Whether proprietary traders provide or take liquidity, and how their behavior evolves over the business cycle and across stocks, remains at the center of an ongoing debate. Using a unique dataset from the NYSE, we document that proprietary traders act as net liquidity providers, buying after price declines in a contrarian pattern. Proprietary trader liquidity provision is concentrated in large, liquid, low-volatility stocks and diminishes significantly when intermediary balance sheets are weak. Liquidity provision is stronger when price movements are plausibly not driven by information. Our findings highlight both the role and the limits of proprietary traders in supporting market liquidity across time and market segments.

The rise of passive investing raises the question of whether passive funds monitor management as effectively as active funds. Gormley and Kim (2026) argue that Heath et al. (2022)'s methodology for answering this question is biased and propose four changes. Three are econometrically invalid. Two share a flaw with Appel, Gormley, and Keim (2016, 2019): they condition on ex-post information about how firms respond to treatment—one selects the sample on post-treatment index assignments, the other controls for post-treatment market capitalization. The third imposes an unsupported symmetry restriction. The fourth, already proposed by Wei and Young (2025), does not change the conclusions. Even after adopting all four, their governance estimates largely agree with Heath et al. (2022) and contradict Appel et al. (2016). Furthermore, their headline claim that passive ownership has not displaced active ownership is contradicted by third-party data showing near one-for-one displacement; thus, either their specification is biased, or it cannot identify the governance effects of passive ownership.

Using detailed micro-level administrative data from Norway and a large dividend tax increase, we examine the direct effect of dividend taxation on shareholders' consumption and saving and firms' investment. We find that higher dividend taxes lead to a persistent decline in consumption of owners of private firms and listed firms. We also show that owners partially offset the consumption decline by reducing private savings. Firms increase retained earnings but do not expand productive investment. Instead, they accumulate financial assets, suggesting a reallocation of savings to the corporate level. Our findings highlight the consequences of dividend taxation on consumption and capital allocation.

The large increase in common institutional ownership has raised legitimate antitrust concerns. While the exact channel by which common institutional shareholders might influence firm policy remains unclear, a prominent potential mechanism is corporate board representation. Using hand-collected data on shareholders' board representation, we show that instances of institutional investors simultaneously holding board positions in rival companies are exceedingly rare and do not account for the positive correlation between common institutional ownership and firm-pair profitability. Our findings suggest that board representation by institutional investors is unlikely to represent an empirically potent channel of influence on corporate policy.

We document an increase in market power for politically active firms during times of heightened policy uncertainty, when their information and influence advantage is greater. The effect is long-lasting and stronger for large politically active firms. We show that relatively large investments during high uncertainty periods serve as a potential mechanism for gains in market power. Industries populated with politically active firms experience lower business dynamism and import penetration, consistent with active firms leveraging investment timing to restrict competition. Results suggest that political activism is a likely contributing factor to the dominance of large firms over the last two decades.

This paper explores whether investors’ personal experience with climate change affects their voting behavior on climate change–related proposals. We find that fund managers exposed to abnormally hot temperatures are significantly more likely to support climate proposals. We further show that the effect is persistent. We observe significant heterogeneity in the effect of hot temperatures, depending on firm-level climate risk, the quality of the proposals, fund investment strategy, and prior awareness of climate change. Fund managers’ personal experience with climate change matters for the outcome of climate proposals as it affects the aggregate support they receive. Fund managers exposed to abnormally hot temperatures are also more likely to divest from stocks with greater exposure to climate change. This paper was accepted by Camelia Kuhnen, finance. Funding: R. Michaely acknowledges financial support from the National Nature Science Foundation of China [Project 72332002]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2022.03733 .

This study investigates the links between climate-related disclosure and investor sup port for directors in board elections. Firms not disclosing carbon emissions receive significantly more votes against their directors, a trend robust to various controls, including governance proxies, ESG incidents, environmental activism, climate commit ments, and proxy advisors’ recommendations. Firms initiating climate disclosure face fewer negative votes. Sustainable funds and universal investors are key drivers of this trend. Moreover, investors supporting shareholder-sponsored climate disclosure pro posals are more likely to vote against directors in firms lacking carbon disclosure. In the years following a significant fraction of votes against directors, companies are more likely to respond to the CDP questionnaire. Our results suggest that investors vote against directors as a mean to change boards’ approach towards climate change issues and climate disclosure in particular.

The structure of a special purpose acquisition company (SPAC) provides a special role for its sponsors. We show that while few characteristics can explain SPACs' returns, sponsors' connections and network, measured by their centrality, explain a large portion of return variation in the cross-section. A one standard deviation increase in sponsors' network centrality leads to a 3.7% higher merger and acquisition success probability and a 2.1% higher post-merger monthly abnormal return. We attribute this outperformance of firms with high network centrality to superior deal sourcing and fundraising abilities. Overall, we show that the network connections of the SPAC management teams can add value to SPACs' deals despite the general underperformance of SPACs after business combinations.

