Knowledge that Transforms

We examine how corporate misconduct affects merger and acquisition (M&A) activity of non-prosecuted peer firms. We find that exposure to peer misconduct increases the propensity to participate in M&A transactions, both as an acquirer and as a target. Firms exposed to peer misconduct experience adverse financial and valuation pressures, creating opportunities for financially stronger firms to acquire distressed rivals at discounted prices. We show that acquisitions involving targets exposed to peer misconduct are characterized by lower takeover premiums, a higher fraction of stock payment, higher acquirer announcement returns, and greater deal synergies. Overall, the evidence supports the view that misconduct spillovers disproportionately affect targets through heightened regulatory pressures and compliance costs, shifting bargaining power toward acquirers in M&A transactions.

Firms’ green technology investments are increasingly important for competitive positioning, yet their impact on long-run performance remains unclear. Using electricity capacity data for global utility firms, we construct a unique structural measure of technological greenness based on renewable versus fossil fuel physical infrastructure. We find that adopting sustainable technologies is followed by a long-run improvement in corporate fundamentals that is only partially reflected in stock prices, yielding superior returns over a multi-year horizon. These results partly reflect higher revenue growth in liberalized retail markets rather than investor sentiment, revealing a consumer-based mechanism that likely extends to competitive downstream sectors.

We survey 153 empirical studies of family firms and document 192 operational definitions representing 25 distinct definition types. These definitions can be decomposed into five recurring, codable dimensions: ownership, management, board representation, embeddedness, and succession. We relate these dimensions to economic mechanisms including agency conflicts, residual control rights, transaction costs, and dynastic control. Alternative definitions select systematically different populations and yield materially different estimates of firm performance and innovation. Definition choice is largely unrelated to the research question, except in succession studies. Ownership thresholds track private enforcement of self-dealing rules, but not statutory shareholder rights or rule of law. We conclude that the family firm is a family of related constructs rather than a single latent construct. Definitions should therefore match the family-firm construct implied by the research question, and results should be reported across alternative classification rules.

We study how firms choose to allocate control over strategic corporate decisions between shareholders and management in a historical setting where governance design was not mandated by corporate law, but ownership structures were constrained by differences in regional wealth distributions. The general shareholder meeting is the dominant governance body, retaining control over the largest number of strategic decisions. Nevertheless, firms with a predominance of small —and plausibly less informed— shareholders empower managers by delegating control over a larger number of strategic decisions to them. Furthermore, shareholder empowerment is accompanied by statutory provisions that facilitate information acquisition, suggesting that control and information are complements. Our findings highlight that the debate on shareholder empowerment should account for the role of ownership structure and information as key determinants of the allocation of control between shareholders and management.

We analyze the effect of monetary policy on mergers and acquisitions (M&A) activity using transaction and balance sheet data of public U.S. companies. We provide causal evidence that contractionary monetary policy reduces M&A activity. The response is particularly pronounced among financially constrained and higher-marginal product of capital firms, causing a change in the composition of firms conducting M&A. This in turn reduces the efficiency at which capital is reallocated via M&A.

We develop an inter-temporal model to examine how financing choices influence firm innovation under asymmetric information. The framework incorporates R&D risk and adverse selection, whereby low-quality firms mimic high-quality innovators, generating endogenous screening and financing frictions. Firms choose among bank lending, equity financing, and hybrid financing based on asset composition, cash flow, and innovation risk. Bank lending mitigates moral hazard through collateral and liquidation, making it optimal for low-risk innovation but inefficient for high-risk R&D due to expected liquidation losses. Equity financing supports radical innovation through risk sharing but requires sufficiently high institutional quality to sustain investor participation. Hybrid financing combines these mechanisms and emerges as a response when firms face binding collateral or institutional constraints, expanding the feasibility frontier. Under high institutional quality, financing strategies follow a risk-dependent transition from bank lending to hybrid financing to equity financing. Under low institutional quality, firms that are excluded from external financing must reduce their innovation intensity unless financing constraints are relaxed. We further show that R&D subsidies are generally more effective than risk guarantees, as they relax financing constraints without weakening screening incentives. Our model yields testable predictions linking financing structure to firm characteristics, R&D risk, and institutional quality.