Information asymmetry induced by legislative activity has been largely overlooked in the literature, despite the opacity of the legislative process and the legality of information sharing by politicians with third parties. Using aggregate equity trading by U.S. senators, we develop a two-stage model of legislative information asymmetry that involves a direct effect followed by propagated trading of third parties. We find that firms in industries with high levels of senatorial trading face increased volatility, wider bid-ask spreads, and greater idiosyncratic risk. Because size is associated with a firm's ability to lobby, we discover that the risk of larger firms is less affected by this information asymmetry. While banning politicians' trading might address the ethical problems inherent in political insider trading, our results demonstrate that it will not address the legislative information asymmetry. Instead, the goal should be to address the issue of selective information sharing and its legality.

This study examines how labor unions influence the complexity of CEO compensation contracts. We find unionization rates positively correlate with complexity, especially in the performance-based components. This relationship reflects firms balancing the need to recruit talented CEOs with higher contingent pay against union preferences for less discretionary salary. We discover, however, that greater complexity results in higher future CEO incentive compensation, thus widening the gap between CEO and employee pay. Further, elevated complexity increases the likelihood of a work stoppage. Our results emphasize the challenges of introducing complexity into executive compensation design in unionized environments.

This study examines whether the frequently used, seemingly platitudinous, euphemistic language common in CEO departure announcements has real economic consequences. We analyze 1,330 forced exits at U.S. publicly listed firms between 2016 and 2025, where incentives to soften negative information are strongest and euphemistic framing appears in 27% of cases. Our Employment Outcomes Hypothesis predicts that such framing benefits departing CEOs by muting adverse reputational signals. Accordingly, euphemistically described forced departures are associated with an increase in the odds of reemployment within a year and a reduction in job search duration. Our Succession Outcomes Hypothesis predicts that euphemistic framing dampens negative inferences about the firm, facilitating faster and stronger successor matches. When no immediate successor is appointed, euphemistic narratives are associated with a shorter succession search, lower odds of early successor turnover, and a higher quality successor. These results survive endogeneity corrections and robustness tests. Our findings make several important contributions to the corporate finance and governance literatures. We discover that the career consequences of forced turnover depend not only on the event itself but also on its public framing. Further, we connect departure narratives to succession outcomes, thus linking exit framing to successor stability and quality. Finally, by modeling the determinants of euphemistic framing, we show that these disclosures are strategic. Corporate boards protect departing CEOs when reputational capital is at stake and refrain when the narrative lacks credibility. CEO exit narratives are not boilerplate but deliberate disclosure choices with real economic effects for executives, successors, and firms.

Government subsidies provide firms with external resources that can encourage expansion beyond their core operations. Using 123,362 U.S. firm-year observations from 1999–2021 and the text-based industry classifications of Hoberg and Phillips (2016), we examine whether subsidy recipients expand their product-market scope and whether this expansion improves firm outcomes. Subsidized firms significantly increase the number of product markets in which they operate, but this expansion is associated with lower profitability. We find no evidence that subsidy-induced scope expansion increases capital expenditure or research and development intensity. The findings suggest that subsidies encourage diversification without generating corresponding innovation gains.

The authors investigate the motivations behind corporate political contributions using a new survey methodology using AI-generated agents (“Digital Executives”) representing S&P 500 CEOs. Surveying 4,600 AI-generated agents, the authors find that executives primarily view political contributions as strategic investments that extract economic value and secure critical information to navigate policy landscapes. These motivations dominate rationales related to institutional legitimacy or agency considerations, particularly in the high political uncertainty environments perceived by the agents. The authors’ results provide direct evidence of the drivers of corporate political strategy under uncertainty, highlighting the critical roles of value capture and information acquisition.

Political power in political economy lacks standardized metrics. This study introduces a measurement method combining individual legislators' power with firms' political contributions. This corporate political power measure explains federal contracting success. Results show local politicians representing firms' operational areas provide greater contracting benefits than powerful national politicians. Federal representatives support local firms to boost constituent employment and re-election prospects. Additionally, firms strategically reallocate contributions toward more electable politicians when experiencing political power decline, demonstrating adaptive behavior in maintaining influence.

Based on the leadership responsibilities embedded in the legal duties of all directors, we construct a new model of director quality. Averaging across the quality of individual directors, we estimate the quality of the board itself and explore how it affects a firm's accounting practices. We find that higher-quality boards manage their earnings less, restate their financials less frequently, and hire higher-quality auditors. Additionally, these boards are more transparent, voluntarily disclose business risks, limit non-audit services, and are associated with higher levels of performance. We confirm causality using director death as an exogenous shock.

This study examines the nature of financial distress for firms within business groups distributed across twentyfive European countries from 2000 to 2018. We show that business group membership and a firm's importance within the group explain both the incidence and resolution of financial distress. We find that critical subsidiaries have a negligible chance of default and bankruptcy. Less critical firms, however, are more likely to default and liquidate. It suggests that the future resolution of financial distress could be decided during the group formation and the subsidiary's positioning. We also show the persistent effect of national legal regimes.

Using a natural experiment based on technical improvements to Google Trends data, we can more clearly separate less informed from more informed retail investors. We find that uninformed trading has a significant negative effect on liquidity, although the effect is most pronounced for smaller firms. This adverse effect of uninformed trading also increases the cost of capital for smaller firms. Our results help to explain the mixed evidence in the literature regarding the effect of uninformed trading on market liquidity.

