This paper examines the relation between corporate lobbying and fraud detection. Using data on corporate lobbying expenses between 1998 and 2004, and a sample of large frauds detected during the same period, we find that firms’ lobbying activities make a significant difference in fraud detection: Compared to nonlobbying firms, on average, firms that lobby have a significantly lower hazard rate of being detected for fraud, evade fraud detection 117 days longer, and are 38% less likely to be detected by regulators. In addition, fraudulent firms on average spend 77% more on lobbying than nonfraudulent firms, and they spend 29% more on lobbying during their fraudulent periods than during nonfraudulent periods. The delay in detection leads to a greater distortion in resource allocation during fraudulent periods. It also allows managers to sell more of their shares.

This paper examines how culture affects information asymmetry in financial markets. We extract firms traded in the United States but headquartered in regions sharing Chinese culture (“Chinese firms”), and we manually identify a group of U.S. analysts of Chinese ethnic origin (“Chinese analysts”). We find that Chinese analysts issue more accurate forecasts on Chinese firms than non-Chinese analysts. The effect is stronger among firms with less transparent information environments. Further evidence suggests that cultural proximity can go beyond language commonality and analysts’ pre-existing channels for information. Market reaction is stronger when Chinese analysts issue favorable forecast revisions or upgrades about Chinese firms.

This paper investigates how a firm’s capital structure choice affects the informational efficiency of its security prices in the secondary markets. We identify two new determinants of a firm’s capital structure policy: the liquidity (adverse selection) premium due to investors’ anticipated losses to informed trading, and operating efficiency improvement due to information revelation from the firm’s security prices. We show that the capital structure decision affects traders’ incentives to acquire information and subsequently, the distribution of informed traders across debt and equity claims. When information is less imperative for improving its operating decisions, a firm issues zero or negative debt (i.e., holding excess cash reserves) in order to reduce socially wasteful information acquisition and the liquidity premium associated with it. When information is crucial for a firm’s operating decisions, the optimal debt level is one that achieves maximum information revelation at the lowest possible liquidity cost. Our model can explain why many firms consistently hold no debt. It also provides new implications for financial system design and for the relationship among leverage, liquidity premium, profitability, and the cost of information acquisition.

We explore the link between open-market share repurchases (OMRs) and asymmetric information based on financial reporting quality and find that opaque firms experience positive abnormal returns of twice the magnitude of those of transparent firms. These significant differences remain after controlling for governance, earnings management, and firm characteristics. We document significantly positive long-run postannouncement returns for opaque firms, but not for transparent firms. We find that takeover activity and premiums rise with repurchase activity by opaque firms, which may explain some of the wealth effects. Our results suggest that asymmetric information plays an important role in the wealth effects around OMRs.

After exogenous demand shocks caused by natural disasters, FinTech lenders are more responsive to increased demand for reconstruction mortgages than traditional banks and non-FinTech shadow banks. Both FinTech and traditional banks increase credit supply, but FinTech supply is more elastic without increases in risk-adjusted interest rates or delinquency rates. Comparing lending supply channels, banks respond to regulatory incentives to lend to damaged areas, whereas FinTech lenders supply more credit when traditional banks rely more on balance sheet financing and physical branch networks. Compared to traditional banks, FinTech lenders increase supply elasticity more aggressively in response to local competitive pressure.

We examine whether free-speech protections influence corporate environmental performance. Using the staggered enactment of U.S. anti-SLAPP statutes in a stacked difference-in-differences design from 1990 to 2019, we find that these laws significantly reduce firms’ toxic emissions without curbing economic activity. Anti-SLAPP enactments also promote environmental investment through green innovation, abatement spending, and waste reduction management, and strengthen governance via improved sustainability oversight, ESG-linked executive pay, employee training, and supply chain management. The effects are stronger when stakeholder monitoring is stronger and when managerial incentives embed sustainability goals. Overall, free-speech protections generate powerful environmental benefits.

We investigate performance effects for China's listed firms when there is a change in the controlling shareholder. These changes include ownership transfers from one state entity to another state entity and from a state entity to a private entity. We find positive performance effects when control is passed to a private entity. In contrast, when the transfer is made to another branch of the state, there is little change in performance. The stock market responds positively to a change in control, with the largest effect observed for private transfers. Our results suggest the Chinese government should continue to sell down its share ownership in listed firms as the transfer of control to private owners enhances corporate profitability and efficiency. Moreover, to help ownership reform, China should encourage an active market for corporate control.

We show that political contributions are associated with reduced civil and criminal sanctions for fraudulent executives. These managers benefit more from contributions if their firm also gained from the fraud, if they occupy top positions in firms with weak boards, or if they contribute to powerful politicians. Political contributions reduce budgetary resources for government enforcers and lengthen the Securities and Exchange Commission’s case time-to-resolution. They also facilitate penalty transfer from fraudulent managers to the firm, resulting in their entrenchment and long-term destruction of shareholder value. Our findings highlight an agency cost of political contributions and a mechanism undermining the disciplining effect of regulations.

We construct a mortality table for U.S. public companies during 1985–2006. We find that the age-specific mortality rates of firms initially increase, peaking at age three, and then decrease with age, implying that the first 3 years of public life are critical. Financial intermediaries involved around the “public birth” of a firm (e.g., venture capitalists (VCs) and high-quality underwriters) are associated with lower firm mortality rates, sometimes for up to 7 years after the initial public offering (IPO). VCs reduce mortality rates more through natal financial care than through selection, whereas high-quality underwriters affect firm mortality more through selection.

We study how professional fund managers’ growth expectations affect their equity investments and the consequent effects on prices. Using novel data on China’s mutual fund managers’ growth expectations, we show that pessimistic managers decrease equity allocations and shift away from more cyclical stocks. We identify a statistically significant link between managers’ growth expectations and returns on the stocks that they hold and trade. We also find that an earnings-based measure of price informativeness is increasing in forecasting managers’ investment and forecast-consistent trading, implying that active fund managers in China help move stock prices closer to underlying fundamentals.