Knowledge that Transforms

Some U.S. firms have women directors and executives, while many do not. We seek to explain this heterogeneity. Using U.S. Census data from 1900, we find that U.S. counties with populations originating from countries with stronger gender-egalitarian beliefs have more women in the labor market and in STEM occupations, and lower gender-pay gaps. Firms headquartered in such counties have more women executives and directors. When firms move to more gender-egalitarian counties, the representation of women on board increases. Our findings are consistent with the idea that inherited beliefs about gender roles impact the labor market and corporate leadership.

We document that heightened public attention to gender equality is associated with an increase in board gender diversity. Improvements in diversity are more pronounced in firms with a corporate culture that is already sympathetic to gender equality. When public attention to gender equality increases, firms reach out to a larger pool of women, such as women without industry experience or outside their network, but female director appointments do not appear to be dilutive of the board’s skills. Instead, we observe less reliance on connections for director appointments and a decrease in the propensity to appoint connected men.

In a sample of non-U.S. regulatory regime shifts, we find that expanded short selling is associated with stock price declines, reductions in capital expenditure, and lower asset growth. In a reversal of results found for U.S. stocks in a study of Regulation SHO by Grullon, Michenaud, and Weston (2015), our results are stronger for large firms than for small firms. We also show that this investment effect is stronger for firms that previously relied on outside financing. Our results suggest that short-sale policies affect corporate investment and that this effect is not driven by capital constraints.

This article provides new evidence on how access to finance affects technological innovation and establishes the role of labor practices in shaping this relation. We exploit a unique setting, pre-Civil War America, where staggered adoption of free banking laws across states encouraged bank entry, and variation in the use of exploited workers in agriculture generated differences in producers’ demands for labor-saving technologies. Results show that access to finance spurred innovation; the positive effect on agricultural innovation diminished with labor exploitation. We establish the causal role of labor exploitation using the 1850s cholera pandemic and the influx of Irish immigrants.

There are significant differences among sell-side analysts in how frequently they revise recommendations. We show that much of this variation is an analyst-individual trait. Analysts who change recommendations more slowly make recommendations that are more influential and generate better portfolio returns. Slower-revising analysts tend to change recommendations following corporate news that are harder to interpret by nonstock experts, and our evidence suggests that their investment value derives from their ability to better interpret hard-to-assess information. On average, analysts change recommendations less frequently as their career progresses; however, recommendation speed-style is the dominant predictor of their recommendation value.

Using a proprietary data set on international private equity activity, we study the determinants of buyout investments across 61 countries and 19 industries over the period of 1990 to 2017. We find that countries with cyclically strong economies, more active stock and credit markets, and better rule of law experience more buyout activity. Countries also receive more buyout capital following investor protection and contract enforcement reforms. The set of determinants we identify appear somewhat unique to buyout investments, because other forms of investment such as foreign direct investment, gross capital formation, investments in R&D, and M&A activity do not respond similarly to these factors.

This article empirically analyzes the effect of foreign block acquisitions on U.S. target firms’ credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms’ CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers.

Using a standardized methodology, we empirically evaluate 55 proposed determinants of capital structure in terms of statistical significance, economic significance, and identification. We find that robust and economically important determinants of debt ratios are relatively few in number. Nevertheless, because each determinant relates to one of five market imperfections—taxes, distress costs, information asymmetry, agency costs, or supply frictions—we draw conclusions from the evidence as a whole regarding the explanatory power of different capital structure theories. We find greater support for pecking order theory and supply-related theories, with less support for traditional tradeoff theory and agency theory.

We investigate how bankers use information from lending relationships to help borrowers find partners for strategic alliances. Firms that have borrowed from the same banker or share an indirect connection through a network of bankers are significantly more likely to enter an alliance. Consistent with bankers overcoming informational frictions, their ability to facilitate alliances decreases with banker-network distance, and is stronger for opaque borrowers. Firms connected to more potential partners via banker networks enter more alliances. These alliances are associated with positive announcement returns, and brokering banks are more likely to receive future underwriting mandates.

I study the effect of patent-infringement claims by patent trolls on acquisitions of small firms. Exploiting staggered adoption of state anti-patent troll laws, I find that the laws have two effects. First, the number of acquisitions of small firms declines after these laws are adopted. Second, the anti-troll laws increase the acquisition price for acquirers. The market reflects the increased cost of acquisition as measured by lower acquisition announcement returns. Large firms increase R&D after the adoption of state laws, replacing external innovation. Using a sample of acquisitions that are plausibly unaffected by the laws, I disentangle alternative explanations.