debt and deficits, many onlookers worried about the Federal Reserve’s efforts to stave off deflation without risking severe inflation in the future. John Cochrane outlined three frameworks for analyzing inflation risks: the interest rate model; money; and deficits. Cochrane discussed the connections among these frameworks and evaluated the prospects for future inflation in the United States in light of this analysis. The interest rate framework, he argued, was not currently the most relevant one for examining the prospects for future inflation in the United States. Because of the zero-bound on nominal interest rates, many of the extraordinary measures the Fed took during the crisis, such as buying mortgagebacked securities and other assets, involved “credit policy” rather than interest-rate policy. That is, the Fed’s efforts were aimed at reducing credit spreads between private and public debt, and at reducing high spreads in specific markets, rather than at altering the overall level of interest rates in the economy to influence aggregate demand. “The main issue involving interest rates”, he argued, “is simply political will: Will the Fed raise interest rates in time?” To focus on the role of the money supply in driving inflation, Cochrane pointed out, it is also necessary to consider how the substitutability of money for other assets is changing. At near-zero interest rates, for example, money and debt become close substitutes for financial institutions. Therefore, it is

hard to judge the prospects for inflation just by looking at the huge increase in the money supply that the Fed generated through its quantitative easing policy. Instead, Cochrane argued, the most useful current framework for understanding inflation risks is one focusing on fiscal deficits and debt. It is important to remember, he said, that the real value of government debt is equal to the present value of the surpluses that people expect the government to run in the future, since surpluses will at some point be needed to repay that debt. If people conclude at some point that future tax revenues and surpluses will not be sufficient to make these payments, then the real (i.e., inflation-adjusted) value of the government’s debt must fall. “The prime way for that to happen is that the price level has to rise”, said Cochrane. He also pointed out that once market-driven fiscal constraints such as this kick in, central banks such as the Federal Reserve can do little at that point to stave off the resulting inflation. Cochrane emphasized that he is not making any forecasts about future inflation, and that his goal is rather to highlight the mechanisms that must be understood to see how a steep inflation would work. With that caveat in mind, he explained what debt-induced inflation would look like if it happens. “Think of, first, a flight from the dollar”, said Cochrane. Longterm interest rates will go up in this scenario, and exchange rates will go down.

Should Executive Pay Be Regulated? Steven N. Kaplan Neubauer Family Professor of Entrepreneurship and Finance december 2009

Chief executives in the United States are not overpaid relative to other successful people, and their pay is tied to performance, said Steven Kaplan. He presented extensive evidence on how CEOs are paid and on the compensation of the top performers in other fields. He also discussed the incentives of top executives at financial institutions, and argued that the structure of their pay cannot be blamed for the credit crisis. Regulations that try to impose new rules on boards, said Kaplan, would be harmful. When analyzing executive pay, Kaplan pointed out, it is important to make a clear distinction between “expected pay” and “realized pay”. Expected pay includes the expected value of stock options, whereas realized pay includes the actual value of those options when they are exercised. Thus, expected pay is “what the boards think they’re giving their executives in the year they give it”, and realized pay—which ultimately is more closely tied to performance—is what executives actually

receive. Those who criticize current executive pay practices, Kaplan said, tend to use these measures inconsistently, depending on whether they are trying to show that pay is high or that it is unrelated to performance. Using either measure, CEO pay has fallen sharply in real terms over the past decade. Among CEOs of the S&P 500 group of firms, for example, realized pay fell more than 30 percent between 2000 and 2008. Nor are CEOs in America paid dramatically more than in other countries, Kaplan said, because the rest of the world is catching up. Controlling for obvious characteristics such as firm size, he said, research by others shows that CEOs in the United States were paid 43 percent more than international counterparts in 2006. This premium was down from 190 percent in 2000. Kaplan also compared CEOs’ pay to that of other high-paid professions in America, ranging from hedge fund managers and venture capitalists to lawyers, entertainers, and athletes. Not only are many people in these professions highly compensated as well, but their pay has also risen much more rapidly than that of chief executives since the 1990s. He argued that, since pay in these other professions reflects arm’s length transactions rather than boardroom decisions, it does not make sense to conclude that CEO pay increases are being driven by managerial power or agency problems. A better explanation for high pay among CEOs and other successful people, Kaplan said, is that “technological change and greater scale increase the returns and productivity at the top end. You can manage greater assets, you can apply your talent to larger companies than in the past”. Financial traders can trade large sums much more efficiently, for example, and entertainers and athletes can access much larger audiences. He also presented evidence showing that CEOs’ pay is related closely to the performance of their firms. New regulations on executive pay, said Kaplan, would be a mistake. At the very least, it would be a “nuisance”, “imposing costs with no benefits”. If the costs of new regulation were high enough, he argued, it would lead “talented executives to go do other things”, such as private equity.

