Luigi Zingales

Luigi Zingales
University of Chicago | UC · Chicago Booth School of Business

About

128
Publications
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37,787
Citations

Publications

Publications (128)
Article
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The inaugural dean of Oxford University's Said Business School and academic director of the British Academy's Future of the Corporation program begins by identifying four alternatives to Milton Friedman's Shareholder Value doctrine: (1) enlightened shareholder value maximization; (2) stakeholder value; (3) shareholder welfare; and (4) corporate pur...
Article
Using mobile phone and survey data, we show that during the early phases of COVID-19, voluntary social distancing was greater in areas with higher civic capital and amongst individuals exhibiting a higher sense of civic duty. This effect is robust to including controls for political ideology, income, age, education, and other local-level characteri...
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Exploiting portfolio data and repeated surveys of an Italian bank's clients, we test whether investors’ risk aversion increases following the 2008 crisis. We find that, after the crisis, both qualitative and quantitative measures of risk aversion increase substantially and that affected individuals divest more stock. We investigate four explanation...
Article
Full-text available
We study whether a positive historical shock can generate long-term persistence in development. We show that Italian cities that achieved self-government in the Middle Ages have a higher level of civic capital today than similar cities in the same area that did not. The size of this effect increases with the length of the period of independence and...
Article
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In entering a currency union without any political union European countries have taken a gamble: will the needs of the currency unions force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and...
Article
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While both cultural and legal norms (institutions) help foster cooperation, culture is the more primitive of the two and itself sustains formal institutions. Cultural changes are rarer and slower than changes in legal institutions, which makes it difficult to identify the role played by culture. Cultural changes and their effects are easier to iden...
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We study consumer liquidity in a general equilibrium model where the friction is the nonpledgeability of future income. Liquidity helps to overcome the absence of a double coincidence of wants. Consumers over-hoard liquidity and the resulting competitive equilibrium is constrained inefficient. Fiscal policy following a large negative shock can incr...
Preprint
Using an incentivized measure of test for competition, this paper investigates whether this taste explains subsequent gender differences in earnings and industry choice in a sample of high-ability MBA graduates. We find that “competitive” individuals earn 9% more than their less competitive counterparts do. Moreover, gender differences in taste for...
Article
Entering a currency union without any political union European countries have taken a gamble: will the needs of the currency union force a political integration (as anticipated by Monnet) or will the tensions create a backlash, as suggested by Kaldor, Friedman and many others? We try to answer this question by analyzing the cross sectional and time...
Article
Full-text available
We study which dimensions of corporate culture are related to a firm's performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, a firm's performance is stronger. We then study how different governance structures impact the ability to sustain integrity as a corporate...
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Women outnumber men in undergraduate enrollments, but they are much less likely than men to major in mathematics or science or to choose a profession in these fields. This outcome often is attributed to the effects of negative sex-based stereotypes. We studied the effect of such stereotypes in an experimental market, where subjects were hired to pe...
Article
We compare answers to policy questions by economic experts and a representative sample of the US population. We find a 35 percentage point difference between the two groups. This gap is only partially explained by differences in ideological or personal characteristics of the two samples. Interestingly, the difference is the largest on the questions...
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We estimate what percentage of firms engage in fraud and the economic cost of fraud. Our estimates are based on detected frauds, and frauds that we infer are started but are not caught. To identify the ‘iceberg’ of undetected fraud we take advantage of an exogenous shock to the incentives for fraud detection: Arthur Andersen’s demise, which forces...
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In 2012 the National Public Radio program Planet Money created a fake presidential platform based on the issues a small sample of economists, with different political views, agreed upon. In focus groups this platform found no support among the public at large. Is this just a feature of the particular selection made by NPR or is it a generalizable f...
Article
We study which dimensions of corporate culture are related to a firm’s performance and why. We find that proclaimed values appear irrelevant. Yet, when employees perceive top managers as trustworthy and ethical, firm’s performance is stronger. We then study how different governance structures impact the ability to sustain integrity as a corporate v...
Article
We use survey data to measure households' propensity to default on mortgages even if they can afford to pay them (strategic default) when the value of the mortgage exceeds the value of the house. The willingness to default increases in both the absolute and the relative size of the home-equity shortfall. Our evidence suggests that this willingness...
