We examine how firms are affected by the political bargaining power of their headquarters’ region. Exploiting variation in the strategic importance of swing states stemming from shifting partisan balance in the U.S. Senate, we find that corporate valuations and investments positively respond to increases in regional political influence. We verify the valuation findings using an event study based on the 2021 Georgia runoff election that unexpectedly produced a 50-50 balance in the Senate. We investigate potential policy mechanisms and find that tax incentives constitute the most likely channel through which firms benefit from the political bargaining power of their headquarters’ region.

We document important links between targets’ institutional ownership and takeover-bid outcomes. Firms’ institutional ownership increases the likelihood of receiving stock-for-stock bids. The impact becomes stronger when information asymmetries are higher, whereas we find little support for alternative channels, such as bidder misvaluation or target-side adverse selection. The information channel is further buttressed in our analyses of institutions’ share-retention decisions, targets’ demand for top-tier advisors, collar provisions, and targets’ share of expected synergies. Our findings suggest that institutions’ information advantage facilitates rational payment design and targets’ bargaining power gains, alleviating deadweight losses associated with stock-for-stock offers.

This paper studies the role of scale inflexibility in explaining corporate credit spreads. We find robust evidence that firms with higher inflexibility have higher credit spreads. To mitigate the endogeneity concern, we employ a regression discontinuity design that uses the exogenous variations in labor adjustment costs resulting from close-call union elections. Furthermore, contraction inflexibility is more prominent in influencing credit spreads than expansion inflexibility is. Additionally, inflexibility increases credit spreads due to increased cash flow volatility and financial distress risk. Our findings highlight the importance of a firm’s ability to adapt to productivity shocks in fulfilling its debt obligations.