We examine voluntary disclosures around the exercise of CEO stock options. Previous research shows that managerial incentives depend on the intended disposition of the exercised options' underlying shares. When CEOs intend to sell the underlying shares of exercised options, they have an incentive to increase stock prices in the pre-exercise period. In contrast, when CEOs intend to hold the underlying shares, they have a tax incentive to decrease stock prices in the pre-exercise period. Consistent with these private incentives, we find a significant increase in the frequency and magnitude of good (bad) news announcements in the pre-exercise period when CEOs implement exercise-and-sell (exercise-and-hold) strategies. We provide some evidence that CEOs' propensities for opportunistic disclosures are positively related to the value of their exercised stock options. Lastly, we find that the Sarbanes–Oxley Act (SOX) generally reduces, but does not eliminate, this type of managerial opportunism.

We use loans that were extended to public firms through the Paycheck Protection Program (PPP) as a laboratory to separate between favoritism and informational advantages in interpersonal ties between banks and firms. Because PPP loans are guaranteed by the government and banks do not need to carefully screen borrowers, this setting reduces information frictions, allowing us to quantify the effect of favoritism. We find that firms with personal ties to banks are more likely to obtain PPP loans. The role of personal ties weakens when firms are less opaque, but does not vary with banks' corporate governance. We also find that connected firms are more likely to return their loans to avoid regulatory scrutiny. Overall, we offer clean estimates of the role of favoritism in bank lending and highlight the unintended consequence of government programs that use the banking system to allocate capital.