Have Private Equity Returns Really Declined?
In a recent paper, “Demystifying Illiquid Assets – Expected Returns for Private Equity,” Ilmanen, Chandra and McQuinn (of AQR) give a perspective on the past, present, and expected future performance of private equity. They conclude that “private equity does not seem to offer as attractive a net-of-fee return edge over public market counterparts as it did 15-20 years ago from either a historical or forward-looking perspective.” This analysis provides our perspective based on more recent and, we think, more reliable data and performance measures – the historical perspective is more positive than Ilmanen et al. portray. More
The Impact of the Opioid Crisis on Firm Value and Investment
The increasing rates of opioid abuse has had a significant impact on the United States. This epidemic has implications for firms which must now contend with a lower pool of available and productive workers. To minimize endogeneity, we use historic rates of physician opioid prescriptions to proxy for current opioid abuse. We show a negative relationship between opioids and firm performance, after controlling for local economic and demographic conditions. More
Backhanded Compliments: How Negative Comparisons Undermine Flattery
Backhanded compliments seem like praise but can leave a sting. This study explores the psychology of backhanded compliments. Flatterers deploy backhanded compliments to garner liking while conveying social status. Recipients view praise of this kind as strategic put-downs and penalize would-be flatterers even as the backhanded compliment undermines their motivation and perseverance. More
Public Firm Presence, Financial Reporting, and the Decline of U.S. Manufacturing
The Influence of Loan Officers on Loan Contract Design and Performance
We investigate the extent to which loan officers generate individual effects on the design and performance of syndicated loan deals. We construct a novel database containing the identities of 6,821 loan officers involved in structuring syndicated loan deals. This data allow us to exploit movement of loan officers across banks to disentangle loan officer effects from bank fixed effects and estimate loan officers’ influence on both lending terms and loan performance. We find that loan officers have a significant influence on loan terms and loan performance that is incremental to bank and borrower characteristics. More
FTC Concerns Over Bristol-Myers Deal Raise Questions
On Jan. 3, 2019, Bristol-Myers Squibb Co. announced its proposed acquisition of Celgene Corp. for approximately $74 billion. The Federal Trade Commission issued requests for additional information and documentary materials to the companies on March 25, 2019, that were “focused on marketed and pipeline products for the treatment of psoriasis.” In order to address the FTC’s concerns, BMS plans to divest Celgene’s Otezla (apremilast) drug, which is a phosphodiesterase-4 inhibitor indicated for the treatment of moderate to severe psoriasis and psoriatic arthritis. Psoriasis is an autoimmune disease with multiple subtypes, with large skin plaques being the most common manifestation. More
Corrected Measures for Patent Citation Analysis: Accounting for Published Patent Applications
This article investigates patent citations made to published patent applications. Although citations to patent publications are conceptually indistinguishable from citations to granted patents, they are omitted from all standard measures. We find that publication citations are a large and growing portion of patent citations, and that they differ statistically from citations to granted patents on several important dimensions. We conclude that omitting publication citations is likely to generate biased measures, and that standard measures of patent citations should be corrected. We release our computer code and corrections for future use. More
Pay, Employment, and Dynamics of Young Firms
Why do young firms pay less? Using confidential microdata from the US Census Bureau, we find lower earnings among workers at young firms. However, we argue that such measurement is likely subject to worker and firm selection. Exploiting the two-sided panel nature of the data to control for relevant dimensions of worker and firm heterogeneity, we uncover a positive and significant young-firm pay premium. Furthermore, we show that worker selection at firm birth is related to future firm dynamics, including survival and growth. We tie our empirical findings to a simple model of pay, employment, and dynamics of young firms. More
Is Tax Planning Best Done In Private?
We investigate whether privately-held firms engage in more tax planning than do publicly-held firms. Private firms are commonly believed to face lower non-tax costs of tax planning relative to public firms, allowing them to engage in more tax planning. However, empirical evidence of U.S. private firm tax planning is limited, primarily because of difficulty in obtaining private firm data. More
Redefining the Physician’s Role in Cost-Conscious Care: The Potential Role of the Electronic Health Record
Recent health policy efforts have attempted to promote constructive conversations regarding cost-effectiveness by increasing transparency for both patients and physicians. Spurred by access and cost challenges resulting from increasing pharmaceutical prices, the Centers for Medicare & Medicaid Services (CMS) proposed a rule that would require direct-to-consumer prescription drug advertisements to include the list price for a typical 30-day course of therapy, according to their weighted average cost. This Viewpoint discusses implementing price transparency for health care products and services where physicians spend an increasing proportion of their time—in electronic health records (EHRs). More
Artificial Intelligence Alter Egos:Who benefits from Robo-investing?
Two Faces of Novelty: Idea Selection in Crowdsourcing Challenges
The selection of novel ideas is vital to the development of truly innovative products. Firms often turn to idea crowdsourcing challenges, in which both ideators and the seeker firms participate in the idea selection process. Yet prior research cautions that ideators and seeker firms may not select novel ideas. To address the links between idea novelty and selection, this study proposes a bi-faceted notion of idea novelty and probes the role of task structure. More