Individuals’ stock market participation depends on the risk-return trade-off they expect to achieve. We find that the expected economic benefits of investing are highly heterogeneous. We define the personal equity risk premium (PERP) as the difference between an individual's expectation of returns and personal opportunity cost of capital. Higher PERP is associated with greater stock market participation. Our results hold after we control for known factors, such as financial literacy, trust, and loss aversion, and are stronger for the level of stock investment. Disentangling PERP shows that both components help explain both stock market participation and the level of participation.

Myopic loss aversion was suggested by Benartzi and Thaler (1995) as an explanation for the equity premium puzzle. Its main prediction is that loss averse investors, who evaluate their investment performance too frequently and therefore often observe small losses on their stock portfolios, would invest too little in equity. We investigate the link between myopic loss aversion and actual investment decisions of individual investors, using survey data. Our results are consistent with the predictions of Benartzi and Thaler. Higher myopic loss aversion is associated with lower stock investment as a share of total assets. Investors tend to evaluate their stock portfolio performance too often, which contributes to the prevalence of myopic loss aversion. The effect of myopia is most apparent when investors both evaluate their portfolios frequently and trade stocks regularly.

External networks are usually believed to add value, but what happens when the connected parties have conflicting interests in a transaction? We study the impact of social connections between seasoned equity offering (SEO) issuers and their lead underwriters on SEO outcomes. We find that, during accelerated offerings, connected issuers profit substantially from their links to investment banks through both lower direct issuance costs and smaller SEO discounts. Results of an event study based on the sudden collapse of Lehman Brothers show that the effect of connections is causal. We present evidence supporting an information flow hypothesis that connections improve deal outcomes by facilitating more efficient information exchange.

We examine the role of award-winning CEOs in corporate innovative activities. We find no significant difference in innovation outputs between firms of media award-winning CEOs and a matched sample of predicted winners. However, firms headed by winners of non-media awards generate significantly more patents and citations in the second and third year after the award. Firms led by CEO-winners of media awards attract more interest in Google and see an increase in the number of financial analysts that follow them. These effects likely exert more pressure on managers to meet short-term goals and hence impede the firms’ innovation. We do not find the same effects for firms that have CEOs who win non-media awards. The latter category sees an improvement in employee treatment following the award year. These different channels explain why innovation only increases for firms that are headed by CEOs who win non-media awards.