Attitudes towards business vary significantly across political lines, religious denominations, and ethnic groups. We utilize this variation to construct a measure of local business attitudes and show that firms in areas with stronger probusiness attitudes are less likely to incorporate in Delaware and adopt more management-friendly provisions in their corporate bylaws. These findings are further supported by an instrumental variable estimation utilizing data on immigration at the turn of the 19th century. The overall findings indicate that firms in probusiness areas are less likely to provide unconditional protection of their managers through incorporation in Delaware. Instead, they tend to provide protection through more flexible means, such as corporate bylaws.

This paper develops a theory of venture financing at the earliest stages. Ventures choose between issuing equity or a “SAFE”, which gives investors the right to a number of shares to be determined by a future equity price. Our key assumption is that between two rounds of financing the market learns information that is initially private to the entrepreneur. Higher quality types prefer a SAFE over equity for the first round of financing because under the SAFE they know that their types will be revealed to the market before the determination of the number of shares they must provide to investors. Offsetting this benefit of SAFEs is a moral-hazard (debt-overhang) cost. We find initial support for the theory in a data set of 500 financing rounds.

We study the effect of growth in firms' balance sheets on stock returns by decomposing asset growth into two components, one that captures real investment growth and one that captures accounting distortions and/or reduced efficiency. We show that these components play significant and complementary roles in driving the asset growth anomaly in European equity markets. The effect of the real investment growth (accounting distortions and/or reduced efficiency) component on stock returns, is found stronger in countries with higher (lower) degree of market efficiency, weaker (stronger) barriers to arbitrage, stronger (weaker) corporate governance and less (more) managerial discretion over earnings.

We examine how natural disasters affect the corporate environmental, social, and governance (ESG) disclosure policies of firms located close to disaster areas. We study firms located in counties neighboring those impacted by natural disasters and find that, on average, these firms increase their ESG disclosure transparency over the period subsequent to the disaster. Given that our sample firms are located outside of the area directly impacted by the disaster, the changes in disclosure transparency after the disaster are consistent with managers increasing their preference for transparency as their risk salience increases. Further, we find that firms with a higher percentage of local institutional ownership are more likely to increase ESG disclosure after experiencing nearby disasters. The findings suggest that managers strategically react to a change in investors' risk perception by increasing ESG disclosure.