Abstract While firms manage their capital structure to target credit ratings, how targeting impacts capital structure decisions is not well understood. We hypothesize that firms engage in ratings cushioning by preserving a leverage buffer against rating downgrades. We show that ratings cushions are sizable in magnitude. Following plausibly exogenous increases in cushion, firms increase leverage to consume their newfound cushion particularly when they have attractive investment opportunities and are less exposed to earnings shocks. These findings suggest that ratings cushioning restrains firms from pursuing otherwise more aggressive capital structure and investment choices. (JEL G31, G32)

Abstract Why do firms offer nonwage compensation instead of the equivalent amount in financial compensation? We argue that firms use nonwage benefits, specifically female-friendly benefits, such as maternity leave, to increase gender diversity by efficiently attracting women. Using Glassdoor data, we show that firms offer higher-quality maternity leave benefits in labor markets in which female talent is relatively scarce. This result also holds more generally when examining all female-friendly nonwage benefits and is not present when looking at gender-neutral benefits. Moreover, using staggered adoption of state laws, we show that voluntary provision of these benefits can increase firm value. Wei Jiang. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online