Both stock price synchronicity and crash risk are negatively related to the firm's ownership by dedicated institutional investors, which have strong incentive to monitor due to their large stake holdings and long investment horizons. In contrast, the relations become positive for transient institutional investors as they tend to trade rather than monitor. These findings suggest that institutional monitoring limits managers' extraction of the firm's cash flows, which reduces the firm-specific risk absorbed by managers, thereby leading to a lower R2. Moreover, institutional monitoring mitigates managerial bad-news hoarding, which results in a stock price crash when the accumulated bad news is finally released.

We examine the effects of credit ratings on IPO pricing. The evidence from U.S. common share IPOs during 1986–2004 shows that when firms go public, those with credit ratings are underpriced significantly less than firms without credit ratings. Credit rating levels, however, do not have a significant effect on IPO underpricing. The existence of credit rating reduces uncertainty about firm value. It is the value certainty that matters, not the value per se. Credit ratings also reduce the degree of price revision during the bookbuilding process and the aftermarket volatility in the post-IPO period. The evidence suggests that credit ratings convey useful information in reducing value uncertainty of the issuing firms as well as information asymmetry in the IPO markets.

Using hand-collected data on changes of government officials in 277 Chinese cities, we examine how political turnover affects corporate investment in a transitional economy. We find that political turnover leads firms to significantly reduce corporate investment, particularly when the new official is an outsider appointed by a higher level government. The effect of political turnover on corporate investment is stronger for state-owned enterprises, capital intensive firms, and firms deemed locally important. Overall, the volatility of corporate investment increases with political turnover. Finally, the investment decline due to political turnover has significantly negative impact on the profitability of private firms, but not state-owned firms.