Proximity to plants makes it easier for headquarters to monitor and acquire information about plants. In this article, I estimate the effects of headquarters’ proximity to plants on plant-level investment and productivity. Using the introduction of new airline routes as a source of exogenous variation in proximity, I find that new airline routes that reduce the travel time between headquarters and plants lead to an increase in plant-level investment of 8% to 9% and an increase in plants’ total factor productivity of 1.3% to 1.4%. The results are robust when I control for local and firm-level shocks that could potentially drive the introduction of new airline routes, when I consider only new airline routes that are the outcome of a merger between two airlines or the opening of a new hub, and when I consider only indirect flights where either the last leg of the flight (involving the plant’s home airport) or the first leg of the flight (involving headquarters’ home airport) remains unchanged. Moreover, the results are stronger in the earlier years of the sample period and for firms whose headquarters is more time-constrained. In addition, they also hold at the extensive margin, that is, when I consider plant openings and closures.

Using census microdata on multistate firms and their organizational forms, we estimate the impact of state taxes on business activity. For C corporations, employment and the number of establishments have short-run corporate tax elasticities of −0.4 to −0.5 and do not vary with changes in personal tax rates. Pass-through entity activities show tax elasticities of −0.2 to −0.4 with respect to personal tax rates and are invariant with respect to corporate tax rates. Capital shows similar patterns. Reallocation of productive resources to other states drives around half the effect. The responses are strongest for firms in tradable and footloose industries.

By reducing the threat of a hostile takeover, business combination (BC) laws weaken corporate governance and increase the opportunity for managerial slack. Consistent with the notion that competition mitigates managerial slack, we find that while firms in non-competitive industries experience a significant drop in operating performance after the laws’ passage, firms in competitive industries experience no significant effect. When we examine which agency problem competition mitigates, we find evidence in support of a “quiet-life” hypothesis. Input costs, wages, and overhead costs all increase after the laws’ passage, and only so in non-competitive industries. Similarly, when we conduct event studies around the dates of the first newspaper reports about the BC laws, we find that while firms in non-competitive industries experience a significant stock price decline, firms in competitive industries experience a small and insignificant stock price impact.

This article argues that firms’ balance sheets were instrumental in the transmission of consumer demand shocks during the Great Recession. Using micro-level data from the U.S. Census Bureau, we find that establishments of more highly levered firms experienced significantly larger employment losses in response to declines in local consumer demand. These results are not driven by firms being less productive, having expanded too much prior to the Great Recession, or being generally more sensitive to fluctuations in either aggregate employment or house prices. Likewise, at the county level, we find that counties with more highly levered firms experienced significantly larger declines in employment in response to local consumer demand shocks. Accordingly, firms’ balance sheets also matter for aggregate employment. Our results suggest a possible role for employment policies that target firms directly besides conventional stimulus.

Using confidential establishment-level data from the US Census Bureau’s Longitudinal Business Database, this paper documents how local shocks propagate across US regions through firms’ internal networks of establishments. Consistent with a model of optimal within-firm resource allocation, we find that establishment-level employment is sensitive to shocks in distant regions in which the establishment’s parent firm is operating, and that the elasticity with respect to such shocks increases with the firm’s financial constraint. At the aggregate regional level, we find that aggregate county-level employment is sensitive to shocks in distant counties linked through firms’ internal networks.

We document how a positive shock to investment opportunities at one plant (“treated plant”) spills over to other plants within the same firm, but only if the firm is financially constrained. To provide the treated plant with resources, the firm's headquarters withdraws capital and labor from other plants, especially plants that are relatively less productive, not part of the firm's core industries, and located far away from headquarters. As a result of the resource reallocation, aggregate firm‐wide productivity increases. We do not find evidence of capital or labor spillovers among plants of financially unconstrained firms.

This paper examines whether firms in noncompetitive industries benefit more from good governance than do firms in competitive industries. We find that weak governance firms have lower equity returns, worse operating performance, and lower firm value, but only in noncompetitive industries. When exploring the causes of the inefficiency, we find that weak governance firms have lower labor productivity and higher input costs, and make more value‐destroying acquisitions, but, again, only in noncompetitive industries. We also find that weak governance firms in noncompetitive industries are more likely to be targeted by activist hedge funds, suggesting that investors take actions to mitigate the inefficiency.

We propose a tractable model of dynamic investment, spinoffs, financing, and risk management for a multidivision firm facing costly external finance. Our analysis formalizes the following insights: (i) Within‐firm resource allocation is based not only on divisions' productivity, as in winner‐picking models, but also their risk; (ii) firms may voluntarily spin off productive divisions to increase liquidity; (iii) diversification can reduce firm value in low‐liquidity states, as it increases the spinoff cost and hampers liquidity management; (iv) corporate socialism makes liquidity less valuable; and (v) division investment is determined by the ratio between marginal and marginal value of cash.