We show that public suppliers extend more trade credit than their private counterparts. The impact of stock market listing on accounts receivable is more pronounced among firms that are financially more constrained or more reliant on external finance. Moreover, firms significantly increase their trade credit provision following equity issuances in stock exchanges. These results are consistent with the argument that stock market listing status improves firms' access to external sources of financing, especially equity capital, thus enhancing their ability to offer more trade credit to customers.

Firms differ in their dependence on skilled labor and face labor adjustment costs that increase with their workers’ skill level. We show that firms with a higher share of skilled workers, and thus less flexibility to adjust their labor demand in response to cash flow shocks, hold more precautionary cash. The effect of labor skills on cash holdings is more pronounced for financially constrained firms and varies with exogenous differences in firing and hiring costs. We address endogeneity concerns by using subsamples of firms with reasonably similar characteristics, propensity score matching, and a quasi-experimental shock to labor markets. Received March 21, 2014; editorial decision February 21, 2017 by Editor David Denis.

We investigate how venture capitalists (VCs) serving as directors on corporate boards affect portfolio companies’ debt structure after initial public offerings (IPOs). Using hand-collected data, we find that companies with a higher fraction of VC directors on their boards use significantly fewer types of debt. The impact of VC directorships on debt concentration is more pronounced in companies facing greater expected bankruptcy costs or higher degrees of uncertainty. We further explore the benefits of debt concentration and find that a highly concentrated debt structure is associated with better corporate performance in companies with VC directors. Taken together, our evidence suggests that VC directors influence newly listed companies to adopt a concentrated debt structure, thus minimizing the risk of distress and enhancing company value. Our results are robust to accounting for endogeneity and sample selection bias.

Monitoring by long-term investors should reduce agency conflicts in firms' labor investment choices. Consistent with this argument, we find that abnormal net hiring, measured as the absolute deviation from optimal net hiring predicted by economic fundamentals, decreases in the presence of institutional investors with longer investment horizons. Firms dominated by long-term shareholders reduce both over-investment (over-hiring and under-firing) and under-investment (under-hiring) in employees. The monitoring role of long-term investors is stronger for firms facing higher labor adjustment costs both in absolute terms and relative to capital adjustment costs, and those for which human capital is regarded as more important. The effect is also more pronounced for firms that have stronger incentives and/or more opportunities to deviate from expected net hiring. We address endogeneity concerns by exploiting exogenous changes to long-term institutional ownership resulting from annual reconstitutions of the Russell indexes.

This paper examines differences in the use of trade credit by publicly listed firms and their privately held counterparts. We show that public firms maintain a significantly lower level of trade credit than private firms. This finding is consistent with the argument that public firms rely less on supplier financing because of their greater access to cheaper and less risky sources of external capital. We further find that while public and private firms actively seek to adjust toward their optimal trade credit levels, the former firms experience faster adjustment. The recent financial crisis had differential effects on the trade credit ratios of public and private firms.

This paper examines the relation between employee welfare practices and corporate cash holdings. We find firms that are strongly committed to employee well-being, measured by ratings on employee relations, to hold more cash. The effect of employee welfare standards on cash holdings is stronger for firms in human-capital-intensive, competitive, and high-labor-mobility industries in which employees are more important to their businesses. These results are consistent with the predictions of the stakeholder theory. Overall, our paper provides novel evidence on the role human capital and employee relations play in a firm's cash management policy.

We examine which methods are appropriate for estimating dynamic panel data models in empirical corporate finance. Our simulations show that the instrumental variable and GMM estimators are unreliable, and sensitive to the presence of unobserved heterogeneity, residual serial correlation, and changes in control parameters. The bias-corrected fixed-effects estimators, based on an analytical, bootstrap, or indirect inference approach, are found to be the most appropriate and robust methods. These estimators perform reasonably well even in models with fractional dependent variables censored at [0,1]. We verify these results in two empirical applications, on dynamic capital structure and cash holdings.

This paper examines the influence of bank branch deregulation on corporate borrowers' stock price crash risk. Using a large sample of U.S. public firms over the period 1962–2001, we provide robust evidence that intrastate branch reform contributes to the reduction of firms' stock price crash risk. Further analysis shows that the negative relation between bank branch deregulation and crash risk is more pronounced among firms that are more dependent on external finance and lending relationships, as well as firms that have weaker corporate governance and greater financial constraints. Our findings are consistent with the notion that bank branch reform improves bank monitoring efficiency, thereby reducing borrowing firms' bad news formation and hoarding, and hence their stock price crash risk. Overall, our empirical evidence suggests that, as a reform aimed at removing restrictions on bank branch expansion, bank deregulation also helps protect shareholders' wealth.

We examine the impact of the media on firms’ leverage adjustments. Using a comprehensive sample of global news across 33 countries, we find that greater news coverage and more positive news sentiment are associated with greater leverage adjustment speeds. This finding is consistent with the argument that media coverage and content help lower the cost of firms’ adjustment toward target leverage. We further find evidence supporting two mechanisms through which the news media affects leverage adjustments: information dissemination and monitoring. Overall, our results are consistent with the dynamic trade-off theory of capital structure.