Although price anchoring is a global phenomenon, we find that country cultures, trust levels, and information/legal transparency affect its use in determining target offer prices. Price anchoring is associated with cultures that deemphasize long-term orientation, uncertainty avoidance, and personal indulgence. Acquirers from countries with low levels of trust in people or the legal system are more likely to anchor their bids. Anchoring is more frequently observed in countries where information and legal transparency is poor. We find that the use of anchoring can result in reduced long-term performance by acquirers.

This study introduces a new measure of the political risk to which firms are subject. We find that the aggregate equity trading U.S. senators significantly predicts a firm’s future risk and return. This measure possesses industry-relevant information beyond what is contained in existing measures of political risk and uncertainty. We show that aggregated Senatorial trading conveys information about future industry performance more than individual equity transactions. Our findings are robust to alternate model specifications and are economically significant. Our results significantly extend the findings of previous studies on how political risk affects a firm’s performance.

In this study, we provide an analysis of federal contractor default. We examine both the predictability and the consequences of contractor default. We discover that a firm's political contributions, size, sales derived from government contracts, and primary industry concentration are positively related to default, while the average quality of firm contracts and liquidity are negatively related to default. Production of a product rather than service delivery, the number of modifications, and the requirement of a subcontractor are positively related to contract default. Department of Defense contracts and the use of commercial item procedures are negatively related to default. Defaulting firms tend to receive smaller contracts after default. To mitigate possible punishment, defaulting firms increase their political contributions, especially to congressional candidates.

We find that the cultural distance between the CEO and a firm’s directors increases the sensitivity of CEO turnover and compensation to performance while enhancing shareholder value. This effect is concentrated in the cultural distance between the CEO and independent directors. More culturally distant CEOs adopt less risky financial and operating policies. To establish causality, we use the sudden exit of directors as a source of exogenous change in cultural distance. Overall, our results suggest that cultural distance increases information collection costs. This causes the board to monitor with increased rigor and to rely on “hard” information to assess CEO performance.

We examine the persistence of corporate corruption for a sample of privately-held firms from 12 Central and Eastern European countries from 2001 to 2015. Using publicly available information and stochastic frontier analysis, we create a proxy for corporate corruption based on a firm?s internal inefficiency. We find that corruption enhances a firm?s profitability. A channel analysis further reveals that inflating staff costs is the most common approach by which firms divert funds to finance corruption. In spite of corruption?s negative effects on a country?s economy, we conclude that it persists because of its ability to improve corporate profitability. We refer to this effect as the Corporate Advantage Hypothesis.

We examine S&P 500 firms over 1999–2014 that characterize their annual performance with extreme positive language. Only 18% of such firms increase shareholder value, while over 80% have either negative or insignificant abnormal returns. Our evidence suggests that firms often base their claims of extreme positive performance on high raw returns or strong relative accounting performance. In comparison to firms that generate positive abnormal returns without boasting, our sample firms tend to have superior accounting performance. We conclude that boasting about performance is rarely associated with value creation and is more consistent with an emphasis on accounting metrics.

This study examines the effect of Chief Financial Officers (CFOs) on mergers and acquisitions using a newly constructed CFO Influence Index. Because the perceived influence of CFOs is high in U.K. firms, we use that market for our analysis. We find that influential CFOs as measured by experience, stature, and pay are associated with more deal completions and the pursuit of smaller, domestic targets. High influence CFOs require less time to complete a deal and are able to identify higher quality targets for which they pay less. We also discover that firms with high influence CFOs enjoy greater long-term operating and financial performance post-merger. We conclude that influential CFOs are effective in creating shareholder value during M&A.

We examine the effect of investor attention on value loss due to securities class action lawsuits and litigation-based fraud discovery. We find that investor attention is positively associated with damage to corporate reputation and the magnitude of the value losses suffered by defendant firms. The reputational damage to defendant firms with higher investor attention is evident from poor operational performance and lower institutional ownership after filing. Investor attention is positively associated with the diffusion of information regarding fraud and it accelerates lawsuit filing. The effects of investor attention, however, are not subsumed by the severity of the fraud. Our results are robust to a battery of tests that addresses selection and endogeneity concerns.

This study examines the corporate operating performance surrounding CEO appointments from 2001-2013 to firms listed on the Warsaw Stock Exchange. We find that the decision to reappoint or to replace a CEO is preceded by a decline in corporate operating performance. We fail to find, however, improvements or stability in operating performance following either the replacement or reappointment of the incumbent CEO. The likelihood of CEO replacement is greater if the firm does not perform well in the period preceding the appointment. We conclude that there are inefficiencies or inadequacies in the corporate governance system of Polish publicly traded firms.

This study examines the responsiveness of trading volume to a firm’s earnings announcements We find that the volume and earnings surprise information generated at the first earnings announcement within an industry help to explain the stock returns of the non-announcing firm. Specifically, it explains their equity performance at the time of the first industry announcement and then again after their own earnings announcement. These results provide novel insights into how earnings announcements contain both firm specific as well as industry information that is value relevant for investors.

This study examines the effect of busy directors and boards on the value of a set of non-U.S. firms from 1999 to 2012. We find that busy directors and boards are a global phenomenon, but that national culture helps to explain the cross-sectional variation in director and board busyness. Firms with busy boards exhibit lower market-to-book ratios and reduced profitability, but this effect is reversed for younger firms. We conclude that the advising ability of these networked directors is most useful for younger firms. A demographic analysis shows that multiple directorships are positively associated with firm performance and education, but negatively associated with female directors.