Abstract Does distrust in politically affiliated media induce a bias in investor beliefs? We study the acquisition of Dow Jones & Co. by News Corporation in 2007 as a shock to the political affiliation of Dow Jones outlets. Following the acquisition, the prices of Republican- (Democrat-) aligned stocks become less sensitive to favorable (unfavorable) Dow Jones Newswires (DJNW) sentiment, consistent with the market attaching less credibility to a politically affiliated source. There is, however, no evidence of change in DJNW sentiment, coverage, or language about Republican/Democrat stocks, suggesting a loss of stock price informativeness. Consistent with this view, a portfolio exploiting the attenuated reaction to DJNW news earns abnormal returns following 2007.

Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder "distraction" measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders' portfolios. Firms with "distracted" shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints.

Abstract We study what determines catering through the payout policy and how catering affects firm value. We create a catering index, measuring how the firm caters to its investors’ payout preferences. The index is based on the revealed payout preferences of mutual funds holding the firm’s stocks. Catering is constrained by market segmentation and dispersion in investor payout preferences. It is also associated with positive value effects: Firms increasing their catering index also experience an increase in value. Furthermore, greater catering ability is associated with a more positive market reaction to corporate announcements of equity issues and dividend payouts.

Abstract We study human capital synergies in asset management mergers that stem from the improved ability to assign fund managers to more specialized tasks in larger firms. More specialized task assignment allows rotated managers to focus on their investment expertise and leads to incremental $54 million of value added per deal per year on average. The effects are concentrated in mergers that lead to a large increase in firm size and in funds whose management appears less specialized prior to the merger. Our results provide direct evidence on the role of firms in the assignment of tasks to fund managers. (JEL G23, J24, G34)

Using a sample of over 9,000 buyback announcements from 31 non-U.S. countries, we find support for the results of studies based on U.S. data: On average, share repurchases are associated with significant positive short- and long-term excess returns. However, excess returns depend on the likelihood of undervaluation and the efficiency and liquidity of equity markets. In contrast to findings in U.S. markets, we do not find that these long-term excess returns are simply a compensation for takeover risk or have become less significant in recent years.

Using novel data on investors' bond portfolios, we study the contagion of the crisis from securitized bonds to corporate bonds. When securitized bonds became “toxic” in August 2007, mutual funds retained the now illiquid securitized bonds and sold corporate bonds. Funds with negative flows or high liquidity needs liquidated more than others. Yield spreads increased more for corporate bonds whose pre-crisis bondholders were more heavily exposed to securitized bonds, compared to same-issuer bonds held by unexposed investors. The findings suggest that liquidity-constrained investors with exposure to securitized bonds played a role in propagating the crisis from securitized to corporate bonds.

Abstract We exploit the impact of hurricane Katrina on insurance companies to study the relationship between bondholder concentration and credit risk. Redemption-driven sales by property and casualty (re)insurance companies exposed to hurricane Katrina are associated with a large drop in bondholder concentration faced by corporate bond issuers. Exploiting this shock to capture exogenous variation in bondholder concentration, we find that greater bondholder concentration is associated with higher bond yield spreads, as well as with firm characteristics associated with credit risk.

ABSTRACT We study plaintiff law firms in corporate litigation, focusing on “star” firms that dominate settlement outcomes. Stars are associated with larger settlements; however, much of this effect is predicted by the defendant's litigation insurance coverage, suggesting assortative matching of stars with lawsuits that have ex ante larger expected payoffs. Moreover, stars charge higher fees for a given settlement size. Additional tests suggest that visibility and information asymmetry vis‐à‐vis less sophisticated plaintiffs help sustain the stars’ market share. These findings advance our understanding of corporate litigation and the agency relationship between plaintiff law firms and their clients.

Do credit contractions trigger social unrest? To answer this question, we turn to a natural experiment from 1930s China, where the 1933 U.S. Silver Purchase program acts as a shock to bank lending. We assemble a hand-collected data set of loan contracts between banks and firms, labor unrest episodes, and underground Communist Party penetration. The Silver Purchase shock results in a severe credit contraction, and firms borrowing from banks with a larger exposure to it experience increased labor unrest and Communist Party penetration among their workers. These findings contribute to understanding the socio-political consequences of credit shocks.

Investor attention matters for corporate actions. Our new identification approach constructs firm-level shareholder “distraction” measures, by exploiting exogenous shocks to unrelated parts of institutional shareholders’ portfolios. Firms with “distracted” shareholders are more likely to announce diversifying, value-destroying, acquisitions. They are also more likely to grant opportunistically timed CEO stock options, more likely to cut dividends, and less likely to fire their CEO for bad performance. Firms with distracted shareholders have abnormally low stock returns. Combined, these patterns are consistent with a model in which the unrelated shock shifts investor attention, leading to a temporary loosening of monitoring constraints. Received February 7, 2014; editorial decision July 6, 2016 by Editor David Hirshleifer.