I examine whether and how foreign bank branch participation in U.S. loan syndicates influences loan contract design. I predict that foreign bank branches’ dollar funding liquidity risk and information frictions increase renegotiation costs and affect loan contract design. I find that loan contracts with greater foreign bank branch participation include fewer flexibility-reducing covenants, such as capital expenditure and balance sheet covenants, that restrict borrowers from making positive net present value investments. I document similar results using matched sample and plausibly exogenous variation in foreign bank branch participation. Additionally, loan contracts with greater foreign bank branch participation are more likely to feature split control rights, which give banks in revolving lines of credit the exclusive right to renegotiate. In contrast, foreign bank branches are more likely to be included in covenant-lite term loans. Overall, I show that foreign bank branch participation affects U.S. syndicated loan contract design through renegotiation costs.

We first compare several measures of import penetration and find that total imports, tariffs, and exchange rates are endogenous, while imports from China are largely exogenous. Then we examine the effects of Chinese import penetration on executive compensation of U.S. firms. We document that Chinese import penetration reduces executives’ stock grants and wealth-performance sensitivity, suggesting that competition mitigates agency problems and the need for conventional alignment mechanisms. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

ABSTRACT We study manufacturing firms' asymmetric inventory investment in response to sales changes. Focusing on the costs of resource adjustment and stockout that likely differ in sales‐increasing and sales‐decreasing periods, we predict and find that inventory investment declines less during periods with sales decreases than it rises during periods with sales increases. We validate this claim by showing that managers' expectations of future demand and desire to avoid inventory stockouts are important determinants of this asymmetry. In addition, we find that asymmetric inventory investment provides useful information for predicting future sales growth, and that both managers' and analysts' sales forecasts are positively associated with the asymmetry. Lastly, we document that forecasts of future sales growth that incorporate asymmetric inventory investment are associated with lower absolute forecast errors than benchmark forecasts. Overall, we highlight the importance of inventory information in understanding managers' resource adjustment and utilization decisions that have implications for forecasting future demand. Our findings on asymmetric inventory management provide new insights to fundamental analysis based on inventory signals.

ABSTRACT We document that managers stockpile excess inventory to mitigate the operational risk posed by labor unions and to maintain bargaining power in labor negotiations. Inventory levels are higher for union firms and are incrementally higher preceding the renegotiation of collective bargaining agreements with unions. Inventory stockpiling at union firms is more salient when capital market pressure for transparency or information spillover from peers constrains managers from using disclosure strategies. We further show that managers weigh the costs and benefits of inventory stockpiling, as holding excess inventory due to the presence of a union is negatively associated with future profitability, but provides the benefits of avoiding a stockout and mitigating negative outcomes from a strike. Our findings highlight the importance of a major stakeholder, i.e., labor, in managers' investment decision making. Data Availability: All data are available from the public/private sources cited in the text. JEL Classifications: G31; J52; J53.

ABSTRACT Despite private access to managers, issuer-paid credit rating agencies (CRAs) are often criticized for failing to promptly reflect material negative private information in their ratings and being ineffective corporate watchdogs. We utilize a novel dataset of private SEC investigations to examine the timeliness and informativeness of CRAs’ rating adjustments in response to material negative private information. Our evidence suggests that CRAs adjust ratings downward within a quarter following the opening of an SEC investigation. Moreover, these adjustments are over three times larger for those investigations that ultimately yield an enforcement action than for those that do not, suggesting that CRAs quickly form sophisticated expectations about the materiality of the private information. Additionally, rating downgrades during the investigations are more informative to the stock market than other rating downgrades. Overall, our evidence suggests that CRAs reduce information asymmetry in the capital markets by timely incorporating material private information in their ratings. Data Availability: All data are available from the sources cited in the text. JEL Classifications: D82; G24; G30; M40; M41.