Publications

How does market power in the corporate banking sector influence the effects of interest rate cap policies on credit allocation? We study this question using administrative credit registry data in Bangladesh, where the Central Bank capped the interest rate on corporate loans at 13% in 2009, relative to a pre-reform average interest rate of 14.5%. We apply a difference-in-differences design with variation in pre-regulation, branch-level interest rates as an exposure measure and find that a one percentage point cap-induced drop in rates increased lending amounts by 30% over the two years of the cap regime. This increase in lending is not driven by banks’ costs to supplying credit, as proxied by the riskiness of the borrower pool or deposit funding costs. Our results point to substantial credit under-provision due to banks’ market power in an emerging markets context, even in the presence of relationship lending.

We empirically characterize how China is internationalizing its bond market by staggering the entry of different types of foreign investors into its domestic market and propose a dynamic reputation model to explain this strategy. Our framework rationalizes China's strategy as trying to build credibility as a safe issuer while reducing the cost of capital flight. We use our framework to shed light on China's response to episodes of capital outflows.

What is keeping Lidl, Europe’s preeminent grocery chain, from gaining similar success in the U.S?

Upon entry to the U.S. market in 2017, Lidl US aspired to open 1,000 stores in its first years. But the company was unable to attract US consumers. By 2024, Lidl had managed to open fewer than 200 stores, capturing less than 1% of the market. To right the expansion effort in 2023, Joel Rampoldt became Lidl US’s fourth president. In 2024, he faced critical issues in the selection of store locations, assortment, customer relationship management, and effectively communicating Lidl US’s value proposition in a crowded and competitive market.

When Kinya Seto became CEO of LIXIL in 2016, he faced two major challenges: integrating a workforce spread across several acquired brands and differentiating LIXIL in a housing and water technology industry where products were seen as commodities. This case explores how LIXIL developed and activated its corporate purpose—"To Make Better Homes a Reality for Everyone, Everywhere"—as a unifying and strategic force. The purpose became a guiding “North Star,” brought to life through an ambitious new business unit focused on delivering low-cost, eco-friendly toilets to underserved communities around the world. This purpose-driven approach also helped unite employees, spark innovation, and address the challenge of product commoditization.

Over the past two decades, the European Commission's enforcement activities against abusive practices often came too late. Investigations only started when companies had already acquired a strong dominant position. It proved difficult to restore competition. In this paper, we advocate an earlier intervention, namely when undertakings start to monopolize markets. This is possible under Art. 102 TFEU with a return to the original definition of dominance and less emphasis on market shares. In line with cases like Hoffman-LaRoche, dominance must be defined as the ability to steer the market into a direction that is detrimental to competition and trading partners. This will allow to investigate the behaviour of firms at an earlier point of time, particularly in markets prone to tipping.

Nike describes its purpose with reference to three “Purpose Pillars”: People, Planet, and Play. Each pillar sets targets, tracks progress, and assesses outcomes tied to compensation. This approach helps Nike navigate complex social issues and stakeholder relationships, often translating corporate principles into actionable strategies.

Environmental jolts can trigger more conducive conditions for driving change in organizations. However, punctuated equilibrium theories of organizational change concentrate on top managers’ implementation of de novo radical changes after jolts. Existing research has not examined frontline-driven, incremental change efforts during these periods of disrupted stasis, despite the value of frontline change ideas. We develop a process model to explain how and when those on an organization’s front lines can leverage a jolt to opportunistically implement long-desired change ideas in ways that promote their retention. We conducted a two-year qualitative field study at a hospital during the Covid-19 pandemic, examining the trajectories of 33 premeditated change ideas raised by frontline staff. By comparing ideas that persisted to become part of normal operations with those that failed to be selected or retained, we identified practices and conditions that promoted the selection and retention of frontline change ideas. Our study suggests that frontline change advocates can seed the long-term retention of “shovel-ready” ideas—as opposed to de novo ideas—after a jolt by rapidly and opportunistically deploying a novel set of practices before the brief window of opportunity created by lessened constraints and increased managerial receptivity closes. Prior theories of change largely assume frontline-driven change to be slow and continuous, proceeding in a one-off fashion; we explain how and when frontline change can instead occur in rapid, opportunistic bursts. This study advances theories of punctuated equilibrium and bottom-up change in organizations by unearthing an alternative way that change can be intentionally accomplished in organizations.