Three distinguished members of our faculty contributed to a panel to help Chicago Booth’s students sort through ethical issues in business and finance.

Ethics and Wall Street Faculty Panel with Steven N. Kaplan Neubauer Family Professor of Entrepreneurship and Finance Tobias J. Moskowitz fama family Professor of Finance Luigi Zingales robert c. Mccormack Professor of Entrepreneurship and Finance and the David g. booth faculty fellow january 2010

Luigi Zingales said that, if they do not focus enough on ethics, business schools such as Chicago Booth risk giving students the wrong impression. That is because so many of the models which business schools teach involve assumptions that people will do what is narrowly in their self-interest. “We don’t say that people should follow their self-interest, we say that they do, because it gets predictive power”, Zingales pointed out. But he argued that by not spending more time emphasizing this distinction and talking about what people should do, “we are in a sense, I think, endorsing a very narrow pursuit of self-interest”, because “the more you feel that everybody is pursuing self-interest, and only narrow self-interest, the more you feel entitled to do that yourself”. If Chicago Booth were to spend more time teaching some thing else, Zingales said, it would not be obvious what the something else should be, beyond simply encouraging students to obey the law and safeguard their reputations. But he argued that a greater emphasis on ethics should include more focus on the role of trust and “civic capital”. Civic capital “is pretty important in making everything that we do work”, he argued, “but we tend not to teach students—not to teach anybody—about this”. Tobias Moskowitz focused on the importance of thinking carefully about tradeoffs when making ethical decisions. He used several examples from financial management—his area of expertise—to highlight the difficulty of making these tradeoffs. Asset managers in hedge funds, venture capital, and mutual funds have a fiduciary duty to provide the riskreturn tradeoff that is best for their clients, he pointed out. But even when they follow such a seemingly clear goal, tough tradeoffs can arise. Many funds that had a bad year in 2008, for example, had a “high water mark” of value, which they needed to get back up to before the managers could collect a performance fee. And in many cases it seemed unlikely that their funds would return to those levels. Most people would say, without thinking much about it, that it would be wrong for the managers to shut down such a fund and start a new one. Moskowitz pointed out, however, that it might be in the best interests of investors to do so. One reason is because the asset manager’s most

talented staff might leave once they had no hope of achieving bonuses, to the detriment of its current clients. Another example involves letting clients pull their money out, which can hurt other investors in the portfolio because of the need to sell securities quickly. Many funds have conditions that govern these withdrawals, said Moskowitz, which are disclosed to investors in advance. “But in extreme environments they can just refuse to let anybody pull their money out”. This can benefit everyone, but “it can be abused as well”. Tough decisions occur in many other aspects of finance too, Moskowitz said. With illiquid assets, the person in the best position to value the asset is often either the one managing it or a counterparty. But the manager will benefit if the estimated value is high, and the counterparty will benefit if it’s low: neither is an independent source. And almost anyone running a portfolio, said Moskowitz, must make decisions about how much they want to dissuade clients who might not be sophisticated enough to understand the risks involved. Steven Kaplan offered what he called some “common-sense advice” to the audience: “First off, do not do anything illegal. That’s pretty obvious right? But clearly people violate that”. Second, said Kaplan, “don’t do anything that you wouldn’t want to see on the front page of the Wall Street Journal”. Third, said Kaplan, it is important to concentrate on fundamentals and substance when making business decisions, rather than on worrying about “cosmetic” things. Just following such simple advice, Kaplan said, would eliminate a lot of unethical behavior. Bearing in mind how something would look in the newspaper, for example, is a good way to remember how important reputations are. He agreed with Moskowitz that many ethical decisions come down to tradeoffs. It often is important, therefore, to think about these in advance: “Try to figure out potential conflicts you’re going to face…think about them very broadly, and decide, ‘here’s how I’m going to react in that situation’”. Although it is a good idea to act in your best interest when making many types of business decision, Kaplan said, “you really have to think very broadly about what your selfinterest is, and some people don’t do that”. Many, for example, underestimate the cost of jeopardizing their reputations. People should also, Kaplan said, consider “internal reputation”: How they will feel if they make a decision they regret.

