Abstract This paper studies the effect of board reforms on stock liquidity using data from 37 countries. We document that board reforms significantly increase stock liquidity: the effective spread on average decreases by 12.7% after a board reform. As information asymmetry is a key determinant of stock liquidity, we further find that board reforms decrease information asymmetry, and the treatment effect of board reforms on stock liquidity is stronger for firms with ex ante higher information asymmetry. Finally, board reforms facilitate healthy stock market development, with the effect being stronger for countries with lower aggregate stock market liquidity prior to reforms. (JEL G14, G15, G18)

We find direct evidence that sovereign default risk has a negative impact on corporate performance via a rating spillover pooling mechanism. Our results show that this adverse effect is concentrated in firms that are more likely to experience limited access to external finance following a rating downgrade. Difference-in-differences tests exploiting the heterogeneity in corporate credit ratings following sovereign rating downgrades reveal that firm performance deteriorates predominantly for sovereign bound firms with higher information asymmetry, limited financial flexibility, and those operating in countries with less developed banking systems and weaker investor protection.

Abstract This paper examines the impact of promotion-based tournament incentives on corporate acquisition performance. Measuring tournament incentives as the compensation ratio between the CEO and other senior executives, we show that acquirers with greater tournament incentives experience lower announcement returns. Further analysis shows that the negative effect is driven by the risk-seeking behavior of senior executives induced by tournament incentives. Our results are robust to alternative identification strategies. Our evidence highlights that senior executives, in addition to the CEO, play an influential role in acquisition decisions. (JEL G30, G34, G41, J31, J33, J62) Received: November 5, 2018; editorial decision January 6, 2020 by Editor Isil Erel.

In this paper, we examine the effect of financial analysts on the quality of corporate investment decisions. We show that greater analyst coverage leads to higher total factor productivity within firms, a finding that is robust after using both an instrumental variable approach and an experimental design that exploits exogenous reductions in analyst coverage due to broker mergers and closures. We further identify that the positive effect of analysts on firm-level productivity emanates from their critical role in information distribution and external monitoring within more opaque and financially constrained firms and also firms with weaker investor protection.

Bank lobbying has a bitter taste in most forums, ringing the bell of preferential treatment of big banks from governments and regulators. Using corporate loan facilities and hand-matched information on bank lobbying from 1999 to 2017, we show that lobbying banks increase their borrowers' overall performance. This positive effect is stronger for opaque and credit-constrained borrowers, when the lobbying lender possesses valuable information on the borrower, and for borrowers with strong corporate governance. Our findings are consistent with the theory positing that lobbying can provide access to valuable lender-borrower information, resulting in improved efficiency in large firms' corporate financing.

We examine the effect of shareholder litigation rights on managers' acquisition decisions. Our experimental design exploits a U.S. Ninth Circuit Court of Appeals ruling on July 2, 1999 that resulted in a reduction in shareholder class actions. We find that, since the ruling, firms in Ninth Circuit states acquire larger targets. Furthermore, acquirers' returns are lower in these states, especially for those with weaker corporate governance. Further analysis shows that value destruction is the result of managers' freedom to conduct empire-building acquisitions using overvalued equity. Overall, our findings indicate the importance of shareholder litigation as an external governance mechanism.

We examine the impact of the COVID-19 pandemic on the credit risk of companies around the world. We find that increased infection rates affect firms more adversely as reflected by the wider increase in their credit default swap (CDS) spreads if they are larger, more leveraged, closer to default, have worse governance and more limited stakeholder engagement, and operate in more highly exposed industries. We observe that country-level determinants such as GDP, political stability, foreign direct investment, and commitment to crisis management (income support, health and lockdown policies) also affect the sensitivity of CDS spreads to COVID-19 infection rates. A negative amplification effect exists for firms with high default probability in countries with fiscal constraints. A direct comparison between global CDS and stock markets reveals that the CDS market prices in a distinct set of corporate traits and government policies in pandemic times.