We study non-monetary markets where objects that arrive over time are allocated to unit-demand agents with private types, such as in the allocation of public housing or deceased-donor organs. An agent’s value for an object is supermodular in her type and the object quality, and her payoff is her value minus her waiting cost. The social planner’s objective is a weighted sum of allocative efficiency (i.e. the sum of values) and welfare (i.e. the sum of payoffs). We identify optimal mechanisms in the class of direct-revelation mechanisms. When the social planner can design the information disclosed to the agents about the objects, the optimal mechanism has a simple implementation: a first-come first-served waitlist with deferrals. In this implementation, the object qualities are partitioned into intervals; only the interval containing the object quality is disclosed to agents. When the planner places a higher weight on welfare, optimal disclosure policies become coarser.

We study the socially optimal level of illiquidity in an economy populated by house- holds with taste shocks and present bias with naive beliefs. The government chooses mandatory contributions to accounts, each with a different pre-retirement withdrawal penalty. Collected penalties are rebated lump sum. When households have homoge- neous present bias, β, the social optimum is well approximated by a single account with an early-withdrawal penalty of 1 − β. When households have heterogeneous present bias, the social optimum is well approximated by a two-account system: (i) an account that is completely liquid and (ii) an account that is completely illiquid until retirement.

In March 2020, Alex Funk, Deal Team Lead at Palladium Equity Partners, LLC, a private equity firm, was grappling with what to do with the student transportation company he had purchased just weeks earlier.

When he closed the deal with American Logistics Company (ALC) to acquire its subsidiary, ALC Schools, Funk was excited about the acquisition and eager to grow the company, which provided transportation to children with special needs. Operating largely in the Pacific Northwest, ALC maintained that it had no true competitors and was the industry leader in its market niche. ALC benefitted from federal and state laws which mandated that school districts provide transportation for children with special needs. Traditional yellow buses were often not suitable, and school districts found alternative options such as taxis unaffordable, providing a wide opening for ALC.

Palladium’s due diligence had confirmed ALC Schools’ attractive profitability, impressive operational prowess, and rapidly growing, recurring revenue from long-term, evergreen contracts with school districts. Funk planned to transform ALC into an Uber-like system, establishing a nationwide footprint. The fund was so enthusiastic about ALC’s prospects that it had purchased the firm at a multiple 30-40% higher than its preferred range.

But in March of 2020, the bottom fell out. Schools across the United States were shutting down due to the COVID-19 epidemic and nobody knew when they would re-open. ALC’s revenues dropped to zero. Funk had to come up with a plan to deal with the acquisition. He knew he had three options: kill (take the loss; sell off ALC Schools’ assets and liquidate); freeze (continue funding ALC Schools at minimal levels and wait out the pandemic); or build (invest in growth opportunities despite the pandemic).

Disruptions to government contracts traditionally arise during federal shutdowns when Congress fails to appropriate necessary funding. However, recent shifts in federal real estate policy, marked by lease cancellations and non-renewals, challenge the long-standing perception of federal leases as a secure and stable investment. We investigate how federal lease cancellations impact the pricing of government contract risk premia. Using unanticipated Department of Government Efficiency (DOGE) cancellations as a shock to commercial mortgage default risk, we find that first-loss CMBS bond tranches directly linked to DOGE-notified leases experience a persistent 4% drop in price, with large, negative spillover effects to bond prices, delinquency rates, and rental cash flows tied to nearby public and private-tenant leases. These results reflect that early termination options were previously perceived by investors as a dormant clause. Applying arbitrage pricing models of commercial lease contingencies confirms the underpricing of risk associated with government tenants.

Geoeconomics is the use of a country’s economic strength to exert influence on foreign entities to achieve geopolitical or economic goals. We discuss how concepts of power in the political science and economics literature can be used to guide research on geoeconomics. Economic threats as a form of coercion have seen a recent resurgence. We show how different types of threats can be modeled using simple tools and discuss what channels their potential effectiveness is based on. We discuss important open questions for the future literature to pursue.

The rapid rise in the number of PE funds searching for acquisitions across various sectors and size ranges has greatly enhanced exit options for private owners of businesses. The pool of potential buyers now extends far beyond competitors or other corporate acquirors. Significant competition among PE firms under pressure to invest large pools of capital has increased average purchase multiples to historic highs.

Business owners should not assume, however, that heated PE competition correlates to a high probability of their own successful sale. There is much at stake for business owners in launching a process to market their company for sale. Private owners tend to underestimate the substantial time, money, and distraction involved in a transaction process and may likely overestimate the probability of success. Additionally, the investment bankers pitching their services have an inherent conflict in providing advice regarding the sale process. An investment banker's livelihood depends on earning fees contingent on the completion of a sale, and they have less at stake in convincing an owner to start a process. As a result, a private business owner may likely be inadequately informed and not fully comfortable in making this momentous decision.

