Christopher Malloy is the Sylvan C. Coleman Chaired Professor of Financial Management in the Finance Unit at Harvard Business School, and a Research Associate at the National Bureau of Economic Research. Prior to joining HBS in 2007, Professor Malloy was an Assistant Professor in the Finance Department at London Business School, where he was on faculty from 2003-2007, and previously worked for the Federal Reserve Board in Washington D.C. Professor Malloy has consulted with governments, central banks, hedge funds, and technology firms, and has provided expert witness testimony in investment-related lawsuits.
Professor Malloy has taught courses in Investment Strategies, Behavioral Finance, FinTech, Family Office Management, Stock Pitching, Corporate Finance, and Equity Investment Management, and currently co-heads the HBS executive program Finance for Senior Executives. His research focuses on topics in behavioral finance, asset pricing, investments, fintech, family office management, labor economics, and empirical corporate finance. His research has appeared in the Journal of Political Economy, the Journal of Finance, the Journal of Financial Economics, and the Review of Financial Studies, and has been described in The Financial Times, The Wall Street Journal, The New York Times, and various other media outlets. Professor Malloy received a PhD in Finance and an MBA from The University of Chicago Graduate School of Business, and a BA in Economics from Yale University.
This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal xpenditures. In doing so, we show that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity. This retrenchment follows both Senate and House committee chair changes, occurs in large and small firms and within large and small states, and is most pronounced among geographically-concentrated firms. The effects are economically meaningful and the mechanism - entirely distinct from the more traditional interest rate and tax channels - suggests new considerations in assessing the impact of government spending on private sector economic activity.
In this paper we demonstrate that legislation has a simple, yet previously undetected impact on firm stock prices. While it is understood that the government and firms have an important relationship, it remains difficult to determine which firms any given piece of legislation will affect, and how it will affect them. By observing the actions of legislators whose constituents are the affected firms, we can gather insights into the likely impact of government legislation on firms. Specifically, focusing attention on “interested” legislators’ behavior captures important information seemingly ignored by the market. A long-short portfolio based on these legislators’ views earns abnormal returns of over 90 basis points per month following the passage of legislation. Further, the more complex the legislation, the more difficulty the market has in assessing the impact of these bills. Consistent with the legislator incentive mechanism, the more concentrated the legislator’s interest in the industry, the more informative are her votes for future returns.
