This paper exploits a natural quasi‐experiment to isolate the effects that were uniquely due to the Sarbanes–Oxley Act (SOX): U.S. firms with a public float under $75 million could delay Section 404 compliance, and foreign firms under $700 million could delay the auditor's attestation requirement. As designed, Section 404 led to conservative reported earnings, but also imposed real costs. On net, SOX compliance reduced the market value of small firms.

We study bank policies to limit lending to companies engaged in mountaintop removal (MTR) coal mining, a form of coal extraction that has raised many environmental concerns. Using the staggered introduction of these policies, we document that these policies did not lead to meaningful changes in average bank lending or MTR mining. However, larger banks, banks that are under media pressure, and banks operating in the affected states are more likely to reduce MTR loans. Our results are consistent with the hypothesis that banks announced these policies under pressure and to improve their green credentials.

We study the transfer of governance across countries through overlapping international boards. Companies converge to the governance characteristics and board practices of foreign firms through their directors' foreign board experiences. Learning from foreign firms' governance practices is as important as learning from connected domestic firms, and increases with the number of directors with foreign board appointments. This learning channel is stronger for firms domiciled in less-developed governance markets, suggesting a potential mechanism through which better governance practices are propagated. Our results are obtained in the time series and do not exist in placebo samples.

Mutual funds vary greatly in their reliance on proxy advisory recommendations. Over 25% of funds rely almost entirely on Institutional Shareholder Services (ISS) recommendations, while other funds place little weight on them. Funds with higher benefits and lower costs of researching the items up for vote are less likely to rely on ISS. These actively voting funds are less likely to vote in a “one-size-fits-all” manner, and they earn higher alphas, consistent with benefits from this allocation of resources. For the underlying firms, the presence of actively voting funds mitigates the influence of ISS and helps sway shareholder votes toward value-maximizing outcomes.

We study the consequences of a US deregulation allowing small firms to accelerate their public equity issuance. Post-deregulation, affected firms double their reliance on public equity and transition away from private investments in public equity compared to similar untreated firms. The net effect is a 5.7 percentage point or 49% increase in the annual probability of raising equity. This is accompanied by a reduction in equity issuance costs, an increase in investment, and a decrease in leverage. Our findings provide evidence that reducing equity issuance barriers benefits issuers even in highly developed markets.

We study the economic consequences of a recent Securities and Exchange Commission securities regulation change that grants foreign firms trading on the U.S. over‐the‐counter (OTC) market an automatic exemption from the reporting requirements of the 1934 Securities Act. We document that the number of voluntary (sponsored) OTC cross‐listings did not increase following the regulation change, suggesting that it did not achieve its intended purpose of increasing voluntary OTC cross‐listings through a reduction in compliance costs. We do find that the design of the regulation allowed financial intermediaries to create an unprecedented number of involuntary (unsponsored) OTC ADRs: 1,700 unsponsored ADR programs for 920 firms were created for companies that had previously chosen not to cross‐list in the United States. Our difference‐in‐differences analysis based on a matched sample approach documents that foreign firms forced into the U.S. capital markets experience a significant decrease in firm value, and we further show that the decrease in firm value is related to an increase in U.S. litigation risk. We also find that depositary banks’ propensity to involuntarily cross‐list firms is positively related to banks’ expected fee revenue, and that banks chose firms that incur high costs when involuntarily cross‐listed. Our results provide evidence that securities regulation can be exploited for private gain and result in costly unintended consequences.

Contrary to conventional wisdom, we document that approximately 15% of venture capitalist (VC)‐backed firms raise additional capital from VCs in the five years after going public. We propose two explanations for why firms revert to VC financing post‐IPO (initial public offering). First, we hypothesize that VC participation in post‐IPO financing represents an efficient solution to informational problems that would otherwise constrain firms’ abilities to exploit value‐increasing investments. Analyses of firm and VC characteristics, together with the finding that these investments are value‐increasing for both VCs and the underlying companies, support this hypothesis. We find no support for the alternative that agency conflicts motivate these investments.

This paper documents that small-cap mutual funds allocate on average 27% of their portfolio to mid- and large-cap stocks. We find that larger and older small-cap funds are more likely to hold mid- and large-cap stocks, consistent with funds straying from their objective over time. Funds that invest heavily in mid- and large-cap stocks expose their investors to unanticipated risks but investors do not experience higher abnormal returns or performance persistence overall. These funds did outperform their peers by 3% annually in the most recent period between January 2003 and March 2010.

We study a regulatory change that led to over 300 shareholder proposals to instate proxy access and more than 250 firms adopting proxy access from 2012 to 2016. The firms expected to benefit most from proxy access have the most positive market reaction to receiving a proposal, but adoptions are not concentrated at these firms. We find that proposing and voting shareholders do not discriminate between firms that would or would not benefit and that management resists proxy access at the firms that stand to benefit most. This process results in the concentration of adoptions at large, already-well-governed firms.