The Euro in Crisis John H. Cochrane aqr capital management Professor of Finance, Chicago booth Roger B. Myerson glen a. lloyd Distinguished Service Professor, the university of chicago Luigi Zingales robert c. Mccormack Professor of Entrepreneurship and Finance and the David g. booth faculty fellow, Chicago Booth february 2010

As Greece ran into severe debt trouble in early 2010 and, as European governments prepared to arrange a bailout, three distinguished faculty members from Chicago Booth and the University of Chicago’s economics department debated the best way to deal with the crisis. John Cochrane argued that “Greece must default and must not be bailed out”. Moreover, he said, “if Greece does get bailed out, it must not be in defense of the euro or because of something systemic”. The reason, Cochrane said, is because the euro area’s response to Greece’s crisis would set “vital expectations for how this arrangement is going to work in the future”. Therefore, “default is not a danger to the euro; in fact Greece’s default is crucial to defending the euro”. Cochrane argued that Greece’s problems did not constitute any threat of contagion or systemic losses because there were no complex interconnections with other entities: “It’s just sovereign debt that they can’t pay back; and the result is just people are going to lose some money”. The main way in which a Greek default would affect other weak European economies—such as Ireland, Italy, or Portugal—he said, is by revealing information about how European countries will deal with a debt crisis in a euro-area economy. And that, he argued, is not a good reason to bail out Greece, because the right information to reveal is that bailouts are not going to happen. “We learn one thing and one thing only”, from letting Greece default: “that the [European Central Bank] won’t bail out countries of their sovereign debt. That’s exactly what we need to learn this time around”. Luigi Zingales argued that the roots of the euro crisis were analogous to those that caused the credit crisis in the United States. The problems in America, he said, involved parties passing off securities with low credit quality as high-quality securities: “There’s a lot of money to be made if you can sell stuff that looks like triple-A but is not”. In a sense, he said, Europe’s single currency was based on a similarly misleading premise: “If you can pretend that Italian or Greek bonds are like German bonds, you can make a lot of money”. The creation of the euro involved a tradeoff in which weaker economies gave up the right to devalue or inflate in order to get lower rates. The advantage of lower rates, Zingales pointed out, was a “large improvement in the budget of many countries”. But the lower rates were based “on a premise

that things will change down the line”. In some ways, said Zingales, this premise was justified. “You pretend you are good and maybe this potential can turn into reality if you take advantage of this unique opportunity to change things”. This great opportunity has been lost in Greece, Italy, and some other European countries, however, because they did not make structural changes in their budgets to take advantage of the chance. Unlike Cochrane, Zingales argued that a default by Greece would be intrinsically connected to “the exit of Greece from the euro, which opens another can of worms”. Once Greece loses the benefits of lower interest rates, which membership in the euro area has conferred, then the political calculation changes and the temptation to exit the euro, and to inflate by devaluing, becomes great. “It might be the right thing to do to let Greece fail, but the consequences are going to be pretty devastating [for the euro]”. Roger Myerson pointed out that the Greek crisis is a great example for understanding moral hazard problems and the role of political institutions in trying to mitigate them. As a matter of institutional design, he said, “clearly some sort of common market, some sort of political relationship is…a necessary condition for the euro to work”. For similar reasons, issues involving sub-national debt—such as state-level debts in the United States—create moral hazard problems that political institutions find hard to resolve convincingly. “Greece looks very different from Arizona or Indiana”, Myerson said, even though it’s the same size relative to the euro area as those states are relative to America. It is hard to imagine the federal government letting those states default, without being tempted to bail them out in some way; but such guarantees imply the need for “the guarantor to take some power”. “There is value”, said Myerson, to somebody coming in and saying ‘We are going to monitor your fiscal performance, make sure you’re really on the road to being able to repay your loans, and we’re going to blow the whistle if you’re not.’ Such an auditor is more credible if he’s putting his own money in”. When sub-national entities run into debt trouble, therefore, the least bad solution is for the national government to step in as “an auditor with deep pockets”. But this, if course, creates all sorts of political problems.

To understand the challenges presented by climate change, Michael Greenstone said, members of the public need to grasp five facts:

The Energy and Climate Challenges in the Wake of Copenhagen Michael Greenstone 3M Professor of Environmental Economics, Massachusetts Institute of Technology march 2010

