A salient trend in crisis intervention has emerged in recent decades: Government and central banks offered funding directly to nonfinancial firms, bypassing banks and other credit intermediaries. We analyze the long-term consequences of such policies by focusing on firm quality...

Under financing frictions, negative shocks have a lasting impact on credit intermediaries' net worth and lending capacity. Anticipating tighter credit-supply conditions and the resulting difficulty in financing ongoing capital growth, firms' current incentives to borrow and create productive capital weaken....

When the value of a pledgeable asset (or project) is uncertain, investors are tempted to examine it. The information cost is ultimately borne by the asset owner, reducing her financing capacity. A pecking order emerges. Debt generates a greater financing...

Behavioral biases in investors' expectations can lead to a decoupling of asset prices from fundamentals, and risks to financial stability. Central bank communication could be a tool to mitigate these issues, but there is no theoretical guidance on how and...

I study the stationary wealth distribution in a dynamic model of financial markets in which investors differ in their levels of investment sophistication. Some investors form beliefs rationally but have access to different information, while others hold incorrect beliefs. For...

We present a model of competition between ESG raters who acquire information about multiple unrelated categories and sell ratings. Raters specializing in different categories maximizes the amount of information transmitted and surplus, and can be the equilibrium outcome. When investors place a high...