I study how shareholder litigation affects the cost of bank loans via its impact on the distribution of bankruptcy estate and the conflict of interests between shareholders and creditors. Using a natural experiment based on a ruling by the Ninth Circuit Court of Appeals, I find that increasing the difficulty of class action suits decreases loan spreads. The effect is stronger for firms with higher institutional ownership, which is consistent with the argument that class actions suits help shareholders extract wealth from creditors when the firm is in bankruptcy. Further analysis shows that the effect is weaker for firms with stronger creditor protection in bankruptcy.

We examine how the Jumpstart Our Business Startup Act (JOBS Act) affects mergers and acquisitions. We find that U.S. private targets are valued higher after the JOBS Act relative to public targets acquired by U.S. acquirers. The announcement returns of acquirers who acquired U.S. private targets after the JOBS Act are lower. The effect concentrates on private targets that are unlikely to qualify as small reporting companies should they choose to go public. We also show that the results are unlikely to be driven by changes in deal synergy.

We examine the impact of venture capital (VC) on corporate social responsibility (CSR) performance in China. Exploiting the timing of VC exit, we find that the CSR performance of VC-backed companies improves after the exit of VC. Using the age of VC funds as an instrument for VC exit, we find that the effect is likely to be causal. Further analyses suggest that the effect is largely driven by inexperienced, badly performing, and less reputable VCs.

We examine how option compensation affects banks' risky mortgage origination and sale decisions before the financial crisis in 2008. We find that, in the period immediately before the financial crisis, option compensation has little impact on the riskiness of mortgages originated and is negatively associated with mortgage lenders' propensity to sell risky mortgages. The results are consistent with banks' incentives to maximize revenues from origination and servicing fees while managing risk exposure by adjusting the sale of risky mortgages. For identification, we use bank-year fixed effects and matched loan applications to control for both supply- and demand-side factors of mortgage lending. We find similar results when using the variation in option compensation generated by the implementation of FAS 123R.

We examine how management stock options affect corporate risk taking. We exploit exogenous variation in stock option grants generated by FAS 123R and use loan spreads to infer risk taking. Using a difference-in-differences approach, we find that the spreads of loans taken by firms that did not expense options before FAS 123R (treated firms) significantly decrease after FAS 123R relative to firms that either did not issue stock options or voluntarily expensed stock options before 123R (control firms). We also find that the effect is stronger for firms with high agency conflicts associated with risk-shifting. Furthermore, loans taken by the treated firms are less likely to contain collateral requirements and are less likely to have covenants restricting capital investment post FAS 123R.