1) Temperatures are expected to rise; 2) Stopping climate change will be expensive; 3) Stopping climate change will require tremendous reductions, especially in developing countries; 4) Developing countries are poor and will be focused on income growth; 5) T he Copenhagen Accord is worse than it seems because, among other things, it allows countries to monitor themselves and report how much carbon they are emitting. Rising temperatures will be a problem, said Greenstone, primarily because of a shift towards more days that are extremely hot. The likely harm that will be caused by more days of extreme heat, he said, are more worrying than the risks arising from higher average temperatures overall. In many parts of the United States, for example, there will be many more days when the average temperature (not just the high temperature) exceeds 90 degrees Fahrenheit. That will lead to more deaths, along with higher economic costs. In countries such as India—where temperatures are already high and where incomes are much lower than in the United States—the impact of more extremely hot days will be much more devastating. Professor Greenstone presented research he has done on mortality rates in India and the United States to illustrate the risks. There are “no cheap solutions” to this problem, said Greenstone. “Technology has not yet provided a cheap and large-scale solution to decreasing emissions”. Because fossil fuels are “highly abundant” and so much cheaper than alternatives, he said, the “sad truth” is that “we are probably going to wait” before switching to sources that would substantially mitigate climate change. Moreover, Greenstone said, the only way to reduce carbon emissions substantially is to alter sharply the emissions path that developing countries are on. If the United States took large steps now, for example, it “wouldn’t change the path of emissions in a meaningful way”. Yet Greenstone sees little chance that developing countries will want to take steps to reduce emissions dramatically given their low incomes.

The seemingly obvious solution—having rich countries send large payments to poor ones if they sharply reduce their emissions—is not feasible without monitoring of emissions. “Any system that you can think about that could possibly be successful is going to have to know, roughly speaking, who’s emitting what, when”. Greenstone argued, however, that such monitoring is not going to happen in the near future. Countries such as China and India have resisted it; and the technology to monitor if they did consent does not exist. Given all this, Greenstone believes that there is little likelihood of enacting the one policy that would make the most sense: a global price for carbon emissions. For now, therefore, he recommends some other sets of national policies that the United States and other countries could follow instead. One is to invest substantial resources in developing monitoring techniques for carbon emissions. In addition, they should devote substantial resources—the United States should spend, say, $25 billion a year, he proposed—to promote low-carbon energy sources and methods for capturing and sequestering carbon. For such spending to make a difference, Greenstone argued, it would need to be structured in a way that attracted investments in risky new technologies, rather than simply subsidizing the commercialization of technologies that are already nearly developed.

Conferences Scholes Forum Visiting Fellows Research

The Initiative on Global Markets sponsors extended visits by prominent faculty from other institutions to contribute to the research environment at Chicago Booth. The IGM hosted five visiting fellows in the 2009–10 academic year. Efraim (Effi) Benmelech’s research focuses on applied corporate finance. An expert in the area of financial contracting and bankruptcy, he is associate professor of economics at Harvard. He has won several awards including the National Science Foundation CAREER Award in 2009. Efraim Benmelech Associate Professor Department of Economics, Harvard University

Justine Hastings Associate Professor of Economics, Yale University

During his visit, Benmelech presented his recent work entitled “Bankruptcy and the Collateral Channel” to a group of more than 30 faculty. He also attended and participated in a number of research workshops around campus, and met extensively with both junior and senior faculty at Chicago Booth.

Justine Hastings’s research interests focus on consumer behavior, competition, and product differentiation in private and publicly funded markets, applied industrial organization, and public finance. During Hastings’s visit, she interacted with a wide range of faculty throughout Chicago Booth, as well as in the economics department and the Harris School of Public Policy. For example, she participated in the applied microeconomics lunches and attended the conference on human capital development organized by James Heckman. She worked on joint projects with professors Jesse Shapiro, Chad Syverson, and Ali Hortaçsu (economics), and she interacted with psychologists and economists from across University of Chicago in a discussion of cognition, development, and economic behavior. Hastings also discussed research on education in Chile and the United States; research on behavioral economics and regulation; and research on consumption and mental accounting.

Lasse Pedersen John A. Paulson Professor of Finance and Alternative Investments, NYU Stern School of Business

Sergio Rebelo Tokai Bank distinguished Professor of International Finance, Northwestern University, Kellogg School of Management

Antoinette Schoar Michael Koerner, ’49, Professor of Entrepreneurial Finance, MIT Sloan School of Management

Lasse Pedersen’s research focuses on theoretical and empirical asset pricing with an emphasis on liquidity risk and the importance of market frictions such as liquidity, search costs, demand surges, and margin requirements on asset price dynamics. Pedersen is the John A. Paulson professor of Finance and Alternative Investments at NYU Stern. During his visit, Pedersen presented his recent work entitled “Margin-Based Asset Pricing and Deviations from the Law of One Price” to a group of more than 60 faculty and students in the finance workshop. He also presented his work entitled “Two Monetary Tools: Interest Rates and Haircuts”, at the money and banking workshop in the Department of Economics. He also participated in other research workshops around campus, and met extensively with both junior and senior faculty at Chicago Booth and the Department of Economics.

