We examine how climate risk influences analyst forecast accuracy proxied by forecast error and dispersion. Using country-level climate risk estimated with time trends in droughts, we find that analyst forecasts are less accurate for firms in drought-prone countries. This effect of climate risk is stronger when climate risks are denoted in earnings forecasts, and when firms’ home countries have greater reliance on hydroelectric sources in electricity generation, more important agricultural and food industries, and active stances concerning climate change. Overall, our findings suggest noteworthy implications of climate risk on the financial markets via analyst forecast accuracy.

Before the IPO bubble burst, the first day return for IPOs backed by top VC firms was double that of non-top VC IPOs. Top VC IPOs were also twice as likely to receive all-star analyst coverage and suffered twice as large negative returns upon lockup expiration. We argue that this was not a coincidence. Underwriters benefited from underpricing vis-à-vis allocation strategies whereas VCs gain from information momentum which allows them to cash-out at higher prices at lockup expiration. All-stars are a scarce resource underwriters allocate to their best clients (top VCs) who bring them repeat business. Post-bubble, regulatory shocks restricted preferential IPO allocations and reduced the value of all-star coverage. Consequently, these relations disappeared indicating that regulatory changes likely had the desired effect.

In this study, we investigate whether and to what extent institutional shareholders' political values influence their investees' environmental disclosure and performance. Using employees' political donation data, we construct institutional investors' political ideology score, which higher (lower) value represents a more Republican- (Democratic)-leaning culture. We find that firms led by institutional shareholders with a more Republican-oriented political ideology are less likely to issue environmental reports. Such a negative effect is more pronounced for firms with institutional shareholders with long-term horizons, with high corporate Republican ideology scores, and without an environmental committee. We further find that institutional shareholders' Republican-oriented political values are negatively associated with their investee firms' environmental performance and green innovations. Overall, our results indicate that institutional shareholders' internal political polarization significantly influences corporate environmental disclosure policies.

Using a sample of 27 countries between 1990 and 2014, we find that banks charge higher interest rates and adjust other contractual features of their loans when lending to firms facing more stringent environmental regulations. Our evidence suggests that lenders’ concerns about the increase in environmental liabilities resulting from regulations is driving the results. Specifically, we show that firms facing such regulations have fewer participants in their loan syndicates, higher bankruptcy risk, and lower credit ratings, despite reducing their leverage. Overall, our results indicate that the observed higher loan spread is the result of environmentally sensitive lending practices by banks.

When do multinational corporations (MNCs) derive the most from internalizing the transfer of proprietary technological knowhow? We revisit this question, which lies at the core of theories on multinationality and performance, from the perspective of corporate strategy involving a mix of green versus nongreen innovation effort and foreign operations focusing on countries with high versus low environmental standards. We find that high exposure to foreign markets with more stringent environmental regulations stimulates MNCs' green patent applications. Predictably, the pursuit of green innovation is positively associated with firm value in the long run. This long-run advantage produces higher economic rents when MNCs' home countries rely on more clean energy for power generation, have a more developed economy and have a more effective government. We further show that this long-run value enhancement effect is more pronounced in Mining & Oil and energy sectors (i.e., more polluting) than sales and service sectors (i.e., less polluting). In addition, MNCs' environmental competitive advantage obtained through green innovation activities is coupled with exposure to MNCs' host countries with high long-term and femininity orientations. Overall, our study highlights that green technology development is a main source of value creation for multinationals.

We examine the relationship between political geography and corporate political strategy by considering lobbying expenditures. We find that firms increase their lobbying intensity when local politicians cannot provide a direct link to the governing elite, i.e. when firm location on the political map shifts to an area that is not closely aligned with the president. Our results indicate that firm lobbying is a means for exerting influence on political power and is primarily geared toward building valuable political capital in order to exploit short-term opportunities. Lobbying expenditures are a matter of expediency for politically active firms that tend to spend less on lobbying when there is an alignment of power and more when there is misalignment of power. We also find that more sophisticated, better informed institutional investors recognize and/or encourage corporate political strategies that involve adjusting lobbying efforts in response to changes in political geography.

This paper examines the effect of local religiosity on employee treatment, proxied by workplace safety incidents. Using the establishment-level data compiling on the incidents of work-related injuries, we find that employees of the establishments in more religious counties get less injured than those in less religious counties. We further find that a reduction in occupational accidents is more evident for establishments in counties dominated by one religious denomination, strengthening our argument on community solidarity and homophily stemming from religious networks. Firms whose establishments are located in high religiosity counties are less likely to violate workplace conduct and more likely to take workplace safety measures. Moreover, firms with more work-related injuries exhibit poorer firm performance. Overall, our findings suggest that local religiosity has a value implication through human capital protection.

Abstract This study examines how antitrust law adoptions affect horizontal merger and acquisition outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ 5-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers’ announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement. The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.

This paper studies the drivers behind the monitoring effectiveness of institutional investors in curbing earnings management in an international setting. We identify three distinct drivers and propose two competing hypotheses: the hometown advantage hypothesis predicts that because of proximity to monitoring information, domestic institutions have a comparative advantage over foreign institutions in deterring earnings management, whereas the global investor hypothesis predicts that foreign institutions have a comparative advantage because of their proclivity toward activism and ability to deploy superior monitoring technologies. Consistent with the hometown advantage hypothesis, in aggregate, domestic, but not foreign, institutional ownership is associated with less earnings management; the monitoring effectiveness of foreign institutions improves as they gain proximity to monitoring information. Consistent with the global investor hypothesis, the monitoring effectiveness of foreign institutions improves in environments of greater agency conflicts or weaker governance controls or when the gap in monitoring technology between foreign and domestic institutions widens.

This paper examines the impact of changes in job security on corporate innovation in 20 non-U.S. OECD countries. Using a difference-in-differences approach, we provide firm-level evidence that the enhancement of labor protection has a negative impact on innovation. We then discuss possible channels and find that employee-friendly labor reforms induce inventor shirking and a distortion in labor flow. Further investigation reveals that the negative relation is more pronounced in (1) firms that heavily rely on external financing, (2) firms that have high R&D intensity, (3) manufacturing industries, and (4) civil-law countries. Our micro-level evidence indicates that enhanced employment protection impedes corporate innovation.