During market-wide shocks that cause large drops in stock prices, firms with more state-endorsed antitakeover provisions (ATPs) experience smaller declines in value. Two channels appear to drive this finding. First, by giving boards more bargaining power to fight opportunistic bids, firms with more ATPs extract higher takeover premiums during market shocks. Second, having more ATPs attenuates the effect of market shocks on firm value by protecting relationship-specific investments with stakeholders from disruptive takeovers. Our results suggest that ATPs benefit shareholders during market shocks when firm values are abnormally low and represent one advantage of incorporating in states with more ATPs.

After medical marijuana legalization (MML) by U.S. states, firms’ cost of equity (COE) decreases, especially for those with more growth opportunities, higher productivity, or a more skilled workforce. This policy change also reduces firm risk and leads to an increase in labor supply through increased labor force participation, employment, hours worked, and net migration. Further, home prices rise after MML, reflecting increased local housing demand due to a growing supply of workers. These findings align with theoretical models that link asset prices to labor markets and suggest that MML can lower firms’ COE by mitigating labor search frictions.

We find that an increase in a firm’s incentives to use trade secrets to protect its intellectual property results in a more actively managed capital structure. Exploiting U.S. states’ adoption of the Uniform Trade Secrets Act as a positive “shock” in the protection afforded to trade secrets, we find that firms covered by the Act reduce debt levels while increasing investments in intangibles. Additional tests suggest that firms fund these financing and investment activities by issuing more equity. Consistent with an increase in overall intangibility magnifying contracting problems with creditors, we find that covered firms experience higher costs of debt.

Based on a comprehensive data set of classified (staggered) boards covering nearly all U.S. public firms from 1991 to 2020, we show that contrary to conventional wisdom, the use of classified boards remains widespread. Moreover, classified board usage over a firm's life cycle depends significantly on the decade the firm matured or year it went public. While classified boards were rarely removed in the 1990s, firms became more likely to declassify as they matured during the following decades. Decreased collective action costs and increased innovation‐related investments, institutional ownership, and scrutiny of governance contributed to this more dynamic adjustment.