Sergio Rebelo’s research focuses on topics related to macroeconomics, international economics, and finance. His current work examines large exchange-rate devaluations and currency speculation episodes. During his visit, he participated in the macro and international workshop and the money and banking workshop. He also met individually with Chicago Booth faculty who study macroeconomics, international economics, and finance.

Antoinette Schoar’s research focuses on applied corporate finance and she is one of the world’s leading experts in entrepreneurial finance and empirical corporate finance. Schoar has won several awards including the Ewing Marion Kauffman Prize Medal in 2009 for Distinguished Research in Entrepreneurship. During her visit, Schoar presented her recent work entitled “Stressed, not Frozen: The Federal Funds Market in the Financial Crisis” to a group of more than 30 faculty. She also participated actively in other research workshops around campus and met extensively with both junior and senior faculty at Chicago Booth and the economics department.

Conferences Scholes Forum Visiting Fellows Research

Marianne Bertrand Chris P. Dialynas Professor of Economics Neubauer Family Faculty Fellow

Adair Morse Assistant Professor of Finance

â&#x20AC;&#x153;Information Disclosure, Cognitive Biases, and Payday Borrowingâ&#x20AC;?

If people face cognitive limitations or biases that lead to financial mistakes, what are possible ways lawmakers can help? One approach is to remove the option of the bad decision; another is to increase financial education such that individuals can reason through choices when they arise. A third, less-discussed approach is to mandate disclosure of information in a form that enables people to overcome limitations or biases at the point of the decision. This third approach is the topic of this paper. We study whether and what information can be disclosed to payday loan borrowers to lower their use of high-cost debt via a field experiment at a national chain of payday lenders. We find that information that helps people think less narrowly (over time) about the cost of payday borrowing and, in particular, information that reinforces the adding-up effect over pay cycles of the dollar fees incurred on a payday loan, reduces the take-up of payday loans by about 10 percent in a four-month window following exposure to the new information. Overall, our results suggest that consumer information regulations based on a deeper understanding of cognitive biases might be an effective policy tool when it comes to regulating payday borrowing and possibly other financial and non-financial products.

Pietro Veronesi Roman Family Professor of Finance

Luigi Zingales Robert C. McCormack Professor of Entrepreneurship and Finance the David G. Booth Faculty Fellow

“Paulson’s Gift”

We calculate the costs and benefits of the largest ever U.S. government intervention in the financial sector, which was announced during the 2008 Columbus Day weekend. We estimate that this intervention increased the value of banks’ financial claims by $131 billion at a taxpayers’ cost of $25–47 billion, with a net benefit between $84–107 billion. By looking at the limited cross section, we infer that this net benefit arises from a reduction in the probability of bankruptcy, which we estimate would destroy 22% of the enterprise value. The big winners from the plan were the three former investment banks and Citigroup, while the loser was JP Morgan.

Luigi Zingales Robert C. McCormack Professor of Entrepreneurship and Finance the David G. Booth Faculty Fellow

“Civic Capital as the Missing Link”

This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs that help cooperation—which for clarity we label civic capital. We argue that this definition differentiates social capital from human capital and satisfies the properties of the standard notion of capital. We then argue that civic capital can explain why differences in economic performance persist over centuries and discuss how the effect of civic capital can be distinguished empirically from other variables that affect economic performance and its persistence, including institutions and geography. “Can we infer social preferences from the lab? Evidence from the trust game”

We show that a measure of reciprocity derived from the Berg et al. (1995) trust game in a laboratory setting predicts the reciprocal behavior of the same subjects in a real-world situation. By using the Crowne and Marlowe (1960) social desirability scale, we do not find any evidence that a desire to conform to social norms distorts results in the lab, yet we do find evidence that it affects results in the field.

Regina Wittenberg Moerman Assistant Professor of Accounting Neubauer Family Faculty Fellow

“Debt Analysts’ Views of Debt-Equity Conflicts of Interest”

The extant literature has provided limited and mixed evidence with respect to the potentially detrimental effect of specific shareholder actions on debt holders’ wealth, mainly because such actions not only potentially exacerbate debtequity conflicts of interest, but also signal improved asset fundamentals. In addition, the literature has ignored the effectiveness of debt-contract-based restrictions in mitigating the potential negative impact of these shareholder actions on debt holders’ wealth. We use debt analysts’ views to assess the net effect of debt-equity conflicts on debt holders’ wealth since they are expected to take a comprehensive view of such events. Our empirical measures of these views are developed using a computational linguistics procedure that codes the text of their report. First, we document that debt analysts routinely discuss debt-equity conflicts of interest. Their discussions are less negative for firms with more restrictive covenants in place. Second, we provide evidence that debt analysts’ negative interpretations of debt-equity conflicts are more likely to lead to negative bond investment recommendations. The tone of the conflict discussions helps to explain the disagreement between bond and equity analysts’ recommendations. Finally, we document that bond trading volume and credit-defaultswap spread changes are increasing in debt analysts’ negative discussions of conflict events, after controlling for the debt analysts’ recommendation. These latter results imply that debt investors value debt analysts’ guidance about the effect of conflicts on their wealth, beyond the standard investment recommendation.

