Using a sample of firms from 40 countries cross-listed in the U.S. during the 1982–2018 period, we find that the discrepancy between a firm's home industry valuation and its corresponding U.S. industry valuation—the relative industry valuation—is an important factor in the listing decision and valuation after listing. International firms whose home market industries are undervalued relative to the corresponding U.S. industries are more likely to cross-list. They also enjoy permanent valuation gains after listing. These firms issue more equity, invest more, and realize higher growth rates.

Using a corporate culture measure based on the textual analysis of the Q&A section of earnings conference calls, we document robust evidence that similar corporate cultural values between supply chain partners improve the financial performance of suppliers. Consistent with the view that supplier–customer cultural similarity facilitates communication, promotes altruistic attitudes, and builds trust between trading partners, we find that culturally similar suppliers experience higher cost efficiency, fewer problems with underinvestment, and better innovation performance. Our results also indicate that cultural similarity benefits customers, although to a lesser extent. Overall, our study sheds new light on how inter-firm cultural similarity influences firm performance along the supply chain.

Recent studies show that decimal pricing led to significant reductions in the spread and depth on the NYSE. In this paper, we examine how the observed changes in the spread and depth can be attributed to different factors. We show that stocks with higher proportions of one-tick spreads and odd-sixteenth quotes, and more frequent trading before decimalization experienced larger declines in the spread and depth afterwards. We interpret this result as evidence of reduced binding constraints and increased price competition under decimal pricing. We also find that decimal pricing led to nontrivial changes in select stock attributes, and that these changes exerted an additional impact on spreads and depths. Our results suggest that sub-penny pricing may further reduce the spreads of high-volume, low-risk, or low-price stocks.

We provide evidence that U.S. firms have a significantly higher probability of acquiring targets in countries where their CEOs have studied or worked. This finding is robust to alternative measures of CEO country-specific experience, samples or model specifications, and to controlling for endogeneity and target country industry specialization. Moreover, deal-level evidence suggests a reassurance effect. CEO experience has no effect on announcement returns or long-run operating performance on average but is associated with significantly better performance in risky environments. We also provide additional evidence to disentangle alternative hypotheses and explore the role of corporate governance in determining deal outcomes.

We study whether a firm's social connections to banks can augment its political connections to help it obtain loans. In China, Regulation No. 18 (announced in 2013) prohibits all high-level government officials from being independent directors of firms. As a result, many firms lost their political connections. We find that after firms lose their politically connected independent directors, firms having no social connections to banks experience, on average, a 12% decrease in the bank loan ratio relative to the median ratio; but those whose board chairs or CEOs are socially connected to local bank branch heads experience a 22% increase in the loan ratio relative to the median. However, this positive effect is short lived and thus not a new equilibrium. Overall, our findings support the hypothesis that a firm's social connections to banks can augment its political connections to help it get bank financing.

Using a large panel of U.S. public firms, we examine the relation between annual report readability and cost of equity capital. We hypothesize that complex textual reporting deters investors' ability to process and interpret annual reports, leading to higher information risk, and thus higher cost of equity financing. Consistent with our prediction, we find that greater textual complexity is associated with higher cost of equity capital. Our results are robust to a battery of sensitivity checks, including use of multiple estimation methods, alternative proxies of annual report readability and cost of equity capital measures, and potential endogeneity concerns. In addition, we hypothesize and test whether the nature of the relation between readability and cost of capital depends on the tone of 10-K filings. Our results show that the effect of annual report complexity on cost of equity is greater when disclosure tone is more negative or more ambiguous. We also find that the effect of annual report readability on cost of equity capital depends on the degree of stock market competition, level of institutional investors' ownership, and analyst coverage.

We investigate how shared managers and directors (shared M&Ds) with major suppliers affect a firm's access to trade credit. Using a sample of listed firms in China, we find that shared M&Ds play an important role in helping firms obtain trade credit. This favorable effect is strengthened for firms with higher information asymmetry, located in regions with lower social trust, operating in more innovative and heterogeneous industries, and experiencing greater financial constraints. Our findings support the proposition that shared M&Ds can reduce information asymmetry and build mutual trust between firms and their suppliers. This study contributes to the literature on the benefits of social connections within supply chain relationships and the literature on the economic consequences of interlocked managers and directors.

Building on recent research linking changes in housing prices to investors’ degree of risk aversion, we posit that there is a negative relation between growth in housing prices and a firm’s cost of equity capital. Consistent with our hypothesis, we find that firms located in states with positive growth rates in housing prices exhibit lower costs of equity capital. We also observe that the effect of changes in housing prices is mainly driven by smaller firms. This housing effect is not only statistically significant but also economically important. Our results hold across various measures of growth rates in housing prices and are robust to controlling for potential biases due to measurement errors in estimating the implied cost of equity capital. This study is the first to establish an association between growth rates in housing prices and firms’ cost of equity capital. It also contributes to the emerging literature on the economic importance of a firm’s geographic location.

This study investigates how economic policy uncertainty (EPU) affects venture capital (VC) contract terms. Using a unique database of contracts between VCs and entrepreneurial firms in China, we provide evidence that EPU positively affects the presence of investor-friendly covenants in VC contracts. Our mechanism analysis shows that screening for high-quality startups and VCs’ increased bargaining power are potential channels. Furthermore, we find that including more investor-friendly covenants mitigates the negative effect of EPU on VC exit performance.