In search of harmony : diversity & risk in an interconnected world
Keywords: Economics.

This dissertation explores the issue of diversity and risk in the modern, interconnected world. The first chapter, titled Nature or Nurture: Revisiting the Gender Risk Gap in Corporate Finance, is co-authored with Gudrun Johnsen. The motivation for this paper is that existing findings that females leaders are more risk averse may be a result of nurture rather than nature. Specifically, risk aversion may be an acquired trait if girls are encouraged to be more conservative from an early age; moreover, if owners believe that females are more conservative, they would only appoint female executives when the corporation is in need of a conservative manager. Using novel administrative from Iceland and a novel causal identification strategy, we are freed from these confounding factors. As a result, we find no gender risk gap. There are three explanations for our novel finding: (1) Iceland ranks among the highest in gender equality. (2) Our data allow us to study owners rather than senior executives. (3) Our instrument: gender ratio of second-generation owners in family firms, meet the highest standard of causal inference. This chapter is a major milestone in the corporate finance literature. When gender risk gap is wrongly subscribed to nature rather than nurture, it reinforces the prejudice that female leaders are less efficient in allocating capital than their male counterparts, and justify the unjustifiable under-representation of female corporate leaders. The second chapter, titled the Logic of Business Group: A Moral Hazard Perspective, is also co-authored with Gudrun Johnsen. This paper offers a new perspective on why business groups are formed. Specifically, we ask if the expectation of government bailout lowers group-affiliated firms' cost of capital. Using a quasi-natural experiment, we show that group-affiliated firms paid lower interest when government bailout was expected. But as soon as the bailout expectation was removed, bankers had to write down their debts with greater likelihood, and increase the cost of capital to group-affiliated firms. Our result is limited by the inability to deal with time-invariant confounders. But as the first paper in this space, it provides future researchers with some food for thought. The third chapter, titled Positive Metric, Negative Experience: The Curious Demise of Last.fm, studies the preference for diversity in the context of online music streaming. It also asks whether modern recommendation algorithms contributed or hindered diversity. Using data from the U.K. online streaming platform \textit{Last.fm}, we find that: (1) users' preference for diversity is highly diverse. (2) the effect of recommendation algorithms is highly dependent on the users: while it did help some users find new music, it actually made it harder for others. (3) drop in consumer welfare may or may not be detected immediately in total clicks - highlighting a key limitation in AB testing. This paper, while simple in methodology, provides many important insights for the development of recommendation algorithms. It implores recommendation researchers to: (1) seriously re-examine their default assumption that users have an inherent preference for highly similar items; (2) carefully study how their recommendation may or may not improve user experience; (3) develop richer evaluation metrics beyond root-mean-squared-error (RMSE).