Article
We conjecture that the changes in economic activity from late 2008 to early 2009 is due to a drop in trust. We present new survey evidence consistent with this hypothesis.
Article
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We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we show that the level of local financial development enhances the probability an individual starts his own business, increases the creation of new fi...
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Financial transactions require trust. This paper analyzes the role of trust in the context of the 2008 financial crisis. In order to find a role for trust, we need to find a role for trust in a standard economic model which differs from the rational expectation of the equilibrium outcome. It is argued that trust dropped dramatically in the Fall of...
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This paper puts forth and estimates a dynamic asset pricing model with asymmetric information to study the relation between the media and the stock market. In the model, the speed by which information spreads through a population of rational agents determines both the amount of media coverage and the equilibrium fraction of informed agents. Infor-m...
Article
We use a repeated survey of an Italian bank’s clients to test whether investors’ risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an...
Article
We present evidence from an experiment in which groups select a leader to compete against the leaders of other groups in a real-effort task that they have all performed in the past. We find that women are selected much less often as leaders than is suggested by their individual past performance. We study three potential explanations for the underre...
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This study investigated (1) sex differences in hormonal responses to psychosocial stress; (2) the relation between variability in pre-test hormone concentrations and stress-induced hormonal changes; and (3) some possible sources of within-sex variation in pre-test hormone concentrations and in hormonal responses to the test in a large human subject...
Preprint
We use a combination of lab and field evidence to study whether preferences for immediacy and the tendency to procrastinate are connected as in O'Donoghue and Rabin (1999a). To measure immediacy, we have participants choose between smaller-sooner and larger-later rewards. Both rewards are paid by check to control for transaction costs. To measure p...
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This chapter reviews the recent debate about the role of social capital in economics. We argue that all the difficulties this concept has encountered in economics are due to a vague and excessively broad definition. For this reason, we restrict social capital to the set of values and beliefs that help cooperation - which for clarity we label civic...
Article
This paper reports a positive and statistically significant relation between short-term discount rates elicited with a monetary and a primary reward (chocolate). This finding suggests that high short-term discount rates are related to an underlying individual trait.
Article
We use survey data to study American households' propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). The cost of defaulting strategically increases in wealth, but at a decreasing rate. It is driven both by pecuniary and non pecuniary factors, such...
Article
We show that a measure of reciprocity derived from the Berg et al. (1995) trust game in a laboratory setting predicts the reciprocal behavior of the same subjects in a real-world situation. By using the Crowne and Marlowe (1960) social desirability scale, we do not find any evidence that a desire to conform to social norms distorts results in the l...
Preprint
We conduct a field experiment to test whether (and how) emotional intelligence can be taught effectively in a short course. We randomly assign MBA students to an emotional intelligence course, a resiliency course, and a “placebo” course. We compare their emotional intelligences, as measured by the MSCEIT, before and after the sixteen-hour course. W...
Article
Women are generally more risk averse than men. We investigated whether between- and within-gender variation in financial risk aversion was accounted for by variation in salivary concentrations of testosterone and in markers of prenatal testosterone exposure in a sample of >500 MBA students. Higher levels of circulating testosterone were associated...
Article
We study experimentally the effect of expectations on whether trust is repaid. Subjects respond with untrustworthy behavior if they see that little is expected of them. This suggests that guilt aversion plays an important role in the repayment of trust.
Article
Full-text available
We use survey data to study American households’ propensity to default when the value of their mortgage exceeds the value of their house even if they can afford to pay their mortgage (strategic default). We find that 26% of the existing defaults are strategic. We also find that no household would default if the equity shortfall is less than 10% of...
Article
We find that institutional ownership in publicly traded companies is associated with more innovation (measured by cite-weighted patents). To explore the mechanism through which this link arises, we build a model that nests the lazy-manager hypothesis with career-concerns, where institutional owners increase managerial incentives to innovate by redu...
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Full-text available
We study the effect that a general lack of trust can have on stock market participation. In deciding whether to buy stocks, investors factor in the risk of being cheated. The perception of this risk is a function of the objective characteristics of the stocks and the subjective characteristics of the investor. Less trusting individuals are less lik...
