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We exploit a mortgage reform that differentially unlocked home equity across the Danish population and study how this impacted selection into entrepreneurship. We find that increased entry was concentrated among entrepreneurs whose firms were founded in industries where they had no prior work experience. Nevertheless, we find that marginal entrants benefiting from the reform had higher pre-entry earnings and a significant share of these entrants started longer-lasting firms. Our results are most consistent with a view that housing collateral enabled higher ability individuals with less-well-established track records to overcome credit rationing and start new firms, rather than only leading to ‘frivolous entry’ by those without prior industry experience.

We study whether carbon emissions affect the cross-section of US stock returns. We find that stocks of firms with higher total carbon dioxide emissions (and changes in emissions) earn higher returns, controlling for size, book-to-market, and other return predictors. We cannot explain this carbon premium through differences in unexpected profitability or other known risk factors. We also find that institutional investors implement exclusionary screening based on direct emission intensity (the ratio of total emissions to sales) in a few salient industries. Overall, our results are consistent with an interpretation that investors are already demanding compensation for their exposure to carbon emission risk.

On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen’s stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the German laws against this kind of abuse were not effectively enforced. Using hand-collected data we provide the first rigorous academic study of the Porsche-VW squeeze and show that it significantly impeded market efficiency. Preventing manipulation is important because without efficient securities markets, the EU’s major project of the Capital Markets Union cannot be successful.

The promise of contingent convertible capital securities (CoCos) as a ”bail-in” solution has been the subject of considerable theoretical analysis and debate, but little is known about their effects in practice. We undertake the first comprehensive empirical analysis of bank CoCo issues, a market segment that comprises over 730 instruments totaling $521 billion. Four main findings emerge: (1) the propensity to issue a CoCo is higher for larger and better capitalized banks; (2) CoCo issues result in a statistically significant decline in issuers’ CDS spread, indicating that they generate risk-reduction benefits and lower costs of debt (this is especially true for CoCos that convert into equity, have mechanical triggers, and are classified as Additional Tier 1 instruments); (3) CoCos with only discretionary triggers do not have a significant impact on CDS spreads; and (4) CoCo issues have no statistically significant impact on stock prices, except for principal write-down CoCos with a high trigger level, which have a positive effect.

We explore how large and small banks make funding decisions when system-wide bailouts are possible. We show that bank size, purely on strategic grounds, is a key determinant of banks’ leverage choices, even when bailout policies treat large and small banks symmetrically. Large banks leverage more than small banks because they internalize that their decisions directly affect bailout policies. In equilibrium, this effect is amplified by strategic spillovers to small banks since banks’ leverage choices are strategic complements. Overall, the presence of large banks makes bailouts more likely. The optimal regulation features size-dependent policies that disproportionately restrict large banks’ leverage.

Identifying the effects of “flights to safety” on asset prices using pure time-series methods is difficult because crises are infrequent. We develop a new cross-sectional identification approach, motivated by the insight that investors may differ in their “preferred habitats” within a broad asset class. We apply the method to the question of whether foreign capital is responsible for residential real estate price movements in global cities such as London and New York, especially during crises. Using large data sets of housing transactions, we find that foreign risk strongly affects London house prices. The effects are long-lasting, and are associated with both safe-haven effects and immigration.

The 2016 presidential election demonstrated the rise of a “restraint constituency” in American politics that openly questions Washington's bipartisan post-Cold War pursuit of a grand strategy of primacy or liberal hegemony. This constituency has been animated by the return of the Jacksonian tradition of American foreign policy, most notably in the candidacy of Donald Trump, which directly questions the benefits of alliance relationships as well as U.S. underwriting of an open global economic system. It also stresses the need for the United States to act unilaterally in defense of its core foreign policy interests. The resurgence of the Jacksonian tradition will make it difficult for the next President to reestablish a foreign policy consensus and combat perceptions of American decline.

One of the most important goals in current fisheries management is to maintain or restore stocks above levels that can produce the maximum sustainable yield (MSY). However, it may not be feasible to achieve MSY simultaneously for multiple species because of trade-offs that result from interactions between species, mixed fisheries and the multiple objectives of stakeholders. The premise in this study is that MSY is a concept that needs adaptation, not wholesale replacement. The approach chosen to identify trade-offs and stakeholder preferences involved a process of consulting and discussing options with stakeholders as well as scenario modelling with bio-economic and multi-species models. It is difficult to intuitively anticipate the consequences of complex trade-offs and it is also complicated to address them from a political point of view. However, scenario modelling showed that the current approach of treating each stock separately and ignoring trade-offs may result in unacceptable ecosystem, economic or social effects in North Sea fisheries. Setting FMSY as a management target without any flexibility for compromises may lead to disappointment for some of the stakeholders. To treat FMSY no longer as a point estimate but rather as a “Pretty Good Yield” within sustainable ranges was seen as a promising way forward to avoid unacceptable outcomes when trying to fish all stocks simultaneously at FMSY. This study gives insights on how inclusive governance can help to reach consensus in difficult political processes, and how science can be used to make informed decisions inside a multi-dimensional trade-off space.

In recent decades there has been steady progress towards a risk-based management approach for fisheries. An important first step in a risk analysis framework is scoping to identify, describe and catalog the sources of uncertainty that might have an impact on a fishery. This paper introduces a methodology based on a range of tools to formalize the process of elicitation of uncertainties, from both experts and stakeholders, for the International Commission for the Conservation of Atlantic Tunas (ICCAT). ICCAT is a regional fisheries management organization responsible for the conservation of tunas and other highly migratory fish in the Atlantic Ocean and its adjacent seas. The aim of the elicitation was to identify and prioritize uncertainties for inclusion in Operating Models for Management Strategy Evaluation (MSE). The tool presented in this paper supports the qualitative prioritization of uncertainties, while also visualizing the degree of consensus among stakeholders on particular issues. Perceptions of uncertainty in fisheries often vary widely among scientists, industry and other interest groups, so tools that can facilitate inclusion and representation of different opinions are useful where decision-making depends on broad agreement and more generally, where effective management depends on commitment from stakeholders.

China's Eurasian frontiers have emerged as a major factor in Beijing's foreign policy through President Xi Jinping's “One Belt, One Road” strategy. The article argues that this strategy has been given impetus by the shifting geopolitical landscape in Central Asia resulting from the U.S. withdrawal from Afghanistan, Russia's relative decline, and Beijing's quest for stability in its restive province of Xinjiang.