This study examines the spillover effect of constituency statutes along the supply chain. We posit that the enactment of constituency statutes in customer firms’ incorporation states, by removing legal obstacles for customer firms to cater to non-shareholders’ interests, builds suppliers’ trust and cooperation. Consistent with the notion that constituency statutes entice greater trust from suppliers, we find that suppliers make more relationship-specific investments in the supply chain after the enactment of constituency statutes in customers’ states, indicating a greater commitment to the customer. We also show an improvement in customers’ corporate social responsibility performance in the post-constituency-statute period, thus substantiating the claim that the constituency statutes increase customers’ stakeholder orientation. Cross-sectionally, we find the positive effect of constituency statutes on supplier relationship-specific investments is attenuated if the customer and supplier have more repeated interactions in the past, whereas the effect is more pronounced if suppliers produce durable goods. Overall, we provide novel evidence on the spillover of constituency statutes along the supply chain.

This study examines how PCAOB international inspections of non-U.S. auditors affect international Merger and Acquisition (M&A) outcomes. We find that clients of inspected auditors are more likely to become acquisition targets after the public disclosure of auditor's inspection report. We also find that deal completion is more likely and deal announcement returns are higher if deals involve targets with auditors for which inspection reports are available. Engagement deficiencies and unremediated quality control deficiencies identified in inspection reports weaken the positive effect of PCAOB oversight on M&A outcomes. Collectively, our results suggest that PCAOB oversight reduces information uncertainty in M&A deals.

Using a propensity score matched sample and a difference‐in‐differences research design, we find that stock price crash risk increases after a firm voluntarily incorporates clawback provisions in executive officers' compensation contracts. This heightened crash risk is concentrated in adopters that increase upward real activities‐based earnings management and those that reduce the readability of 10‐K reports. Based on cross‐sectional analyses, we also find that the increased crash risk is more pronounced for adopters with high ex ante fraud risk, low‐ability managers, high CEO equity incentives, and low dedicated institutional ownership. Collectively, our results suggest that the clawback adoption per se does not curb managerial opportunism but rather induces managers to use alternative channels for concealing bad news, which may contribute to a greater stock price crash risk; and the increase in crash risk is more likely in cases where incentives are strong or monitoring is weak. Our results should be of interest to regulators and policymakers considering the effects of clawback adoption on the investing public.

Prior studies provide conflicting evidence as to whether managers have a general tendency to disclose or withhold bad news. A key challenge for this literature is that researchers cannot observe the negative private information that managers possess. We tackle this challenge by constructing a proxy for managers' private bad news (residual short interest) and then perform a series of tests to validate this proxy. Using management earnings guidance and 8-K filings as measures of voluntary disclosure, we find a negative relation between bad-news disclosure and residual short interest, suggesting that managers withhold bad news in general. This tendency is tempered when firms are exposed to higher litigation risk, and it is strengthened when managers have greater incentives to support the stock price. Based on a novel approach to identifying the presence of bad news, our study adds to the debate on whether managers tend to withhold or release bad news. Data Availability: Data used in this study are available from public sources identified in the study.