We provide causal evidence on the effects of mandated board independence. We compare firms that replace existing non-independent directors to firms that retain these directors by reclassifying them as independent. Reclassification eligibility, being largely predetermined, offers quasi-exogenous variation in compliance strategies. We show that firms required to replace insiders perform worse post-mandate, driven by increased operational costs and reduced labor efficiency. Boards of non-reclassifying firms retain fewer former employees and replace them with directors more likely to join monitoring-focused committees, emphasizing the shift from advising to monitoring. Overall, these findings suggest that firm-specific director expertise contributes materially to performance and is consistent with pre-mandate board compositions optimized to balance benefits of enhanced monitoring against costs of reduced advisory capacity. We rule out alternative explanations, including adjustment costs due to director turnover and co-option. Our study underscores the importance of allowing firms’ flexibility in governance structures and cautions against uniform mandates.

This article proposes and estimates a tractable, arbitrage-free valuation model for corporate coupon bonds that includes a more realistic recovery rate process. Most existing studies use a recovery rate process that is misspecified because it includes recovery for coupons due after default. Misspecification errors from assuming recovery on all coupons can be substantial; they increase with recovery rates, coupons, maturity, and default probabilities. For a large sample of market transactions, i) our model has lower pricing errors than one assuming recovery on all coupons and ii) the magnitude of our model’s outperformance is linked to misspecification errors from assuming recovery on coupons.

Many CEOs engage in activism by publicly expressing their views on social, environmental, and political issues, while other CEOs refrain from doing so—a behavior we term CEO inactivism. We use two experiments to examine how CEO (in)activism impacts investor decisions. Our results are consistent with our theoretical predictions. When a CEO expresses an activist position that is consistent versus inconsistent with investors' views, investors invest more in the CEO's firm because they perceive the CEO more positively. We also find that CEO inactivism can lead to investment decisions that are as favorable as when the CEO expresses a position consistent with investors' views; our process evidence suggests that this may occur because CEO inactivism increases the likelihood that investors believe the CEO shares their position on a social issue. Finally, we do not find evidence that investor decisions are influenced by whether CEO (in)activism is in response to an external prompt. This study contributes to the emerging literature on CEO activism, a unique form of voluntary disclosure, by providing evidence about how CEO (in)activism influences investors. We also contribute to the literature examining the impact of social media disclosure on investor decisions. Finally, our findings have practical implications for CEOs, who increasingly face external pressures to engage in activism.

We propose a new measure of price discovery, New Leadership Share (NLS), that attributes permanent information flow to individual markets using a uniquely identified structural moving average model. NLS quantifies each market’s contribution to permanent price innovations as a proportion of total informational leadership and offers key technical advantages, including uniqueness and adherence to standard statistical asymptotics. We derive closed-form solutions and analytical standard errors for bivariate markets and provide a framework that extends naturally to multiple markets without the variable ordering problem. Simulation results show that NLS consistently outperforms three widely used benchmarks. Empirical analysis of 2023 data finds that exchange-traded funds and front-month futures markets share equal leadership relative to the S&P 500 spot index.