We examine the relationship between CEO ownership and stock market performance.A strategy based on public information about managerial ownership delivers annual abnormal returns of 4% to 10%. The effect is strongest among firms with weak external governance, weak product market competition, and large managerial discretion, suggesting that CEO ownership can reverse the negative impact of weak governance. Furthermore, owner-CEOs are value increasing: they reduce empire building and run their firms more efficiently. Overall, our findings indicate that the market does not correctly price the incentive effects of managerial ownership, suggesting interesting feedback effects between corporate finance and asset pricing.WE EXAMINE STOCK MARKET returns of firms in which the CEO holds a significant fraction of the firm's outstanding shares. We find that firms with high managerial ownership deliver higher stock market returns than firms with low managerial ownership in a trading strategy purely based on public information. This effect is most pronounced among firms with high managerial discretion, where outperformance is as large as 10% per annum.Since the seminal work of Berle and Means (1932), it is often critically discussed that managers' interests are not well aligned with shareholders' interests in publicly traded firms. Principal agent problems arise because managers 1013 3 Recently, Johnson, Moorman, and Sorescu (2009) challenge the findings of Gompers, Ishii, and Metrick (2003), arguing that the abnormal returns of firms with good external governance are due to industry clustering. However, Cremers and Ferrell (2009) provide evidence of a positive impact of good governance on stock market returns even after accounting for industry clustering. More recently, Bebchuk, Cohen, and Wang (2013) show that markets have learned about the governance premium and that it has eventually vanished in recent years. 4 In their discussion, Gorton, He, and Huang (2014) study a bilateral bargaining game that is applicable to a situation in which equity shares are not traded, while Lilienfeld-Toal (2010) and Blonski and Lilienfeld-Toal (2010) analyze a setting in which equity shares are traded on a public market at a price that does not fully reflect information on managerial ownership. Traditional models of asset pricing with a value-increasing shareholder in which the existence of an ownermanager is fully priced include Admati, Pfleiderer, and Zechner (1994) and, more recently, DeMarzo and Urosevic (2009) and the main section of Gorton, He, and Huang (2014).

This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. These data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. Consumption increases out of housing wealth are concentrated among the home owners who sell subsequent to privatization and among those who receive negative income shocks, evidencing a collateral effect.

We analyse an economy where principals and agents match and contract subject to moral hazard. Bankruptcy law defines the limited liability constraint in these contracts. We analyse Walrasian allocations to generate the following predictions: (i) weakening bankruptcy law causes redistribution of debt and welfare from poor agents and principals to rich agents; (ii) exemption limits Pareto‐dominate other bankruptcy laws if project size is fixed; (iii) means‐testing (as in recent US personal bankruptcy law) that is ex post pro‐poor in intent makes the poor worse off ex ante.

This paper studies the economic benefits of home ownership. Exploiting a quasi-experiment surrounding privatization decisions of municipally-owned apartment buildings, we obtain random variation in home ownership for otherwise similar buildings with similar tenants. We link the tenants to their tax records to obtain information on demographics, income, mobility patterns, housing wealth, financial wealth, and debt. These data allow us to construct high-quality measures of consumption expenditures. Home ownership causes households to move up the housing ladder, work harder, and save more. Consumption increases out of housing wealth are concentrated among the home owners who sell subsequent to privatization and among those who receive negative income shocks, evidencing a collateral effect.(owning versus renting), making it difficult to separate out the effect of home ownership from the effect of these underlying characteristics. While the literature has tried to control for household-level characteristics, the approach ultimately fails to resolve the endogeneity problem: characteristics unobservable to the researcher could be driving both the tenure decisions and the outcome variable.Second, the properties that are owned and rented have different characteristics. Singlefamily versus multi-family structure, floor area, number of bedrooms, age of the structure, heating methods, etc. could all differ. Neighborhood characteristics also differ since rental properties are more likely located in densely-populated urban areas while owned properties are more likely to be in suburban areas. Neighborhood density, its racial or ethnic makeup, distance to work, quality of the local school system, etc. are all likely to differ. One can control for such observable property and neighborhood characteristics, but fully unbundling tenure choice and dwelling characteristics is an uphill battle. It is impossible to rule out that unobserved differences in property characteristics affect both the tenure choice and the outcome variable of interest.In recognition of these challenges, a small literature has used survey methods or quasiexperiments to study the causal effects of home ownership. 3 The few studies there are have small samples, focus on a small set of non-economic outcome variables (like life satisfaction), and the survey data they use may not carry over to actual market behavior.This paper provides new evidence on the benefits and costs to home ownership, focusing on the economic effects to individual households. We overcome key challenges that have plagued the literature to date by using a quasi-experiment which randomly assigns home ownership.We consider a larger sample. We track more outcome variables over a longer period of time.And since our data are based on tax registries, they measure actual decisions (rather than survey responses) and are more granular and of higher quality than survey-based data.Our study exploits a unique setting to overcome the endogeneity problems. In the early

Laws permitting bonded labor in a matching market for contracts subject to moral hazard are shown to have two contrasting effects: a partial equilibrium (PE) enhancement of commitment of agents' effort, and a general equilibrium (GE) impact via higher profits earned by principals. The GE effect operates when enough agents enter the market to fully utilize available capacity, creating a pecuniary externality which outweighs the PE effect on agent payoffs. Hence agents prefer minimal bonding limits consistent with full capacity utilization, while principals prefer higher limits. Efficiency may also decline with higher bonding limits if it is ex post distortionary. The model explains why low limits on bonding may be preferred politically or on normative grounds, when borrowers become more wealthy, and the range of collateral instruments widens. THE POLITICAL ECONOMY OF DEBT BONDAGE May 20 2009Abstract Laws permitting bonded labor in a matching market for contracts subject to moral hazard are shown to have two contrasting effects: a partial equilibrium (PE) enhancement of commitment of agents' effort, and a general equilibrium (GE) impact via higher profits earned by principals. The GE effect operates when enough agents enter the market to fully utilize available capacity, creating a pecuniary externality which outweighs the PE effect on agent payoffs. Hence agents prefer minimal bonding limits consistent with full capacity utilization, while principals prefer higher limits. Efficiency may also decline with higher bonding limits if it is ex post distortionary. The model explains why low limits on bonding may be preferred politically or on normative grounds, when borrowers become more wealthy, and the range of collateral instruments widens.2