We find that 43% of firms that make payouts also raise capital during the same year, resulting in 31% of aggregate payouts being externally financed, primarily with debt. Most financed payouts cannot be explained by payout smoothing in response to volatile earnings or investment (rather, they are the result of firms persistently setting payouts above free cash flow). In fact, 25% of aggregate payouts could not have been paid without the firms simultaneously raising capital. Profitable firms with moderate growth use debt-financed payouts to jointly manage their leverage and cash, thus highlighting the close relationship between payout and capital structure decisions.

Environmental and social (ES) funds in non-ES families must balance incorporating the stakeholders' interests they advertise and maximizing shareholder value favored by their families. We find that these funds support ES proposals that are far from the majority threshold, while opposing them when their vote is more likely to be pivotal. This strategy results in a high average support for ES proposals, seemingly consistent with their fiduciary responsibilities, while opposing contested ES proposals. This greenwashing strategy is driven by ES funds in non-ES families who cater to institutional investors. Indeed, these funds experience lower inflows when providing low average support for ES proposals. This strategic voting is not exhibited in governance proposals, nor by ES funds in ES families or by non-ES funds in non-ES families, reinforcing the notion of strategic voting to accommodate family preferences while appearing to meet the fiduciary responsibilities of the funds.

We examine how value-added tax (VAT) impacts corporate decisions using data from 54 countries. Contrary to standard economic theory, firms increase cash payouts after VAT hikes while reducing investment. Our theoretical model with overlapping generations explains this behavior: short-term oriented owners prioritize current consumption over future generations. Using an exogenous VAT shock, we find that firms with domestic owners (subject to VAT) raised payouts, while those with foreign owners (not subject to VAT) did not. Cross-country evidence confirms stronger payout effects in short-term oriented cultures. Our results show how consumption taxes can distort capital ccumulation and hinder long-term growth.

This study investigates whether investors can reap economic benefits from analyzing differences in analyst quality. Although high-quality analysts’ average forecast is more accurate than the consensus forecast for firms with a large analyst following, the benefits of using high-quality analysts’ average forecasts are not economically significant. In contrast, the value of analyst quality differentiation exists in the second moment of forecasts. High-quality analysts’ forecast dispersion gives investors an advantage in dealing with uncertainty by predicting return volatility and providing opportunities for economically significant returns using option straddle and post-earnings announcement drift investment strategies. This paper was accepted by Suraj Srinivassan, accounting. Funding: A. Rubin and A. Vedrashko thank the financial support of the Social Sciences and Humanities Research Council of Canada (SSHRC). Supplemental Material: The data are available at https://doi.org/10.1287/mnsc.2023.4699 .

Washington policy research analysts (WAs) monitor political developments and produce research to interpret the impact of these events. We find institutional clients channel more commissions to brokerages providing policy research and commission-allocating institutional clients generate superior returns on their politically sensitive trades. We find that WA policy research reports are associated with significant price and volume reactions. Finally, we find sell-side analysts with access to WA issue superior stock recommendations on politically sensitive stocks. These effects are particularly acute during periods of high political uncertainty. Overall, we uncover a unique and an important conduit through which political information filters into asset prices. This paper was accepted by David Sraer, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4919 .

Using micro-level data on consumer shopping behavior, this paper investigates end-consumers’ attitudes toward firms’ ESG behavior, and as importantly, the ability of consumers to affect firms’ policy concerning sustainability issues. We find that consumers care about firms’ approach toward ESG, and consumers’ behavior can impact firms’ attitudes. Using ESG incidents as a proxy, we find that the reduction in store visits is more pronounced for ESG-conscious consumers, such as those living in democratic counties, and counties with a higher fraction of educated and younger residents. Online shopping interest data yields similar results. Using abnormally hot temperature as a shock to residents’ awareness of sustainability issues, we show the effect is plausibly causal.

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.

In our paper “Cybersecurity Risk” (Florackis, C., Louca, C., Michaely, R. and M. Weber. 2023. The Review of Financial Studies, Volume 36, Issue 1, Pages 351-407; https://doi.org/10.1093/rfs/hhac024) we construct a novel firm-level measure of cybersecurity risk using textual analysis of cybersecurity-risk disclosures in “Item 1A. Risk Factors” section of 10-K statements. The measure successfully identifies firms extensively discussing cybersecurity risk in their 10-K, displays intuitive relations with quantitative measures of cybersecurity risk disclosure language, exhibits a positive trend over time, is more prevalent among industries relying more on information technology systems, correlates with several characteristics linked to firms hit by cyberattacks and, importantly, predicts future cyberattacks. After providing evidence that our measure captures exposure to cybersecurity risk, we show that cybersecurity risk is priced in the cross-section of stock returns. Here, we publicly release our measure and hope that this allow for more subtle investigations and spur new research in this area.

Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds. SRI funds select firms with lower pollution, more board diversity, higher employee satisfaction, and better workplace safety. Yet, both in the cross-section and using an exogenous shock to SRI capital, we find that SRI funds do not significantly change firm behavior. Moreover, we find little evidence that they try to impact firm behavior using shareholder proposals. Our results suggest that SRI funds are not greenwashing, but they are impact washing; they invest in a portfolio of firms with better environmental and social conduct but do not follow through on their promise of impact.