Category Archives: Accounting

Corporations hoard cash as a precautionary measure

Academic studies have shown that over the past few decades, public firms are increasingly holding large amounts of cash. Curiously, much of this build up in cash savings can be attributed to cash saved from seasoned share issues, which are sales of equity by already public companies. I examined the share-issuance cash savings of a […]

U.S. corporate taxes: A strong incentive to move overseas

When a U.S. company owns a subsidiary overseas, it has a big decision to make when it comes to the earnings of that subsidiary. Does it send the money back to the parent company in the U.S. and pay U.S. corporate taxes or does it avoid the U.S. tax by permanently reinvesting the money abroad? […]

Why a rating agency should be concerned about the survival of the company it’s assessing

My latest paper* focuses on the difficulties that rating agencies face in setting a credit score that accurately reflects the credit quality of a borrower, but also takes into account the effect that score will have on the borrower’s credit quality in the future. When a rating agency cuts a given company’s credit rating, investor […]

Debate about public pension plans should include understated funding levels

As a former pension consultant-turned MIT Sloan professor, I get asked to speak at my fair share of pension conferences. I recently spoke at a symposium for trustees of Taft-Hartley funds, which are pension funds for unionized workers jointly trusteed by union representatives and management. After my talk, something unexpected happened: the audience gave me […]