In many advertising-intensive industries one observes market share persistence, i.e., firms maintaining lead market shares over long periods of time. I hypothesize that firms that have the largest stock of well-established brands, a stock that I term brand capital, are most likely to introduce new products in response to new market information about consumer preferences. Firms with less brand capital delay their introductions until the uncertainty concerning the market size is reduced. I present empirical support in a study of new product introductions in the U.S. beverage industry.

Bradshaw, Richardson, and Sloan (BRS) find a negative relation between their comprehensive measure of corporate financing activities and future stock returns and future profitability. Noticing that accounting accruals are increases in net operating assets on a company's balance sheet, we question whether it is possible to distinguish between the ‘external financing anomaly’ documented by BRS and the ‘accrual anomaly’ first documented by Sloan [1996. Do stock prices fully reflect information in accruals and cash flows about future earnings? The Accounting Review 71, 289–315]. We show that once controlling for total accruals, the relation between external financing activities and future stock returns is attenuated and not statistically significant. These findings are consistent with Richardson and Sloan [2003. External financing, capital investment and future stock returns. Working Paper, University of Pennsylvania and University of Michigan].

We study whether and how publicizing internal information affects the value of financial markets to the real economy. By publicizing corporate filings, the Securities and Exchange Commission’s EDGAR (Electronic Data Gathering, Analysis, and Retrieval) web platform reduces the cost of acquiring internal information for outsiders and so makes it relatively less attractive to gather external information. We find that the staggered introduction of EDGAR reduced the sensitivity of firm investment to prices, consistent with prices being less informative to managers due to the crowding out of external information gathering. This crowding out effect is stronger when outsiders’ incentives for gathering information are stronger and for firms that rely more on external information. Our findings suggest that policies designed to “level the playing field” by publicizing internal information can have significant unintended consequences by reducing the informativeness of prices for real decisions.

We examine the joint response to political uncertainty along two margins: changes in real activity and voluntary disclosure. We focus on within‐firm variation in exposure to ex ante competitive U.S. gubernatorial elections using data on preelection poll margins and firms’ state exposures. Despite real activity falling in the years leading up to a close election, we find that voluntary disclosure increases both in frequency and content, including mentions of risk in filings that reference states holding elections. Our tests use a decomposition of 8‐K filings into real activity and voluntary disclosure to address the endogenous complementarity between these two responses. These results hold when using alternative ex ante measures of political uncertainty based on term‐limited incumbents, historically competitive offices, or state legislature gridlock. Both effects of political uncertainty are stronger for firms in highly regulated industries and weaker for those least exposed to the local market, linking the real activity and disclosure responses to uncertainty.

Mortgage overage pricing is little understood by consumers and has received little academic scrutiny. We consider the impact of the market power of individual loan officers on overages paid by borrowers, particularly minorities. We include numerous borrower and lender characteristics unavailable previously. We find that minorities who purchase homes pay larger overages than whites, but our evidence suggests that this traces to differences in the pools of borrowers rather than to racial discrimination. We conclude that a more effective way to eliminate racial differences in overages is to increase minorities’ ability to bargain rather than to enact additional anti-discrimination laws.

We examine an econometric model of counts of worker absences due to illness in a sluggishly adjusting hedonic labor market. We compare three estimators that parameterize the conditional variance—least squares, Poisson, and negative binomial pseudo maximum likelihood—to generalized least squares (GLS) using nonparametric estimates of the conditional variance. Our data support the hedonic absenteeism model. Semiparametric GLS coefficients are similar in sign, magnitude, and statistical significance to coefficients where the mean and variance of the errors are specified ex ante. In our data, coefficient estimates are sensitive to a regressor list but not to the econometric technique, including correcting for possible heteroskedasticity of unknown form.

We study the stock market's reaction to the unexpected death of a top executive or board chair for insight into grey director incentives. Whereas there is little debate as to the motives of inside and strict outside directors, the allegiance of grey directors is less certain. We find that grey directors' dominant incentive depends on whether the firm has a succession plan or not. In firms with a succession plan, grey directors' primary motive is to maintain their business ties to the firm. Absent a succession plan, the stock market expects grey directors to use their influence to hire a higher quality replacement, particularly when these directors hold a large equity stake. Our findings suggest that grey directors place their interests as shareholders first when a replacement decision is likely to weaken their business ties with the firm. Grey directors appear to influence the choice of a higher quality replacement whether that person is an insider or outsider.

We provide evidence that some managers use a multi‐period, coordinated strategy involving inflated current‐period discretionary accruals and optimistic forecasts of future earnings to delay the revelation of bad news. Inflating discretionary accruals increases investor expectations of future performance, and issuing optimistic earnings forecasts of future earnings supports the inflated accruals and extends the horizon for managers to benefit. This strategy is more pronounced for firms that engage in earnings management outside of GAAP, suggesting intentional behavior. Our evidence indicates that managers use this coordinated strategy when firms experience significant bad news and cannot delay revealing all of the bad news through accrual management. We also find that managers use this coordinated strategy when focusing on short‐term performance due to career concerns (i.e., dismissal) or retirement or when they have shorter stock option vesting schedules, which motivates them to inflate investor expectations for shorter‐term personal benefits. Furthermore, managers using this strategy do not hold deep in the money exercisable stock options, which is consistent with managers' private assessment of a higher (lower) likelihood of releasing bad (good) news in the future.

We use a threshold-based design to study ex post discretion in lenders’ contractual enforcement of covenant violations. At preset thresholds, lenders enforce contractual breaches only infrequently, but this enforcement is associated with material consequences (e.g., fees and renegotiations). Enforcement varies significantly over time and peaks when credit conditions are tightest, indicating that enforcement is procyclical. Costly coordination reduces enforcement: Syndicates with ex ante restrictive voting requirements enforce at lower rates. Consistent with theories of lender competition and implicit contracting, enforcement rates are lower for borrowers with access to alternative sources of financing and well-reputed lead arrangers.