We investigate the mechanism through which the Sarbanes Oxley Act ( SOX ) was associated with changes in corporate investment strategies. We document that the passage of the governance regulations in SOX was followed by a significant decline in pay‐performance sensitivity (Delta) and incentives to take risk (Vega) in CEO s' compensation contracts. These changes in compensation contracts are related to a decline in investments, including research and development expenditures, capital investments and acquisitions. Moreover, consistent with the rules in SOX directly affecting CEO s' incentives to take risk, we document that the decline in investments exceeds the amount that would be expected from changes in compensation packages alone. Finally, we also find evidence that the changes in investments are related to lower operating performances of firms, suggesting that these changes were costly to investors. Our evidence speaks to the debate on how corporate governance regulation interacts with firms' and managers' incentives, and ultimately affects corporate operating and investment strategies. Our study suggests that one indirect cost of such regulations in SOX is the significant reductions in corporate risk‐taking activities in the post‐ SOX period. The changes in investments were in part due to changes in executive compensation contracts and in part related to increased executives' personal costs of engaging in risky activities.

The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms' greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings—separated by several weeks and going in opposite directions—that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by presenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.

Conventional wisdom holds that individuals find it difficult to obtain new credit post-bankruptcy. Using credit bureau data, we test this hypothesis and show that more than 90% of bankrupt individuals receive credit shortly after filing. Individuals with good credit history prior to filing have reduced credit availability after bankruptcy while those with ex-ante low credit quality receive more credit. We show that credit supplied to low quality individuals is severely curtailed during the financial crisis. We also find that the default probability on new debt increases after bankruptcy, especially among individuals with high ex-ante credit score. These findings are consistent with an information channel, in which bankruptcy reveals new information about a borrower’s credit quality.

Using panel data on over 300,000 Israeli women from 1999 to 2005, we exploit variation in Israel's child subsidy to identify the impact of changes in the price of a marginal child on fertility. We find a positive, statistically significant, and economically meaningful price effect on overall fertility and, consistent with Becker (1960) and Becker and Tomes (1976), a small effect of income on fertility, which is negative at low and positive at high income levels. We also find a price effect on fertility among older women, suggesting that part of the overall effect is due to a reduction in total fertility.

The correlation between governance indices and abnormal returns documented for 1990–1999 subsequently disappeared. The correlation and its disappearance are both due to market participants' gradually learning to appreciate the difference between good-governance and poor-governance firms. Consistent with learning, the correlation's disappearance was associated with increases in market participants' attention to governance; market participants and security analysts were, until the beginning of the 2000s but not subsequently, more positively surprised by the earning announcements of good-governance firms; and, although governance indices no longer generated abnormal returns during the 2000s, their negative association with firm value and operating performance persisted.