Counterparty risk is an important determinant of corporate credit spreads. However, there are only a few techniques available to isolate it from other factors. In this paper we describe a model of financial networks that is suitable for the construction of proxies for counterparty risk. Using data on North American supplier–customer network of public companies, we find that, for each supplier, counterparties’ leverage and option implied volatilities are significant determinants of corporate credit spreads in the period after the 2008–2009 U.S. recession. Our findings are robust after controlling for several idiosyncratic, industry, and market factors.

There is a long-standing debate on whether sell-side analysts learn from their experience to improve earnings forecast skills. This study shows that incentive is an important factor for understanding the “learning by doing” effect by analysts. We examine analysts’ response to a complex type of information – corporate pension underfunding. Pension underfunding negatively impacts future earnings and analysts on average underreact to such information in their earnings forecasts. More importantly, when there is a strong incentive for analysts to deliver accurate forecasts, analyst learning effectively reduces their underreaction to pension underfunding information. On the other hand, when such an incentive is absent, the analyst learning effect is not discernible in the data. Further evidence suggests that analyst learning and incentive jointly reduce stock market mispricing associated with corporate pension underfunding.

This paper investigates the impact of international political risk on government bond yields in 34 debtor countries using a comprehensive database of 109 international political crises from 1988 through 2007. After employing the total number of international political crises as a proxy for political risk and controlling for country-specific economic conditions, we establish a positive and significant link between international political risk and government bond yields. This is consistent with global bond investors demanding higher returns at times of high political uncertainty. In addition, we show that international political risk has a reduced adverse effect on bond prices when the debtor country has a stable political system and strong investor protection.

Managers often overreact to revenue fluctuations, leading to unnecessary workforce adjustments and increased training costs. This study examines how board governance influences firms’ employment sensitivity to revenue fluctuations. Analyzing global board reforms, we find that board reforms significantly reduce managerial overreaction to revenue fluctuations. Utilizing recent difference-in-differences estimators that address heterogeneous treatment effects, we ensure the robustness of our results. The reduction in employment sensitivity is more pronounced when board reforms strengthen the independence of boards and audit committees, particularly in jurisdictions with weaker board efficacy, shareholder, and employment protection legislation. Enhanced effects are observed in firms with initially lower board independence and rapid reform compliance, in entities experiencing greater information asymmetry, marked by higher labor intensity, higher pre-reform agency costs and financial constraints, and in firms led by less experienced CEOs or boards with higher male representation.

Taking advantage of the institutional difference in capture between local and non-local media in China, we examined the association between media capture and post-earnings announcement drift (PEAD). Using both portfolio and regression analyses, we found that, for the same firms, non-local media coverage is negatively associated with PEAD; however, there is no association between local media coverage and PEAD, except for non-state-owned firms. Given that in China, non-local media are less captured or more independent than local media, the negative association observed for non-local media coverage can be interpreted as an indication that media independence plays a role in reducing PEAD or improving informational efficiency in the stock market.