Product market power provides firms with comparative advantages through more persistent profitability and insulation from competitive threats. These advantages likely provide firms with the ability to engage in greater tax avoidance. We present evidence consistent with this hypothesis. We also show that firms mimic the tax outcomes of their product market leaders. Among firms with greater product market power and comparatively high cash tax avoidance, we find stock prices to be less informative and that investors require additional compensation for the risks associated with comparatively high cash tax avoidance. Our results survive numerous robustness tests. Overall, our results suggest that industry dynamics, particularly related to a firm's competitive position, play a meaningful role in corporate tax policy.

Endowment payouts have become an increasingly important component of universities' revenues in recent decades. We study how universities respond to financial shocks to endowments and thus shed light on a number of existing models of endowment behavior. Endowments actively reduce payouts relative to their stated payout policies following negative, but not positive, shocks. This asymmetric behavior is consistent with “endowment hoarding,” especially among endowments whose current value is close to the benchmark value at the start of the university president's tenure. We also document the effect of negative endowment shocks on university operations, such as personnel cuts.

Antitrust laws mandate review of mergers and acquisitions (M&As) that exceed an asset size threshold based on accounting standards that exclude most intangible capital. We show that this exclusion leads to thousands of intangible‐intensive M&As being nonreportable. Acquirers in nonreportable deals achieve higher equity values and price markups, especially when consolidating product markets. Furthermore, nonreportable pharmaceutical deals are three times more likely to involve overlapping drug projects, which are subsequently 40% more likely to be terminated. Our results suggest that the growth of intangible assets may exacerbate market power through nonreportable consolidation of the sectors most concerning for consumers.

An employee's annual earnings fall by 13% in the first full calendar year after her firm's bankruptcy, and the present value of lost earnings from bankruptcy to six years following bankruptcy is 87% of pre‐bankruptcy annual earnings. More worker earnings are lost in thin labor markets and among small firms. Ex ante compensating wage differentials for this “bankruptcy risk” are up to 2% of firm value for a firm whose credit rating falls from AA to BBB, comparable in magnitude to debt tax benefits. Thus, wage premia for expected costs of bankruptcy are sufficiently large to be an important consideration in capital structure decisions.

Unexpectedly severe winter weather, which is arguably exogenous to firm and bank fundamentals, represents a significant cash flow shock for bank‐borrowing firms. Firms respond to these shocks by drawing on and increasing the size of their credit lines. Banks charge borrowers for this liquidity via increased interest rates and less borrower‐friendly loan provisions. Credit line adjustments occur within one calendar quarter of the shock and persist for at least nine months. Overall, we provide evidence that bank credit lines are an important tool for managing the nonfundamental component of cash flow volatility, especially for solvent, small bank borrowers.

The financing of R&D provides a potentially important channel to link finance and economic growth, but there is no direct evidence that financial effects are large enough to impact aggregate R&D. U.S. firms finance R&D from volatile sources: cash flow and stock issues. We estimate dynamic R&D models for high‐tech firms and find significant effects of cash flow and external equity for young, but not mature, firms. The financial coefficients for young firms are large enough that finance supply shifts can explain most of the dramatic 1990s R&D boom, which implies a significant connection between finance, innovation, and growth.

To shed new light on the role private profit incentives play in promoting public health, in this paper we conduct an empirical study of the impact of pharmaceutical industry advertising on smoking cessation decisions. We link survey data on individual smokers with an archive of magazine advertisements. The rich survey data allow us to measure smokers' exposure to smoking cessation advertisements based on their magazine-reading habits. Because we observe the same information about the consumers that the advertisers observe, we can control for the potential endogeneity of advertising due to firms' targeting decisions. We find that when smokers are exposed to more advertising, they are more likely to attempt to quit and are more likely to have successfully quit.

Regulatory programs that restrict output levels often impose restrictions on the transfer of rights to produce or to use particular inputs. In this paper, we use a unique cross-section, time-series data set from North Carolina to quantify the welfare effects of transfer restrictions for poundage quota under the U.S. flue-cured tobacco program. We find that the deadweight costs of such restrictions are small but that the distributional effects are substantial. We analyze congressional testimony on quota transfer legislation and conclude that our estimates of the distributional effects are consistent with expressed views of market participants.

The Supplemental Security Income program uses a birth weight cutoff at 1,200 grams to determine eligibility. Using birth certificates linked to administrative records, we find low-income families of infants born just below the cutoff receive higher monthly cash benefits (equal to 27 percent of family income) at ages 0–2 with smaller benefits continuing through age 10. Yet we detect no improvements in health care use and mortality in infancy, nor in health and human capital outcomes as observed through young adulthood for these infants. We also find no improvements for their older siblings.