NBER Publications by Richard Stanton

This paper analyzes the performance of the commercial mortgage-backed security (CMBS) market before and during the recent financial crisis. Using a comprehensive sample of CMBS deals from 1996 to 2008, we show that (unlike the residential mortgage market) the loans underlying CMBS did not significantly change their characteristics during this period, commercial lenders did not change the way they priced a given loan, defaults remained in line with their levels during the entire 1970s and 1980s and, overall, the CMBS and CMBX markets performed as normal during the financial crisis (at least by the standards of other recent market downturns). We show that the recent collapse of the CMBS market was caused primarily by the rating agencies allowing subordination levels to fall to levels that pr...

We derive a firm's optimal capital structure and managerial compensation contract when employees are averse to bearing their own human capital risk, while equity holders can diversify this risk away. In the presence of corporate taxes, our model delivers optimal debt levels consistent with those observed in practice. It also makes a number of predictions for the cross-sectional distribution of firm leverage. Consistent with existing empirical evidence, it implies persistent idiosyncratic differences in leverage across firms. An important new empirical prediction of the model is that, ceteris paribus, firms with more leverage should pay higher wages.

The discount on closed-end funds is widely accepted as proof of investor irrationality. We show,however, that a parsimonious rational model can generate a discount that exhibits many of the characteristics observed in practice. The only required features of the model are that managers have (imperfectly observable) ability to generate excess returns; they sign long-term contracts guaranteeing them a fee each year equal to a fixed fraction of assets under management; and they can leave to earn more money elsewhere if they turn out to be good. With these assumptions, time-varying discounts are not an anomaly in a rational world with competitive investors -- they are required.