Matthew Gentzkow Professor of economics neubauer family faculty fellow

Jesse M. Shapiro Professor of economics Robert King Steel faculty fellow

â&#x20AC;&#x153;The Effect of Newspaper Entry and Exit on Electoral Politicsâ&#x20AC;?

We use new data on entries and exits of U.S. daily newspapers from 1869 to 2004 to estimate effects on political participation, party vote shares, and electoral competitiveness. Our identification strategy exploits the precise timing of these events and allows for the possibility of confounding trends. We find that newspapers have a robust positive effect on political participation, with one additional newspaper increasing both presidential and congressional turnout by approximately 0.3 percentage points. Newspaper competition is not a key driver of turnout: Our effect is driven mainly by the first newspaper in a market, and the effect of a second or third paper is significantly smaller. The effect on presidential turnout diminishes after the introduction of radio and television, while the estimated effect on congressional turnout remains similar up to recent years. We find no evidence that partisan newspapers affect party vote shares, with confidence intervals that rule out even moderate-sized effects. We find no clear evidence that newspapers systematically help or hurt incumbents.

â&#x20AC;&#x153;Ideological Segregation Online and Offlineâ&#x20AC;?

We use individual and aggregate data to ask how the internet is changing the ideological segregation of the American electorate. Focusing on online news consumption, offline news consumption, and face-to-face social interactions, we define ideological segregation in each domain using standard indices from the literature on racial segregation. We find that ideological segregation of online news consumption is low in absolute terms, higher than the segregation of most offline news consumption, and significantly lower than the segregation of face-to-face interactions with neighbors, coworkers, or family members. We find no evidence that the internet is becoming more segregated over time.

Steven N. Kaplan Neubauer Family Professor of Entrepreneurship and Finance

Tobias J. Moskowitz Fama Family Professor of Finance

â&#x20AC;&#x153;The Effects of Stock Lending on Security Prices: An Experimentâ&#x20AC;?

Working with a sizeable (greater than $15 billion in assets) anonymous money manager, we exogenously shift the supply of lendable shares for certain stocks by randomly making available for lending 2/3 of the stocks in the managerâ&#x20AC;&#x2122;s portfolio and withholding 1/3 of the stocks from the loan market. The lending program commenced in early September 2008 and the loans were recalled in mid-September 2008, with over $700 million in securities lent out at the peak of the study. During the lending (recall) period, returns to stocks randomly made available for lending were not lower (not greater) than returns to stocks randomly withheld from lending. Stocks randomly made available for lending experienced no differences in volatility, bid-ask spreads, or skewness compared with stocks randomly withheld from lending during either the lending or recall period. We find some evidence that loan supply increases volatilities and spreads for stocks with high short interest and expected loan spreads.

Joseph Gerakos Assistant Professor of Accounting

“Hedge Funds: Pricing Controls and the Smoothing of Self-Reported Returns”

We investigate the extent to which hedge fund managers smooth self-reported returns. In contrast with prior research on the “anomalous” properties of hedge fund returns, we observe the mechanisms used to price the fund’s investment positions and report the fund’s performance to investors, thereby allowing us to differentiate between asset-illiquidity and misreportingbased explanations. We find that funds using less verifiable pricing sources and funds that provide managers with greater discretion in pricing investment positions are more likely to have returns consistent with intentional smoothing. Traditional controls, however, are not associated with lower levels of smoothing. “Determinants of Hedge Fund Internal Controls and Fees”

Hedge funds are subject to minimal regulation. Hence, hedge fund managers voluntarily implement internal controls, and managers and investors freely contract on fees. We find that internal controls are stronger in funds with higher potential agency costs. Further, internal controls are stronger in funds domiciled in jurisdictions that provide investors with limited legal redress for fraud and financial misstatements. Short selling funds, however, are more likely to protect information about their investment positions by implementing weaker internal controls that limit external oversight. With respect to fees, we find that the percentage of positive profits that the manager receives increases in the strength of the fund’s internal controls.

Francesco Trebbi Assistant Professor of Economics

â&#x20AC;&#x153;Measuring Central Bank Communication: An Automated Approach with Application to FOMC Statementsâ&#x20AC;?

