Stock-market effectiveness in attracting and retaining firms under public ownership depends not only on stand-alone firms’ net listing benefits but also on gains from merging with a public acquirer. Using a novel merger-adjusted listing count, we show that the dramatic (≈50%) post-1996 U.S. listing decline—often attributed to declining listing benefits—is reversed as the “missing” firms de facto continue existing inside their public acquirers. Our merger adjustment also eliminates the U.S. listing gap, pointing instead to a distinct U.S. listing advantage: providing access to a well-functioning market for complex merger transactions.

We examine the effects of a severe climate event on local firms. Our data include 8,218 business credit reports and a detailed survey of 273 businesses in the area affected by Hurricane Harvey. Delinquent credit balances doubled in areas with the worst flooding, although nonflooded areas also had significant credit impairments. Only independent businesses showed signs of distress; subsidiaries of larger firms did not. Firms were largely uninsured and often were denied credit postdisaster. Many funded recovery informally, such as through friends and family. Our findings suggest that several financial frictions compound the challenges posed by a severe climate event.

We consider a model in which the correlation between shocks to consumption and to expected future consumption growth is nonzero and varies over time. We validate this assumption empirically using the model’s implication that time variation in consumption growth persistence (CGP) drives the correlation between stock and bond returns. Our model implies that the stock–bond correlation is also related to the predictive relation between bond yields and future stock returns. Finally, we provide suggestive evidence that asset price fluctuations are the primary driver of changes in CGP.

The speed of stock price reaction to news exhibits substantial time variation. Higher risk-bearing capacity of financial intermediaries, lower passive ownership of stocks, and more informative news increase price responses to contemporaneous news; surprisingly, these interaction variables also increase price responses to lagged news (underreaction). A simple model with limited attention and three investor types (institutional, noninstitutional, and passive) predicts the observed variation in news responses. A long–short trading strategy based on news sentiment earns high returns, which increase when conditioning on the interaction variables. The interactions we document are robust to the choice of news source.

Antitakeover measures are controversial because the evidence of their net effect on shareholders is mixed. We propose that, for many firms, the potential bonding benefits outweigh the agency costs of the quiet life, explaining the mixed results. We study business combination and poison pill laws as exogenous shocks to takeover vulnerability and use shareholder valuation of internal slack as an indicator of the net effect of takeover protection. Firms susceptible to quiet life agency problems exhibit a decrease in the market-assessed value of internal slack. Conversely, cash appreciates at companies where takeover protection bonds commitments with major counterparties.

We introduce a test to assess mutual funds’ “conditional” performance that is based on updated information and corrects data snooping bias. Our method, named the functional false discovery rate “plus” ($ {\mathrm{fFDR}}^{+} $), incorporates fund characteristics in estimating fund performance free of data snooping bias. Simulations suggest that the $ {\mathrm{fFDR}}^{+} $ controls well the ratio of false discoveries and gains considerable power over prior methods that do not account for extra information. Portfolios of funds selected by the $ {\mathrm{fFDR}}^{+} $ outperform other tests not accounting for information updating, highlighting the importance of evaluating mutual funds from a conditional perspective.

Returns to currency carry and momentum compensate for the risk of global interest rate volatility (IRV), with risk exposures explaining 92% of the cross-sectional return variations. This unified explanation stems from its impact on foreign exchange intermediaries. An intermediary-based exchange rate model shows that a higher global IRV increases the uncertainty of future risk-taking and tightens current financial constraints. Position unwinding triggers loss of carry and momentum. Additional empirical results confirm this economic channel. Global IRV risk is also negatively priced in other currency strategies and momentum. The explanatory power is not driven by existing measures of uncertainty or intermediary constraints.

We develop methods for testing factor models when the weights in portfolios of factors and test assets can vary with lagged information. We derive and evaluate consistent standard errors and finite sample bias adjustments for unconditional maximum squared Sharpe ratios and their differences. Bias adjustment using a second-order approximation performs well. We derive optimal zero-beta rates for models with dynamically trading portfolios. Factor models’ Sharpe ratios are larger but standard test asset portfolios’ maximum Sharpe ratios are larger still when there is dynamic trading. As a result, most of the popular factor models are rejected.

This study examines whether and how corporate venture capital (CVC) spurs changes in firm scope. Using two text-based measures of firm scope, I provide evidence that CVC investments are strongly correlated with subsequent changes in firm scope among CVC parent firms, including seeding emerging businesses and creating new segments or divisions. Further evidence is consistent with an experimentation view, with more promising ventures having a stronger strategic impact on the scope changes of parent firms. Moreover, the study finds that post-CVC scope changes are primarily built internally and rarely involve killer acquisitions. These changes create value for CVC parents.

We use a novel experiment in China to examine the effects of having a quasi-official investor own a small number of shares on specific firm outcomes. We find that, relative to control firms, pilot firms experience an increase in dissenting votes from independent directors, a reduction in tunneling and earnings management activities, and an improvement in merger performance. Independent directors questioned by the quasi-official shareholder in activism events subsequently lose board seats in the director market. Overall, our results shed light on a new mechanism for enhancing the protection of minority shareholders.

