Recurrent clustered episodes of corporate default are a long-standing puzzle that standard models driven by observable fundamentals struggle to explain. We develop a general equilibrium model where demand externality generates such default cycles endogenously through a self-fulfilling mechanism. In our framework, a decline in aggregate output reduces individual firm revenues and values, raising default risk. The subsequent exit of defaulting firms further depresses aggregate output, creating a positive feedback loop and pessimistic expectations about defaults can become self-fulfilling. This mechanism generates multiple equilibria and features endogenous, sentiment-driven default cycles. A global dynamic analysis using Bogdanov–Takens bifurcation reveals a rich set of dynamics, including periodic orbits, that are overlooked by standard local analysis. Our framework thus provides a microfounded explanation for business cycle patterns driven by internal economic forces, as emphasized by the empirical literature of endogenous business cycles.

Using comprehensive patent data, we document: (1) multinational affiliates and their foreign parent firms comprise a significant portion of patents filed in China; and (2) there are subsequent transfers and spillovers of these technologies to domestic firms. Guided by this evidence, we develop a model of multinational production featuring cross-country idea flows, transfers, and spillovers. Quantitatively, we find that without multinational production and knowledge spillovers, the idea stock owned by China would drop by 30%. Furthermore, due to the externalities of multinationals through technology transfers and spillovers, subsidizing multinationals will at most increase real income by 8% in China.

Credit expansions stimulate the economy. We quantify the contribution of households versus firms for this stimulus. Using causal evidence from the quasi-natural experiment of bank deregulation across US states, we estimate a small open-economy heterogeneous-agent New Keynesian model. Deregulation generated lower borrowing costs. Firms' responses to such shocks account for most of the long-run rise in output and employment. For short-run dynamics, firms and households are equally important. Firms' large role is identified by an empirical observation: output and employment expanded gradually following deregulation. In the model, lower interest rates generate increasing capital stocks which in turn increases economic activity gradually.

We document significant increases in the suspension of ongoing drug projects following the passage of the Food and Drug Administration Amendments Act of 2007 (FDAAA), which mandates that pharmaceutical companies publicly disclose detailed clinical study results. Our results suggest a causal interpretation through difference-in-differences analyses that exploit variations in pre-FDAAA information environments. We also show evidence that fewer new projects are initiated after the FDAAA. Drug developers’ learning from peer failures is the primary mechanism, further amplified by financial constraints. We also examine the consequences of enhanced information disclosure, including changes in firm investment efficiency, drug quality, and disease morbidity.

We uncover a new real effect of harmonizing accounting standards on international trade: following a mandatory adoption of International Financial Reporting Standards, exporters experiencing a greater change in reporting requirements become more successful in defending against foreign antidumping cases. The effect is also stronger with better reporting enforcement and is robust to excluding exporters from non-market economies. We discuss channels through which accounting-standards globalization facilitates efficient trade by either mitigating importing countries’ protectionism or curtailing exporters’ dumping activities.

Firm-level evidence suggests that turbulence that reshuffles firms’ productivity rankings rises sharply in recessions. An increase in turbulence reallocates labor and capital from high- to low-productivity firms, reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous firms and financial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity firms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. This leads to a reallocation that reduces aggregate TFP. Unlike uncertainty, turbulence changes both the conditional mean and the conditional variance of the firm productivity distribution, enabling a turbulence shock to generate a recession with synchronized declines in aggregate activities.

Digital advancements have revolutionized customer service by enabling custo-mers to easily express dissatisfaction and request resolutions through online platforms.Customer complaint management platforms are especially unique in facilitating provider-customer interactions, but researchers overlook implications from service provider ano-nymity. In this article, two randomized field experiments are conducted to examine acustomer complaint management platform to identify how disclosure of service provideridentity affects service performance, customer satisfaction, and biases in customers. Study1, a large-scale randomized field experiment involving 75,041 customers and 1,280 serviceproviders across 672 companies, finds that identity disclosure improves provider perfor-mance. This improvement is achieved by removing the provider’s dissociative anonymity,mitigating deindividuation, instilling self-awareness, and motivating personal responsibil-ity. This effect is stronger for inexperienced service providers who work with many collea-gues and have more discretion in handling complaints. Customers who receive identitydetails about providers benefit from better service and perceive higher satisfaction withcomplaint resolution. Study 2, a field experiment involving 2,710 customers, shows thatcustomers report more satisfaction when customers identify that providers belong to themajority ethnic group compared with when they belong to an ethnic minority. Intrigu-ingly, minority customers showed lower satisfaction with same-ethnicity providers, indi-cating that ethnic cues and identity matching significantly influence customer satisfaction.Four follow-up studies involving 1,211 participants identify the underlying mechanismsthat influence customer and provider behaviors. The article concludes with practical impli-cations for firms and platforms dedicated to customer service.

