This paper investigates bank stock performance following different monetary policy actions in times of positive and negative interest rates. Controlling for the broader stock market, monetary policy announcements that cause an unanticipated downward shift in the yield curve and a flattening of the shorter-end of the yield curve are found to persistently reduce bank stock prices once the interest rate environment is negative. Consistent with the deposits channel of monetary policy, the effects are larger and more persistent for banks that are relatively dependent on deposit funding. By contrast, a surprise movement in the slope of the longer-end of the yield curve does not impact bank stock prices in times of negative interest rates. Accounting data confirm that a parallel drop in the yield curve following a monetary policy decision in a negative interest rate environment hurts banks through shrinking deposit margins.

Abstract We examine the choice of organizational structure for VC-backed startup firms. These firms overwhelmingly organize as C-corporations rather than as tax advantaged limited liability companies (LLCs). This results in foregone tax savings of $43.9 billion, or 4.9% of the total equity invested in the sample firms. The decision is puzzling, given plausible estimates of the direct costs involved, but appears related to “hassle” and other transition costs generated by participants implementing a new form. Firms with more employees and investors are likely to choose the C-corporation. VCs appear to prefer the C-corporation form, as receiving VC money is associated with most LLC firms switching to a C-corporation within 30 days. Greater VC preferences for C-corporations are linked to a preference for familiarity, and less attention to taxes.

From 2007 to 2020, unlisted Chinese firms paid an average of over US $500 million to listed firms for their shell value in reverse merger transactions. We show that this large shadow price for a public listing sheds light on other features of Chinese markets, including (i) near-zero mortality rates, (ii) frequent major-asset restructurings (MARs), (iii) insensitivity of small-firm prices to corporate earnings, and (iv) a large size effect. A firm-level measure of expected shell probability (ESP) predicts stock returns, MARs, earnings-to-price sensitivity, and short-window returns to initial public offering-related regulatory news. Furthermore, adding ESP to existing pricing models for Chinese stocks significantly improves model performance.

Abstract Using micro-level data, we examine the behavior of socially responsible investment (SRI) funds. SRI funds select firms with lower pollution, more board diversity, higher employee satisfaction, and better workplace safety. Yet, both in the cross-section and using an exogenous shock to SRI capital, we find that SRI funds do not significantly change firm behavior. Moreover, we find little evidence that they try to impact firm behavior using shareholder proposals. Our results suggest that SRI funds are not greenwashing, but they are impact washing; they invest in a portfolio of firms with better environmental and social conduct but do not follow through on their promise of impact.

We find that a new compensation disclosure item on expected payouts from performance-based stock grants reveals unique information regarding future firm performance. Extracting inferred performance expectations from the disclosures, we find that firms disclosing the highest expected grant payout significantly outperform in ROA, Q, sales growth, and profit margin over the next two years, while those disclosing the lowest expected payout underperform. The embedded information is not captured by other information channels, such as managerial earnings guidance, 10-K sentiment, insider selling activities, unexplained CEO pay, and analyst forecasts. Investors and analysts do not fully incorporate the information and are later surprised around earnings announcement days. A portfolio that buys firms with the highest performance expectation and shorts firms with the lowest expectation earns significantly positive abnormal returns. Our findings suggest that the enhanced compensation disclosure contains valuable information, but investors underreact to information that is difficult to collect and process.

ABSTRACT The management control information used in decision‐making comports with one of the two generally accepted roles—to monitor and evaluate employees to conform their behavior to achieving organizational goals (decision‐influencing role), or to reduce decision uncertainty (decision‐facilitating role). However, the ways in which these two roles may combine concurrently has received limited empirical attention. Thus, in this case study, archival data and evidence from 30 interviews with space sector experts are employed to evaluate how the two roles assumed by management control contributed—both individually and jointly—to the achievements of the National Aeronautics and Space Administration's Apollo program. The analysis leads to a proposed 2×2 matrix that better characterizes the roles that could be assumed by management control in decision settings. This study extends the management control literature by presenting an additionally nuanced picture of these roles, as well as the subsequent consequences that arise from their combinations. Its findings provide insight for management control development and application.

While multinational firms invest large amounts of money in employee stock ownership plans (ESOPs) to reduce turnover, there is little evidence regarding ESOPs' effectiveness in retaining rank-and-file employees and none on a global scale. Building on psychological ownership (PO) arguments, we predict that a rank-and-file employee's ESOP participation will be negatively associated with a firm exit decision and that this effect will be stronger in contextual settings that are more conducive to turnover. For our analysis, we used internal data from a large multinational firm covering 190,453 rank-and-file employees and approximately 650,000 employee years. We find that ESOP participation is associated with a lower likelihood of individual firm exit decisions. We also find this effect to be more pronounced in countries with favorable labor market conditions and lower uncertainty avoidance (UA). Additional tests support our argument that PO arising from ESOP participation is particularly important for rank-and-file employees, who often only invest small amounts. Overall, our study provides cross-country evidence regarding the retention effect of ESOP participation for rank-and-file employees.

Abstract U.S. equity exchanges have experienced a dramatic increase in competition from new entrants, resulting in the fragmentation of trading across venues. While market quality has generally improved over this period, we show most of the improvements have accrued to the largest stocks. We then show this bifurcation in market quality is related to the fragmentation of trading. Theoretically, more exchange competition should reduce trading costs, yet it may also increase adverse selection for liquidity providers, leading to higher spreads. We document evidence of both effects (fragmentation improves market quality for large stocks while small stocks experience relatively worse quality).

Abstract We hypothesize that corporate takeover markets create significant constraints for short sellers. Both short sellers and corporate bidders often target firms with declining economic prospects. Yet, a target firm’s stock price generally increases upon a takeover announcement, resulting in losses for short sellers. Therefore, short sellers should require higher rates of return when the takeover likelihood is higher. Consistent with this prediction, the return predictability of monthly short interest increases with industry-level takeover probability and decreases as takeover defenses are implemented. Our results suggest that efficient takeover markets create trading frictions for short sellers and can therefore inhibit overall market efficiency.