Article
We argue that profit-maximizing media help overcome the problem of "rational ignorance" highlighted by Downs (1957) and in so doing make elected representatives more sensitive to the interests of general voters. By collecting news and combining it with entertainment, media are able to inform passive voters on politically relevant issues. To show th...
Preprint
Full-text available
This paper shows that there is a positive and statistically significant correlation between the short-term discount rate over a monetary reward and the short-term discount rate over a primary reward (chocolate). This correlation, however, is absent among subjects who do not like chocolate and are not hungry. This suggests that monetary rewards are...
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Analysis of PISA results suggests that the gender gap in math scores disappears in countries with a more gender-equal culture.
Article
To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapp...
Article
We study the effect of media coverage on corporate governance by focusing on Russia in the period 1999 to 2002. We find that an investment fund's lobbying increases coverage of corporate governance violations in the Anglo-American press. We also find that coverage in the Anglo-American press increases the probability that a corporate governance vio...
Article
There is a large body of literature documenting both a preference for immediacy and a tendency to procrastinate. O'Donoghue and Rabin (1999a,b, 2001) and Choi et al. (2005) model these behaviours as two faces of the same phenomenon. In this paper, we use a combination of lab, field, and survey evidence to study whether these two types of behaviour...
Article
This paper estimates the risk preferences of cotton farmers in Southern Peru, using the results from a multiple-price-list lottery game. Assuming that preferences conform to two of the leading models of decision under risk--Expected Utility Theory (EUT) and Cumulative Prospect Theory (CPT)--we find strong evidence of moderate risk aversion. Once we...
Article
Full-text available
Women's emancipation (GGI) Gender gap, math Gender gap, reading 70 60 50 40 30 20 10 0 -10 -20 -30
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Several papers study the effect of trust by using the answer to the World Values Survey (WVS) question “Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people?” to measure the level of trust. Glaeser et al. (2000) question the validity of this measure by showing that it is not corre...
Article
This paper analyzes the interaction between corporate taxes and corporate governance. We show that the design of the corporate tax system affects the amount of private benefits extracted by company insiders and that the quality of the corporate governance system affects the sensitivity of tax revenues to tax changes. Analyses of a tax enforcement c...
Article
What external control mechanisms are most effective in detecting corporate fraud? To address this question we study in depth all reported cases of corporate fraud in companies with more than 750 million dollars in assets between 1996 and 2004. We find that fraud detection does not rely on one single mechanism, but on a wide range of, often improbab...
Article
To explain the extremely long-term persistence (more than 500 years) of positive historical experiences of cooperation (Putnam 1993), we model the intergenerational transmission of priors about the trustworthiness of others. We show that this transmission tends to be biased toward excessively conservative priors. As a result, societies can be trapp...
Article
Full-text available
How much do cultural biases affect economic exchange? We answer this question by using data on bilateral trust between European countries. We document that this trust is affected not only by the characteristics of the country being trusted, but also by cultural aspects of the match between trusting country and trusted country, such as their history...
Article
Why is underdevelopment so persistent? One explanation is that poor countries do not have institutions that can support growth. Because institutions (both good and bad) are persistent, underdevelopment is persistent. An alternative view is that underdevelopment comes from poor education. Neither explanation is fully satisfactory, the first because...
Article
We study the location-specific component of research productivity for economics and finance faculty over the last three decades. We find that there was a positive effect of being affiliated with a top 25 university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. The decline in elite university fixed effect is due to th...
Article
,Chava is with the Finance Department, C. T. Bauer School of Business, University of Houston, Houston, TX 77204.Phone: (713) 743-4780, email: schava@uh. edu. Roberts is with the Finance Department, The Wharton School, University of Pennsylvania, 3620 Locust Walk, Philadelphia, PA 19104.Phone: (215) 573-9780, email: mrrobert@wharton. upenn. edu. We...
Article
Capitalism–or, more precisely, the free enterprise system–is the most effective system for allocating resources and rewards. For this reason, most economists tend to believe that capitalism is bound to spread from the U.S. to all parts of the world. But the authors argue that the triumph of capitalism is far from certain. Part of the problem is tha...
Article
Citations are one way that past research echoes through time. In this paper, we compile a list of articles published in major refereed economics journals in the last 35 years that have received more than 500 citations as of June 2006. We then use this list to examine various trends: what fields of economics are most in vogue; what types of articles...