We present a new automated, objective, and intuitive scoring technique to measure the content of central bank communication about future interest rate decisions based on information from the internet and news sources. We apply the methodology to statements released by the Federal Open Market Committee (FOMC) after its policy meetings starting in 1999. Using intra-day financial quotes, we find that shortterm nominal Treasury yields respond to changes in policy rates around policy announcements, whereas longer-dated Treasuries mainly react to changes in policy communication. Using lower frequency data, we find that changes in the content of the statements lead policy rate decisions by more than a year in univariate interest rate forecasting and vector autoregression (VAR) models. When we estimate Treasury yield responses to the shocks identified in the VAR, we find communication to be a more important determinant of Treasury rates than contemporaneous policy rate decisions. These results are consistent with the view that the FOMC releases information about future policy rate actions in its statements and that market participants incorporate this information when pricing longer-dated Treasuries. Finally, we decompose realized policy rate decisions using a forwardlooking Taylor rule model. Based on this decomposition, we find that FOMC statements contain significant information regarding both the predicted rule-based interest rate and the Taylor-rule residual component, and that content of the statements leads the residual by a few quarters.

â&#x20AC;&#x153;City Structure and Congestion Costsâ&#x20AC;?

This paper presents a model and an automated methodology for decomposing congestion costs in cities. We model a city as a directed graph and define the plannerâ&#x20AC;&#x2122;s problem of finding the subgraph minimizing the congestion costs (latency) of endogenously routing traffic flowing through the subgraph. We show that the minimal total latency subnetwork displays congestion directly proportional to city population. By applying an automated search algorithm on a widely available internet mapping application and hence sampling from the empirically implemented subgraphs, the paper estimates the congestion-minimizing distortions of city transit networks in a large sample of United States and Italian cities.

Atif Mian Associate Professor of Finance

Amir Sufi Associate Professor of Finance

Francesco Trebbi Assistant Professor of Economics

â&#x20AC;&#x153;The Political Economy of the Subprime Mortgage credit expansionâ&#x20AC;?

We examine how special interests, measured by campaign contributions from the mortgage industry, and constituent interests, measured by the share of subprime borrowers in a congressional district, may have influenced U.S. government policy toward the housing sector during the subprime mortgage credit expansion from 2002 to 2007. Beginning in 2002, mortgage industry campaign contributions increasingly targeted U.S. representatives from districts with a large fraction of subprime borrowers. During the expansion years, mortgage industry campaign contributions and the share of subprime borrowers in a congressional district increasingly predicted congressional voting behavior on housing related legislation. The evidence suggests that both subprime mortgage lenders and subprime mortgage borrowers influenced government policy toward housing finance during the subprime mortgage credit expansion.

Emir Kamenica Associate Professor of Economics

â&#x20AC;&#x153;Voters, Dictators, and Peons: Expressive Voting and Pivotalityâ&#x20AC;?

Why do the poor vote against redistribution? We experimentally examine one explanation, namely that individuals gain direct expressive utility from voting in accordance with their ideology and understand they are unlikely to be pivotal; hence, their expressive utility, even if arbitrarily small, entirely determines their voting behavior. In contrast with a basic prediction of this explanation, we find that the probability of being pivotal does not affect the impact of monetary interests on whether a subject votes for redistribution.

Atif Mian Associate Professor of Finance

Amir Sufi Associate Professor of Finance

“The Household Leverage-Driven Recession of 2007 to 2009”

We show that household leverage was an early and powerful predictor of the 2007–09 recession. Counties in the United States that experienced a large increase in household leverage from 2002–06 showed a sharp relative decline in durable consumption starting in the third quarter of 2006—a full year before any significant change in unemployment. Similarly, counties with the highest reliance on credit card borrowing reduced durable consumption by significantly more following the financial crisis of the autumn of 2008. Overall, our estimates show that household leverage growth and dependence on credit card borrowing explain a large fraction of the overall consumer default, house price, unemployment, residential investment, and durable consumption patterns during the recession. Our findings suggest that a focus on household finance may help elucidate the sources of macroeconomic fluctuations.

Brent Neiman Assistant Professor of Economics Neubauer family faculty fellow

“Stickiness, Synchronization, and Exchange Rate Passthrough in Intrafirm Trade Prices”

About 40 percent of all U.S. international trade occurs between related parties, or intrafirm, such as trades between a parent and subsidiary of the same multinational corporation. Using a goods-level dataset that distinguishes arm’s length from intrafirm trades, I demonstrate that for the set of differentiated products, intrafirm prices are characterized by 1) less stickiness, 2) less synchronization, and 3) greater exchange rate passthrough. These differences emerge in a simulated dynamic model in which input exporters that are integrated, unlike arm’s length exporters, seek to maximize combined manufacturer and distributor profits.

