Government subsidies allocated by politicians are ultimately funded by taxpayers, who care about how tax money is spent and demand transparency. I argue that subsidized firms, as beneficiaries of government subsidies, have incentives to provide more disclosures to help politicians achieve a reputation for transparency as well as to lower their own costs from public scrutiny. Using a novel dataset that tracks government subsidies, I provide the first large-sample evidence on the relation between government subsidies and firm disclosure. I find that relative to unsubsidized firms, subsidized firms provide more voluntary disclosures of general information about their business activities and profitability, as well as more disclosures of subsidy-goal-related information, such as job creation and capital investment. Further, these associations are stronger for firms operating in or obtaining subsidies from states whose politicians reveal a stronger preference for subsidy transparency, and for firms that are more likely to attract public scrutiny.

This paper examines the impact of internal bank governance on bank liquidity creation in the U.S. before, during and after the 2007–2009 financial crisis. Using bank holding company level data, we analyze whether better-governed banks create higher levels of liquidity. We find that this effect is positive and significant but only for large bank holding companies. Further analysis reveals that specific internal governance categories: CEO education, compensation structure, progressive practices, and ownership have a significant effect on bank liquidity. However, this positive effect occurs mostly during the crisis period, and for large banks that are also high liquidity creators. Finally, we find that the effect of governance on liquidity creation increases during the crisis period. These findings are robust even while controlling for liquidity measures, bank size, and endogeneity problems between governance and liquidity creation.

We examine whether Basu's (1997) differential timeliness metric and the related C-Score metric are effective in detecting predictable differences in conservatism surrounding corrections of overstated earnings. Cross-sectional and time-series analyses, employing 2132 firms making restatements during 1999–2005, suggest Basu-based metrics capture variation in conservatism. Further, we find that increases in conservatism following restatements are contingent on improvements in corporate governance. Collectively, these results provide evidence of the usefulness of the Basu-based metrics in the restatement setting.

This study examines the effect of product market competition on managerial disclosure of earnings forecasts using large reductions in U.S. import tariff rates to identify an exogenous increase in competition for domestic firms in U.S. product markets. Our difference-in-differences estimations show that tariff reductions are associated with a significant decrease in management forecasts of annual earnings by U.S. domestic firms. Further, this decrease is more pronounced when the tariff rate reduction triggers a greater increase in imports and when the forecasts are likely to incur higher proprietary costs. Our findings are consistent with competition from existing rivals reducing voluntary disclosure through increased proprietary costs.

We examine the causal effect of managerial litigation risk on managers’ disclosure of earnings warnings in the face of large earnings shortfalls. Exploring the staggered adoption of universal demand (UD) laws as an exogenous decrease in litigation risk, we find that the adoption leads to a decrease in managers’ issuance of earnings warnings, especially among firms facing a higher litigation risk prior to the adoption. In contrast, we find no change in managers’ tendency to alert investors of impending large positive earnings surprises. Collectively, our results provide causal evidence that higher litigation risk incentivizes managers to issue more earnings warnings. Our results differ from Bourveau et al.’s finding of an increase in the frequency of management earnings forecasts after the adoption of UD laws. We reconcile our findings with theirs by demonstrating that the effect of adopting UD laws on management earnings forecasts depends critically on forecast horizon: The adoption increases long‐horizon forecasts, but decreases short‐horizon forecasts.

We examine the effect of firm-level political risk on debt choices and find: (i) firms with higher political risk display a preference for private debt over public debt; (ii) the magnitude of this preference varies with the aggregate policy uncertainty; (iii) politically risky firms indeed receive less favorable terms in the bond market. To explain such findings, we show that private lenders have several advantages in serving politically risky borrowers. First, to the extent that lenders cannot perfectly foresee the adoption of new government policies, private lenders' expertise in implementing the reorganization process is important to limit their potential loss. Second, politically risky borrowers must undertake significant operation adjustments facing rising policy uncertainty. Private lenders can gather accurate information and closely monitor these adjustments. Last, as the severity of political risk varies with aggregate policy uncertainty, there exists an implicit contract between a borrower and its relationship bank, whereby a borrower accepts less favorable terms during normal times in exchange for the bank's support during difficult times. Taken together, this study advances our understanding of how cross-sectionally heterogeneous political risk influences corporate debt choice.

This study examines the association between customer base concentration and corporate public disclosure policy. When the customer base is more concentrated, large customers face lower costs of accessing the supplier firm's private information, reducing customers' overall demand for the supplier's public information, suggesting a negative association between customer concentration and the amount of public disclosure. Alternatively, large customers have greater bargaining power and may demand that the supplier firm provide more public disclosures. Consistent with customer concentration facilitating private information flow from the supplier to customers, we find that the frequencies of management earnings and sales forecasts are negatively associated with customer concentration among firms with major corporate customers. These associations are stronger when the supplier and customers are engaged in more relationship‐specific investments, when customers' private information acquisition costs are lower, and when it is less costly for customers to find another supplier.

[This paper develops and tests a new theoretical explanation for stock repurchases. Investors may disagree with the manager about the firm's investment projects. A repurchase causes a change in the investor base as investors who are most likely to disagree with the manager tender their shares. Therefore, a firm is more likely to buy back shares when the level of investor-management agreement is lower, and agreement improves as a consequence. Moreover, dispersion of opinion among investors cannot explain repurchase activity once the stock price and investor-management agreement are controlled for. Overall, the evidence is consistent with firms strategically using repurchases to improve alignment between management and shareholders.]

We examine market behavior of the stock and option markets upon the arrival of noisy information in the form of CNBC’s Mad Money recommendations. If stock and option markets are not equally efficient, they should respond differently to noisy information, with the less efficient market more susceptible to noise. We find that the stock market is less efficient than the option market. The abnormal difference between option-implied and actual stock returns is negative and significant upon exposure to noisy information. This difference may yield an economically significant monthly trading profit of up to 5%. We conclude that the stock market is more susceptible to noisy information than the option market and is therefore less efficient.