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Until recently, economists have been reluctant to rely on culture as a possible determinant of economic phenomena. Much of this reluctance stems from the very notion of culture: it is so broad and the channels through which it can enter the economic discourse so ubiquitous (and vague) that it is difficult to design testable, refutable hypotheses. I...
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We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990...
Article
This paper analyzes the interaction between corporate taxes and corporate governance. We show that the design of the corporate tax system affects the amount of private benefits extracted by company insiders. A higher tax rate increases the amount of income insiders divert and thus worsens governance outcomes. In contrast, stronger tax enforcement r...
Article
Full-text available
This paper analyzes the influence of a large creditor --mainly a financial intermediary--on the likelihood of financial distress of its borrower. Contrary to the common thinking, I show that a large creditor could increase the probability of financial distress of its borrower. The results are driven by two forces: Firstly, the large creditor may ha...
Article
This article summarizes the findings of the authors' study, published recently in the Journal of Finance, that use control premiums paid in large block sales to assess the quality of corporate governance systems. The authors report significant variation in such premiums, with countries like the U.S. and U.K. showing premiums of less than 10% while...
Article
We estimate private benefits of control in 39 countries using 393 controlling blocks sales. On average the value of control is 14 percent, but in some countries can be as low as -4 percent, in others as high a +65 percent. As predicted by theory, higher private benefits of control are associated with less developed capital markets, more concen...
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We use exogenous variation in the degree of restrictions to bank competition across Italian provinces to study both the effects of bank regulation and the impact of deregulation. We find that where entry was more restricted the cost of credit was higher and - contrary to expectations - access to credit lower. The only benefit of these restrictions...
Article
Ideas occur to managers that can replace existing technologies. Managers choose between contracts offered by an existing firm and a competitive venture capitalist. Implementing ideas within the existing firm has costs and advan-tages. Relying on existing assets makes implementation cheaper. But it also reduces contractual flexibility which is valua...
Article
Full-text available
Does media coverage affect asset prices? If so, why? And what are the consequences? In this paper we try to answer these questions by looking at the effect media reporting has on stock market reactions to earnings announcement. We find that stock prices are most reactive to the type of earnings emphasized by the press. This effect is stronger for c...
Article
The state of development of the financial sector does not change monotonically over time. In particular, by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels. To explain these changes, we propose an interest group theory of financial development where incumbents opp...
Article
In the last two decades the European financial markets have become more market-oriented. We analyse the economic and political forces that have triggered these changes as well as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we conjecture that even if Europe might benefit from a co...
Article
Full-text available
We study the effects of differences in local financial development within an integrated financial market. We construct a new indicator of financial development by estimating a regional effect on the probability that, ceteris paribus, a household is shut off from the credit market. By using this indicator we find that financial development enhances...
Article
The state of development of the financial sector does not change monotonically over time. In particular, by most measures, countries were more financially developed in 1913 than in 1980 and only recently have they surpassed their 1913 levels. We propose an interest group theory of financial development where incumbents oppose financial development...
Article
In the last two decades the European financial markets have become more market oriented. We analyze the economic and political forces that have triggered these changes as well as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we conjecture that even if Europe might benefit from a co...
Article
How did citizens acquire rights protecting their property from the depredations of the government? In this paper, we argue that one important factor strengthening respect for property is how it is distributed. When there is some specificity associated with property, and property is held by those who are most productive, the distribution of property...
Article
Full-text available
How did citizens acquire rights protecting their property from the depredations of the government? In this paper, we argue that one important factor strengthening respect for property is how it is distributed. When there is some specificity associated with property, and property is held by those who are most productive, the distribution of property...
Article
Since Max Weber, there has been an active debate on the impact of religion on people's economic attitudes. Much of the existing evidence, however, is based on cross-country studies in which this impact is confounded by differences in other institutional factors. We use the World Values Surveys to identify the relationship between intensity of relig...
Article
Abstract In the last two decades the European financial markets have become,more market oriented. We analyze the economic ,and political forces that have triggered these changes ,as well ,as their likely welfare implications. We also try to assess whether this trend will continue. Based on our analysis, we conjecture that even if Europe might benef...