We document significant increases in the suspension of ongoing drug projects following the passage of the Food and Drug Administration Amendments Act of 2007 (FDAAA), which mandates that pharmaceutical companies publicly disclose detailed clinical study results. Our results suggest a causal interpretation through difference-in-differences analyses that exploit variations in pre-FDAAA information environments. We also show evidence that fewer new projects are initiated after the FDAAA. Drug developers’ learning from peer failures is the primary mechanism, further amplified by financial constraints. We also examine the consequences of enhanced information disclosure, including changes in firm investment efficiency, drug quality, and disease morbidity.

Using patent lawsuit data from 2000 to 2014, we find that a stock portfolio consisting of alleged patent infringers (i.e., firms sued for patent infringement) provides significantly higher stock returns (between 0.48% to 0.61% per month) in the following year compared to other firms with similar characteristics. In contrast, plaintiff firms’ subsequent stock returns are not significantly different from comparable firms’ returns. We examine several possible explanations for this pattern, including pessimism-driven mispricing, exposure to unknown systematic risk, cash holdings, and financial constraints. Our evidence supports the explanation based on pessimism-driven mispricing.

In this paper, we empirically measure the impact of natural disasters on firm-level operating performance and examine if such impact can be mitigated by technology diversification. Using major natural disasters specified by Barrot and Sauvagnat (2015) and factory location data from the toxic release inventory (TRI) database, we first find that firms with factories located in states affected by natural disasters are much less profitable. Second, we find that firms with diversified technologies are significantly less subject to the impact of natural disasters, suggesting that technology diversity enhances firms’ sustainability.

Firms become more efficient at innovation activities when they face pressure to meet earnings per share (EPS) targets using stock repurchases. Using a regression-discontinuity framework, we find that incentives to engage in “EPS-motivated buybacks” are followed by more citations and higher values for firms’ new patents. We trace these effects to improved allocation of R&D resources and a greater focus on novel innovation. The positive effects are concentrated among ex ante “innovation-efficient” firms that achieve better patenting outcomes after reorganizing (but not cutting) their R&D investments. Our findings illustrate that short-term earnings pressure can act through a free cash flow channel that motivates more efficient spending.