We examine how relative performance evaluation (RPE) affects industry competition—a question relevant for corporate boards interested in incentivizing executives. Using U.S. airline data, we estimate a dynamic game of competition between heterogeneous firms in an oligopolistic market, with managers incentivized by RPE contracts. While RPE can induce a firm to compete more intensely by smoothing compensation, it also amplifies a firm’s cost efficiency relative to its peers and can weaken competition from inefficient firms. The first effect dominates in small markets and the second in median-sized markets. RPE has little effect in large, highly profitable markets.

We study how risk management through hedging affects firms and competition among firms in the life insurance industry, an industry with over 7 trillion in assets and over 1,000 private and public firms. We examine firms after a staggered state-level reform that reduces the costs of hedging by granting derivatives superpriority in case of insolvency. We show that firms that are likely to face costly external finance increase hedging and reduce risk and the probability of receivership. Firms that are likely to face costly external finance also lower prices, increase policy sales, and increase their market share post-reform.

We educate investors about the benefits of dividend reinvestment and costs of misperceiving dividends as free income. The intervention increases planned dividend reinvestment in survey responses. Using trading records, we observe a causal increase in dividend reinvestment in the field of roughly 50 cents for every euro received. This holds relative to investors’ prior behavior and various control samples. Investors who learned the most from the intervention update their trading the most. The results suggest the free dividends fallacy is a significant source of dividend demand. Our study demonstrates that simple, targeted, and focused educational interventions can affect investment behavior.

We study the effects of going public using a unique panel of firms in 16 European countries for which we observe financial data before and after initial public offering (IPO) attempts. We compare completed and withdrawn IPO attempts. We instrument the decision to complete the IPO using prior market returns. After instrumenting, we isolate a positive causal effect of going public on profitability. We also find a post-IPO expansion in sales per employee, subsidiaries, and countries in which firms operate. Overall, our results are consistent with going public relaxing financial constraints and inducing a shift in strategy towards increased commercialization.

When a macroeconomic shock arrives, variation in household balance sheet health (captured by the presence of financial distress, or “FD”) leads to differential access to credit and hence a distribution in consumption responses. As we document, though, over the past two recessions, households in prior FD also experienced macroeconomic shocks more intensely than others, leading to a distribution of shock severity. Quantifying the importance of each dimension of heterogeneity (FD or shock severity) for consumption requires a structural model. We find that heterogeneity in FD matters more for shaping the responses of individual and aggregate consumption to shocks.