This paper examines empirically the effects of domicile and SEC registration and reporting requirements on information asymmetry. We compare the adverse-selection component of the relative bid–ask spread (our measure of information asymmetry) for three samples of Nasdaq NMS companies that trade in different home markets and are subject to different standards of disclosure: registered U.S. companies, registered non-Canadian foreign companies, and unregistered non-Canadian foreign companies covered by the information-supplying exemption of the Securities and Exchange Act of 1934. We find that the adverse-selection component is not significantly larger for the two foreign samples, and it is not reliably different for the registered and unregistered foreign samples. Therefore, we are unable to document that less stringent SEC registration and reporting requirements for foreign companies are associated with greater information asymmetry among investors for non-U.S. securities traded on Nasdaq.

Following the 2023–2024 Tokyo Stock Exchange (TSE) capital-efficiency initiative, investors favored low price-to-book (PBR) firms, particularly those with high return on equity (ROE). These effects are concentrated among persistently undervalued firms, increase smoothly with the degree of undervaluation rather than jumping at the regulatory threshold, and are robust to endogenous treatment assignment. Although firms’ value-enhancing plans were already publicly available in corporate governance reports, the TSE’s consolidated compliance list triggered strong market reactions, consistent with a salient informational event. We find no short-run improvements in realized profitability or upward revisions in analyst earnings forecasts, but significant declines in illiquidity and increases in valuation ratios among low-PBR firms. We also find little evidence of a persistent “price-of-shame” mechanism or strong industry-level spillovers, although spillovers through non-industry links cannot be fully ruled out. Overall, the evidence suggests that the reform primarily triggered investor-side repricing of chronic undervaluation rather than immediate changes in firm behavior.

We examine the firm's choice between an SEO and a PIPE, an innovation in follow-on equity selling mechanism seen in the late 1990s. Our primary finding indicates that the rapid rise of the PIPE market fills the capital needs of firms which may not have access to more traditional alternatives. This lack of access is driven mainly by information asymmetry and weak operating performance. We also show that firms are more likely to choose PIPEs when the general market and the firm's stock are performing poorly. Furthermore, we find that selected firms with access to the public market may prefer a PIPE due to specific cost considerations.

This paper investigates the impact of investment characteristics on the financing choice. We investigate instances of seasoned equity, bank debt, straight non-bank debt, and convertible issues by U.S. firms where the stated use of proceeds is capital expenditure and where we are able to hand-collect and classify the characteristics of the investment. Controlling for a firm's existing assets, capital structure and valuation, we document a strong empirical link between an investment's characteristics and the choice between debt and equity financing. Factor analysis indicates that the principal determinant of the financing choice is whether an investment's payoffs can be described as a hit or miss.

Over the last two decades, share repurchases have emerged as the dominant payout channel, offering a more flexible means of returning excess cash to investors. However, little is known about the costs associated with payout-related financial flexibility. Using a unique identification strategy, we document a significant cost. We find that actual repurchase investments underperform hypothetical investments that mechanically smooth repurchase dollars through time by approximately two percentage points per year on average. This cost of financial flexibility is correlated with earnings management, managerial entrenchment, and less institutional monitoring.

Active corporate executives are a popular source of independent directors. Although their knowledge, expertise, and network can bring value to firms on whose boards they sit, independent executive directors may be more likely to be distracted than other directors due to their outside executive roles. Using newly constructed data linking independent directors to their employers, we identify periods when employers' poor performance may distract them from board service. We find that firms with distracted independent executive directors have lower performance and value, higher CEO compensation, reduced CEO turnover-performance sensitivity, lower earnings quality, and lower M&A performance. These adverse effects are mainly driven by distracted directors who sit on relevant committees, and are stronger for small boards.

Motivated by recent changes to corporate governance standards around the world, we use a regulatory shock that substantially altered the governance structure for some firms to shed light on the long-term impact of mandates that are of global interest. Firms affected by this shock had lower values and non-mandated governance practices that were less shareholder friendly before the mandates were in effect when compared to unaffected matched peers. In the post-mandate period, we document a 48% tightening of the relative value gap, and show that this gap relates to the continued use of less shareholder friendly non-mandated governance practices. Our results suggest that governance mandates can tighten, but not eliminate, the value gap between poorly and well governed firms, and that firms affected by the shock continue to have less shareholder friendly governance cultures long after regulatory intervention.

Corporate taxation can have redistributive effects on income and wealth. We hypothesize and empirically establish such an effect working via bank credit. We use a unique sample of small majority-owned firms that apply for credit, where only some firms (treated) experience a corporate tax cut. We show that after the decrease in corporate tax rates, the treated poorer business owners get easier access to credit. However, this policy also considerably increases loan amounts and decreases loan spreads for the treated richer. Ultimately, reducing the corporate tax rate predominantly increases the future income and wealth of richer business owners.

Clustering of IPO underwriting spreads at 7% poses two important puzzles: Is the market for U.S. equity underwriting services anti-competitive and why do equity underwriters invest in reputation-building? This study helps resolve both puzzles. Modeling endogeneity of firm-underwriter choice using a two-sided matching approach, we provide strong evidence of price and service differentiation based on underwriter reputation. High-reputation banks receive average reputational premia equaling 0.65% (0.47%) of average IPO (SEO) underwritten proceeds, which constitutes 10% (13%) of their underwriting spreads. Equity issuers working with high-reputation underwriters receive significant benefits, including higher offer values and lower percentage spreads net of reputational premia.