Export activity shapes workers' experience-wage profiles. Using employer-employee and customs data for Brazilian manufacturing, we document that workers' experience-wage profiles are steeper at exporters than at non-exporters and, among exporters, steeper at exporters shipping to high-income destinations. We develop and quantify a model featuring worker-firm wage bargaining, export-market entry by multi-worker firms, and human capital accumulation by workers to interpret the data. Human capital growth can explain one-half of the differences in wage profiles between exporters and non-exporters. We show that increased human capital per worker can account for one-half of the overall gains in real income from trade openness.

We examine whether CEOs use share repurchases to sell their equity at inflated prices. We document that share repurchases, like equity-based compensation, are affected by the corporate calendar-the firm's schedule of earnings announcements and insider trading restrictions. The corporate calendar can fully explain why share repurchases and equity-based compensation coincide. The alignment with the corporate calendar is stricter in firms with strong internal governance or high external monitoring. When CEOs sell equity, firms are actually less likely to repurchase. Our findings reconcile earlier studies and highlight the importance of the corporate calendar for the timing of share repurchases.

This paper studies the impacts of financial shocks on firm insurance, firm dynamics, and macroeconomic implications. A key departure from the literature is that firms provide wage insurance contracts to risk-averse workers in a long-term relationship. Such contracts endogenously impose a form of inflexible debt liability to firms, and make firms with limited financial net worth more vulnerable to shocks than others. In our model, firms have heterogenous productivity and financial net worth, and also firms face financial frictions. Search and matching in the labor market endogenously determines the value of wage contract, and thus the level of liability to the firm. We have three new findings: (1) The wage dynamics of the quantitative model are consistent with those in empirical studies, with significant insurance against firm-level idiosyncratic shocks, and also a weak comovement between aggregate wage and GDP when there are aggregate shocks. (2) Firms with limited financial resources are hit by financial shocks significantly more than others, with larger negative impacts on dividends, credit borrowing, firm value, and firm entry; the endogenous wage insurance also becomes more limited, and there are more separations. These impacts on both firms and workers are different from—and cannot be accounted for by—standard models with a representative firm or worker. (3) Quantitative exercises for the Great Recession in the United States suggest that aggregate productivity shocks and financial shocks play different roles; without financial shocks, we cannot account for the dynamics of financial variables, including the reduced credit borrowing, spikes in credit spreads, and large drops in dividend payments. Lastly, we provide microlevel empirical supports for our model implications.

How much value does an additional dollar of cash create for a firm? It is generally recognized that the marginal value of cash (MVC) can either exceed or fall below one dollar. Estimates of MVC can guide corporate cash and payout policy, indicate the quality of governance, and make a firm a target for takeover or activism. Yet the existing methods of estimation lack a rigorous theoretical foundation and often provide implausibly high or low estimates. In this paper, we provide a formulation of MVC and structurally estimate the MVC based on a model that encompasses the important determinants for the choice of cash savings, including financing and agency costs. We find that firms with large cash and capital stocks have lower marginal value of cash, whereas the relationship between leverage and marginal value of cash is hump shaped. Two quasi-natural experiments validate the MVC estimates.

We explore the possibility of designing matching mechanisms that can accommodate nonstandard choice behavior. We pin down the necessary and sufficient conditions on participants' choice behavior for the existence of stable and incentive-compatible mechanisms. Our results imply that well-functioning matching markets can be designed to adequately accommodate a plethora of choice behaviors, including the standard behavior consistent with preference maximization. To illustrate the significance of our results in practice, we show that a simple modification in a commonly used matching mechanism enables it to accommodate nonstandard choice behavior.

This paper considers a random search model where some locations provide sellers with better chances of meeting many buyers than other locations (for example popular shopping streets or the first page of a search engine). When sellers are heterogeneous in terms of the quality of their product and/or the probability that a given buyer likes their product, it is desirable that sellers of high-quality niche products sort into the best locations (positive assortative matching, PAM). We show that this does not always happen in a decentralized market. Finally, we endogenize the location distribution and show that PAM between sellers and locations always arises in equilibrium. However, the equilibrium distribution of locations is too favorable for the sellers of high-quality, niche products.

This paper studies whether and how corporate venture capital (CVC) spurs changes in firm scope. Using two sets of firm scope metrics, a text-based emerging business measure and Compustat segment measures, I document that CVC investments are strongly associated with subsequent firm scope changes of the CVC corporate parent, including seeding emerging businesses, establishing new divisions, terminating obsolete divisions, and changing the primary industry. Further evidence is consistent with an experimentation view of CVC investments, with more promising ventures having a stronger impact on the scope change of parent firms. Finally, to sharpen the causality, I explore the idiosyncratic fund inflow shocks of those connected independent VCs in each CVC program, as well as the US non-stop airline routes.

