This study examines whether mutual fund managers generate alpha through thematic investment strategies that select stocks poised to benefit from specific themes. Using textual analysis of 10-K filings, we identify stocks’ thematic exposures and construct each fund’s thematic concentration index (TCI) from its holdings. High-TCI funds significantly outperform, with a top-minus-bottom decile spread of 4.26% in annualized four-factor alpha. Managers’ thematic expertise is related to their undergraduate field of study. Outperformance arises from superior stock selection rather than theme-related timing, with an informational advantage on firm earnings, particularly in stocks exposed to themes related to managers’ undergraduate training.

We exploit the adoption of U.S. state-level labor protection laws to study the effect of employment protection on corporate investment rates and sales growth. We find that, following the adoption of these laws, capital expenditures as a percentage of book assets decrease, resulting in slower sales growth. Our findings are consistent with theories predicting that greater employment protection discourages investment by making projects more irreversible. Supporting this channel, following negative cash flow shocks, firms are less likely to downsize operations in states that have adopted these laws but more likely to downsize in states that have not adopted these laws.