This study employs variance ratios (VRs) to assess the roles of regulation and liquidity on cryptocurrency market efficiency, focusing on crypto-assets subject to varying degrees of regulation. Our findings reveal that cryptocurrencies supervised by FinCEN-licensed exchanges (IEO-L) exhibit market efficiency similar to SEC-regulated traditional stock offerings (IPOs). Conversely, noncompliant crypto-assets display higher market inefficiency. We also establish a connection between regulatory compliance and issuing entity reputation mechanisms. Our results indicate that compliance with existing regulatory norms enhances efficiency and reduces investor risks in crypto-assets. Furthermore, assets voluntarily adhering to regulatory norms can attain efficiency akin to government-regulated assets.

We examine how changes in foreign labor regulations affect U.S. multinationals’ operating strategies. We show that firms with integrated operations in countries where labor regulations become tighter tend to establish arm’s-length relations with local business partners in that nation. The substitution between integrated and arm’s-length operations is stronger toward joint ventures than suppliers and weaker in the presence of financial constraints. Our findings are consistent with the idea that when firms find it harder to terminate their workers in integrated operations, they change to an operating model where it is easier to replace or discontinue business partners instead of employees.

How should the lender of last resort provide liquidity to banks during periods of financial distress? During the 2008–2010 crisis, banks avoided borrowing from the Fed’s long-standing discount window but actively participated in its special monetary program, the Term Auction Facility, although both programs had the same borrowing requirements. Using an adverse selection model with endogenous borrowing decisions, we explain why the two programs suffer from different stigma costs and how the introduction of TAF incentivized banks’ borrowing. We discuss the empirical relevance of the model’s predictions.

We document spillover effects of government policies promoting capital investment on household financial choices and wealth accumulation. Using individual-level data on employment outcomes and household balance sheets, we find that increase in accelerated depreciation limits increases the layoff probability of routine workers and reduces their stock share of liquid wealth relative to non-routine workers. Background risk due to the policy is mitigated when workers have access to generous unemployment insurance benefits. Finally, we show that such portfolio rebalancing adversely impacts investment returns and the wealth accumulation of routine workers.

This study analyzes meetings of firms with policymakers at the European Commission (EC). Meetings with Commissioners are associated with positive abnormal equity returns for U.S. firms. Firms of the European Union (EU), however, do not experience significant value increases. We identify regulatory outcomes as a channel that can rationalize this difference in value effects of political access. U.S. firms with meetings are more likely to receive favorable decisions in their EC merger decisions than their EU peers. The results suggest that cross-border political access can alleviate uncertainties and alleged discriminatory behavior of regulators in foreign markets.

We demonstrate that investment income taxes incentivize capital allocation to the ecofriendly green sector away from the non-ecofriendly brown sector in a stylized economy. This tax reduces the arrival intensity of climate disasters, delivers the socially optimal allocation, and can be jointly implemented with a carbon tax, expanding policymakers’ toolkit to reduce climate disasters. Extending the model with heterogeneous investors, we show that investment income taxes can obtain support from a political majority and thereby relax political constraints faced by a carbon tax alone.

I show that a tariff policy change that increased trade with China led to a decline in U.S. public listing rates and elevated industry concentration. Consistent with heterogeneous firm models of trade, the shock impeded the entry and performance of small domestic manufacturers but did not adversely impact large multinationals. In addition, stock price reactions to the tariff policy change and threat of reversal imply that trade liberalization creates or destroys value depending on firm size. These findings suggest that recent trends in the U.S. public equity market are driven, in part, by fundamental changes in the global competitive landscape.

The credit default swap (CDS) Big Bang introduced 2 standard coupons for CDS trading. We exploit the setting of the 2 standard coupons as a natural experiment to quantify the components of the bid–ask spreads in over-the-counter markets. We find that a significant portion of the difference in the bid–ask spread between the 2 coupons is explained by the difference in funding costs. Furthermore, search intensity also explains the variation in the difference in bid–ask spread. The liquidity typically concentrates on one of the standard coupons and can suddenly switch to the other coupon. Using the sudden switch of the primary coupon, we provide further evidence to support the predictions of search-based liquidity models.

Information production associated with derivatives markets is not a sideshow; rather, it has significantly positive spillover effects on an array of corporate decisions of underlying firms. Using a regression-discontinuity design based on exogenous variation in options availability as an instrument for changes in the information environment, we show that options introductions have causal effects on corporate policies on both sides of the balance sheet. Through improved information efficiency, options availability reduces the need for debt and payout, increases efficient investment, and yields superior innovation. We conduct two independent experiments demonstrating that our instrument’s impact is not derived from alternative channels.

Using high-frequency data on over 7 million import transactions, we study the disruptions to U.S. firms’ trade patterns and growth immediately following the initial COVID-19 trade shock. While large firms were not direct recipients of government fiscal support, they experienced fewer disruptions when located in counties where small businesses (SMEs) received government stimulus loans under the Paycheck Protection Program. These effects were largest in counties with greater share of SMEs and stronger input–output linkages between large firms and SMEs. Our results point to local spillovers between SMEs and large firms as being an important determinant of firm resiliency during crises.