As algorithm-driven content platforms sweep the world, what is changing in journalism? This article investigates news production of the Chinese official media on Douyin (the Chinese version of TikTok). From the perspectives of news gathering, professional role, and news value, we conducted a manual content analysis (N = 991) of four representative Chinese official media (People’s Daily, China Youth Daily, Southern Metropolis Daily and Sichuan Observer) to reveal the commonalities and heterogeneities of their news production on Douyin. Then, through an automated content analysis of Sichuan Observer (N = 16,045), we illustrate how district media convergence centers have fought for public attention as emerging actors in the news ecosystem. Overall, we map the current practices of Chinese official media on the emerging algorithm-driven content platforms, focusing on how they pursue a new type of news orientation and popularize the Party’s message while disseminating entertainment content. Contributions, such as the expansion of the classification framework of Chinese official media, and the catering of journalism to platforms, are discussed.

Three experimental studies demonstrate if, when, and how an organization involved in information system (IS) incidents can effectively strategize the use of emoji in its online communication. Theoretical foundations drawn from the stereotype content model, the psychological distance literature, and the situational crisis communication theory have informed the predictions. Among the Chinese, emoji in social media responses reduced psychological distance and alleviated anger, which had positive impacts on evaluations of the company involved in the incident. The impact was particularly evident when the business social media account (vs. the CEO account) employed emoji. Furthermore, emoji in incident responses signaled warmth and competence, while its impact was contingent on incident type. The positive emoji effect on competence was stronger when the company was deemed responsible for the incident indicating Chinese’ public appreciation for emoji as an additional communication effort for emotional disclosure and relationship maintenance. In contrast, people from the United States negatively evaluated the use of emoji in such responses, especially when the CEO facing an internally caused incident utilized it. This study is the first study to delineate differential understandings of emoji use and its competing effects on warmth and competence as cognitive underpinnings of contradictory emoji effects across different cultures. Our findings offer important theoretical and practical implications in digitally-mediated communication related to IS incidents.

The digital era has necessitated a better understanding of effective customer interaction strategies for luxury brands in the e-commerce space. This article proposes a model that explains how online response speed (i.e. the amount of time it takes for a business to respond to a customer’s inquiry) can influence brand attitudes among luxury e-commerce consumers. Results from two empirical studies (N = 615), demonstrate that the speed of online responses can impact brand attitude via two mediators: perceived exclusivity and interaction quality. A slower response speed enhances the perceived exclusivity of the brand, thereby positively influencing brand attitude. However, this slow response speed negatively impacts the perceived interaction quality, subsequently diminishing brand attitudes. These competing pathways illustrate the multifaceted influence of online response speed on brand attitudes. Moreover, the indirect effect of response speed on brand attitude through perceived exclusivity depends on the product availability. A delay in response speed improves brand attitude through heightened exclusivity perception only when the product is readily available. Furthermore, this article reveals a moderating role of service rudeness; slow response speed negatively impacts brand attitudes when the service provider appears to be rude. This study extends current literature on service response speed and abundant rarity as we demonstrate delayed online responses—typically discouraged for mass-market brands—can enhance perceived exclusivity and brand attitude for luxury brands. In addition, this study identifies response speed as a strategic tool for luxury brand management, offering an alternative to traditional scarcity tactics and providing new insights into its effects on consumer perception.

We examine how social norms measured by religiosity influence institutional investors' willingness to lend stock and constrain short selling in the U.S. markets. We find that firms with blockholders located in higher religiosity areas are associated with lower supply and higher utilization of lendable shares, but are not related to the demand for stock borrowing. Short interest, utilization rates, and lending fees, when combined with high blockholder religiosity, are stronger negative predictors of future stock returns. Our findings suggest that the social norms of institutional investors serve as a source of limits to arbitrage, which hinders market efficiency through stock lending.

Recently, Kurisu and Otsu (2022b, Econometric Theory 38(1), 172-193) derived the uniform convergence rates for the nonparametric deconvolution estimators proposed by Li and Vuong (1998, Journal of Multivariate Analysis 65(2), 139-165). This article shows that faster uniform convergence rates can be established for their estimators under the same assumptions. In addition, a new class of deconvolution estimators based on a variant of Kotlarski's identity is also proposed. It is shown that in some cases, these new estimators can have faster uniform convergence rates than the existing estimators.

Idea screening in collaborative crowdsourcing communities poses significant challenges for firms. These challenges are primarily attributable to issues of prediction accuracy and information overload. The rapid expansion of idea pools generates a vast amount of data, making it difficult to effectively identify valuable ideas for new product development. This study introduces an interpretable framework for machine learning that integrates a novel exploration and exploitation perspective within the value cocreation model to enhance idea screening. The framework incorporates six theoretical dimensions of the exploration and exploitation of value cocreation (EEVC): the exploration and exploitation of digital resources, direct interactions, and ideas and their comments. Our evaluation reveals that the EEVC-based idea-screening system significantly outperforms the traditional 3Cs model in terms of prediction accuracy. SHAP value analysis further reveals that the exploration and exploitation of digital resources are the most influential predictors of idea implementation. The EEVC framework advances open innovation theory by clarifying how value cocreation dynamics influence idea implementation. Practically, it proposes a human–machine collaboration system that enhances expert decision-making for more effective idea selection.