Douglas J. Skinner John P. and Lillian A. Gould Professor of Accounting

“Audit Quality and Auditor Reputation: Evidence from Japan”

We study events surrounding ChuoAoyama’s failed audit of Kanebo, a large Japanese cosmetics company whose management engaged in a massive accounting fraud. ChuoAoyama was PricewaterhouseCoopers’ Japanese affiliate and one of Japan’s “Big Four” audit firms. In May 2006, the Japanese Financial Services Agency (FSA) suspended ChuoAoyama’s operations for two months as punishment for its role in the accounting fraud at Kanebo. This action was unprecedented, and followed a sequence of events that seriously damaged ChuoAoyama’s reputation for audit quality. We use these events to provide evidence on the importance of auditors’ reputation for audit quality in a setting where litigation plays essentially no role. We find that ChuoAoyama’s audit clients switched away from the firm as questions about its audit quality became more pronounced but before it was clear that the firm would be wound up, consistent with the importance of auditors’ reputation for delivering quality.

Anil K Kashyap Edward Eagle Brown Professor of Economics and Finance Richard N. Rosett Faculty Fellow

â&#x20AC;&#x153;Will the U.S. Bank Recapitalization Succeed? Eight Lessons from Japanâ&#x20AC;?

During the financial crisis that started in 2007, the United States government has used a variety of tools to try to rehabilitate the U.S. banking industry. Many of those strategies were used also in Japan to combat its banking problems in the 1990s. There are also a surprising number of other similarities between the current U.S. crisis and the recent Japanese crisis. The Japanese policies were only partially successful in recapitalizing the banks until the economy finally started to recover in 2003. From these unsuccessful attempts, we derive eight lessons. In light of these eight lessons, we assess the policies the United States has pursued. The United States has ignored three of the lessons and it is too early to evaluate the U.S. policies with respect to four of the others. So far the United States has avoided Japanâ&#x20AC;&#x2122;s problem of having impaired banks prop up zombie firms.

Christian Leuz Joseph Sondheimer Professor of International Economics Finance and Accounting richard n. rosett Faculty Fellow

“Different Approaches to Corporate Reporting Regulation: How Jurisdictions Differ and Why”

This paper discusses differences in countries’ approaches to reporting regulation and explores the reasons why they exist in the first place, as well as why they are likely to persist. I first delineate various regulatory choices and discuss the tradeoffs associated with these choices. I also provide a framework that can explain differences in corporate reporting regulation. Next, I present descriptive and stylized evidence on regulatory and institutional differences across countries. There are robust institutional clusters around the world. I discuss why these clusters are likely to persist given the complementarities among countries’ institutions. An important implication of this finding is that reporting practices are unlikely to converge globally, despite efforts to harmonize reporting standards. Convergence of reporting practices is also unlikely due to persistent enforcement differences around the world. Given an ostensibly strong demand for convergence in reporting practices for globally operating firms, I propose a different way forward that does not require convergence of reporting regulation and enforcement across countries. The idea is to create a “Global Player Segment” (GPS), in which member firms play by the same reporting rules and face the same enforcement. Such a segment could be created and administered by a supra-national body like the International Organization of Securities Commissions.

â&#x20AC;&#x153;Did Fair-Value Accounting Contribute to the Financial Crisis?â&#x20AC;?

The recent financial crisis has led to a major debate about fair-value accounting. Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we assess these arguments and examine the role of fair-value accounting in the financial crisis using descriptive data and empirical evidence. Based on our analysis, it is unlikely that fair-value accounting added to the severity of the 2008 financial crisis in a major way. While there may have been downward spirals or asset fire sales in certain markets, we find little evidence that these effects are the result of fair-value accounting. We also find little support for claims that fair-value accounting leads to excessive writedowns of banksâ&#x20AC;&#x2122; assets. If anything, empirical evidence to date points in the opposite direction, that is, towards overvaluation of bank assets.

The Initiative on Global Markets was launched with a founding grant from the Chicago Mercantile Exchange (CME) Group Foundation. The CME Group Foundation funds academic research on various aspects of financial markets. The Initiative on Global Markets Corporate Partners Program is designed to build a deeper relationship between the private sector and faculty from the University of Chicago Booth School of Business. Our corporate partners support the research efforts of the world’s best faculty in accounting, economics, and finance on topics of great importance to financial and economic decision making around the globe.

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