The purpose of this note is to help business owners make informed decisions as they contemplate a sale process. I highlight five fundamental questions a seller should consider before initiating a sale process:

• Am I ready for this huge transition?

• Do I fit what a buyout firm wants?

• Should I launch a sale process?

• How should I prepare for a sale process?

• How do I avoid getting taken advantage of?

A common-sense moral intuition is that bad acts should be condemned according to severity. Yet seven experiments (N = 6,075 U.S. adults) show that the extent to which people differentiate between transgressions hinges on the direction of comparison. When scaling up from a less severe transgression to a more severe one, people readily express stronger condemnation of the worse transgression. But when scaling down from a more severe transgression to a less severe one, they differentiate less, often condemning the lesser transgression just as strongly as one that is transparently worse. Indicating that one transgression is less bad than another can be construed as downplaying such transgressions, signaling bad moral character. Supporting this account, the asymmetry is larger for judgments that implicate moral character and for transgressions that seem especially important to condemn. Observers’ moral-character judgments reveal a similar pattern, suggesting that the asymmetry is reinforced by social incentives.

Over the first two decades of the 21st century, Rio Tinto, a 150-year-old global mining leader, faced significant volatility as it navigated an increasingly globalized and financialized economy. Mining companies, heavily reliant on commodity prices, struggled after the 2008 Great Recession, leading to cost-cutting measures and changes in how they managed their global operations.

In May 2020, Rio Tinto legally blasted two sacred, 46,000-year-old caves at Juukan Gorge in Western Australia to access $135 million worth of iron ore. The decision deeply distressed the Traditional Owners, who had long opposed the action, and sparked widespread criticism from the government, investors and communities. The fallout led to the resignation of Rio Tinto’s CEO, two senior executives, and the board chair. Jakob Stausholm, formerly CFO, became CEO in January 2021. This case provides background and traces the events that precipitated Rio Tinto’s decision to blow the Juukan Gorge caves—and the ensuing stakeholder backlash.

This case, Rio Tinto Aftermath, picks up where the case Rio Tinto leaves off. Jakob Stausholm has just assumed the helm of international mining giant Rio Tinto following stakeholder uproar over the company’s decision in May 2020 to dynamite two sacred, 46,000-year-old caves at Juukan Gorge in Western Australia to extract iron ore. Case Rio Tinto Aftermath examines how Stausholm addressed the dilemma over the next four years and how a company that loses its social license to operate (SLO) can take steps to regain it.

Specifically, readers learn how leaders diagnose deep-rooted issues and strategically use crises to implement transformation strategies: in Rio’s case, by systemically and holistically embedding value-based culture change to regain SLO and improve future competitiveness. The case details Stausholm’s efforts to perform root-cause analysis; build leadership capacity; redefine and live Rio’s objectives, values, and purpose; resurrect and modernize the company’s historical good DNA; overhaul community relation systems; and embed financial and non-financial metrics.

Online platforms are rife with racial discrimination, but current interventions focus on employers, rather than customers. We propose a customer-facing solution: changing to a two-point rating scale (dichotomization). Compared with the ubiquitous five-star scale, we argue that dichotomization reduces modern racial discrimination by focusing evaluators on the distinction between ‘good’ and ‘bad’ performance, thereby reducing how personal beliefs shape customer assessments. Study 1 is a quasi-natural experiment on a home-services labour platform (n = 69,971) in which the company exogenously changed from a five-star scale to a dichotomous scale (thumbs up or thumbs down). Dichotomization eliminated customers’ racial discrimination whereby non-white workers received lower ratings and earned 91 cents for each US dollar paid to white workers for the same work. A pre-registered experiment (study 2, n = 652) found that the equalizing effect of dichotomization is most prevalent among evaluators holding modern racist beliefs. Further experiments (study 3, n = 1,435; study 4, n = 528) provide evidence of the proposed mechanism, and eight supplementary studies support measurement and design choices. Our research offers a promising intervention for reducing customers’ subtle racial discrimination in a large section of the economy and contributes to the interdisciplinary literature on evaluation processes and racial inequality.

We characterize profit-maximizing menus in screening settings in which the agent has one of two privately-known types. We assume that utilities are quasi- linear but impose no other restrictions (such as increasing differences) on the agent’s utility or the set of alternatives. Our characterization clarifies the role of increasing differences in the standard setting and shows when random menus are beneficial. We describe applications to vertical and horizontal differentiation and multi-product bundling.