Abstract We assess the effect of the built environment on low-cost helping behavior toward neighbors. The setting is households in Shanghai, China that, due to rapid development, were involuntarily, i.e. as good as randomly, relocated to different building structures. Using a natural field experiment of misdelivered mail, we test the causal effect of spatial proximity and the built environment on helping behavior. Living one floor apart reduces the willingness to help a neighbor by 16 percentage points, similar to adding one more apartment per floor. Small spatial barriers can profoundly shape social interactions, and helping behavior, in urban settings.

Firm innovation drives both firm competitiveness and economic growth. Constructing a novel firm-patent panel database from 29 countries, I find that transparency directly boosts innovative effort by reducing managerial career concerns. This effect operates through transparency's implicit contracting role: it reduces the sensitivity of management turnover to poor innovative output. Transparency also increases innovative efficiency through its governance role in facilitating efficient allocation of R&D capital. Nonetheless, the benefit of transparency is fully offset in environments with greater proprietary cost. These findings illuminate the unique roles and mechanisms of transparency in promoting innovation incentives and outcomes.

This paper presents evidence that firms choose conservative financial policies to mitigate firms’ exposure to short selling threat. I exploit changes in the regulation of short selling constraints as an exogenous shock to the short selling threat borne by firms. I find that higher short selling threat leads to decreased corporate leverage, particularly for firms facing greater expected short selling threats, for firms with higher financial distress risks, and for firms whose managers are more risk averse. The findings suggest that short selling threats have a significant impact on corporate financing decisions through changes in the costs of financial distress.

[We study the effect of the Global Analyst Research Settlement and related regulations on sell-side research. These regulations attempted to mitigate the interdependence between research and investment banking. We document that following the regulations many brokerage houses have migrated from the traditional five-tier rating system to a three-tier system. Optimistic recommendations have become less frequent and more informative, whereas neutral and pessimistic recommendations have become more frequent and less informative. Importantly, the overall informativeness of recommendations has declined. The likelihood of issuing optimistic recommendations no longer depends on affiliation with the covered firm, although affiliated analysts are still reluctant to issue pessimistic recommendations.]

ABSTRACT We examine the cross‐sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi‐quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By examining the variation in excess stock returns over the fiscal year, we find that the marginal value of cash declines with larger cash holdings, higher leverage, better access to capital markets, and as firms choose greater cash distribution via dividends rather than repurchases.

ABSTRACT Analysts are recognized for their expertise in predicting industry growth, yet little is known about whether CEOs learn from analysts’ insights to guide investment decisions. Focusing on conglomerates where CEOs are underinformed about segment growth opportunities, we find that CEOs learn industry insights from analysts to adjust internal capital allocation. The extent of learning increases when analysts have closer proximity to CEOs or expertise in segments where CEOs face larger internal knowledge gaps. CEOs likely learn from analysts through private communications, as the insights learned are not yet publicly available, difficult to replace with other sources, and persistently impactful for firms. CEOs also exploit conference calls as another way to learn from analysts. As a result, learning analysts’ insights enhances firm value. We employ brokerage mergers/closures as a quasi-experiment to address endogeneity concerns. Overall, our study provides novel evidence on a learning channel through which analysts add value to firms. JEL Classifications: D80; D83; G10; G31.

The liquidity shocks of ’08–’09 revealed that measures of liquidity risk being used in most financial institutions turned out to be woefully inadequate. The construction of long-short portfolios based on liquidity proxies introduces errors such as extraneous risk factors and hedging error. We develop a new measure for liquidity risk using exchange-traded funds (ETFs) that attempts to minimize this error. We form a theoretically-supported measure that is long ETFs and short the underlying components of that ETF, i.e., long and short a similar set of underlying securities with the same weights. Pricing discrepancies between the long and short positions are driven by liquidity differences between the ETF and its underlying components. Constructing liquidity risk factors in a number of markets, we undertake several tests to validate our new liquidity metric. The results show that our illiquidity measure is strongly related to other measures of illiquidity, explains bond index returns, and reveals a systematic illiquidity component across fixed-income markets.

In an attempt to explain the weak evidence of priced exchange rate risk, we hypothesize that in addition to currency derivative usages, earnings management serves as another factor contributing to a reduction in exchange rate exposure. Our evidence reveals that earnings management activities, particularly those undertaken for the purpose of income smoothing, significantly reduce firm-specific exchange rate exposure, and that such role is particularly important if appropriate currency derivative instruments are limited. These results complement prior attempts to explain the puzzle of unpriced exchange rate risk. The investigation also highlights the importance of recognizing different managerial purposes behind discretionary accruals.

This study examines whether and how financial statement comparability facilitates the dissemination of innovative knowledge between firms and stimulates the creation of new knowledge. Using cross-patent citations to track interfirm knowledge transfers, we find that comparability increases firms' incentives to learn from peers and create new patents that cite their peers' existing patents. The investigation into the mechanism reveals that comparability improves firms’ ability to estimate the monetary value of peer knowledge and predict their own financial benefits from knowledge acquisition. The impact of comparability is more pronounced when peer knowledge is more publicly accessible or of higher monetary value. Consequently, the acquired knowledge fosters follow-on innovation, enabling firms to produce more patents with greater economic significance. Evidence from two quasi-natural experiments suggests that our findings are plausibly causal. Overall, our study highlights the important role of accounting comparability in facilitating knowledge dissemination.