Using five‐year credit default swap (CDS) spreads on 2,364 companies in 54 countries from 2004 to 2011, we find that firms exposed to stronger property rights through their foreign asset positions (institutional channel) and firms cross‐listed on exchanges with stricter disclosure requirements (informational channel) reduce their CDS spreads by 40 bps for a one‐standard‐deviation increase in their exposure to the two channels. These channels capture effects beyond those associated with firm‐ and country‐level fundamentals. Overall, we find that firm‐level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.

This paper documents some empirical facts about ex‐day abnormal returns to high dividend yield stocks that are potentially subject to corporate dividend capture. We find that average abnormal ex‐dividend day returns are uniformly negative in each year after the introduction of negotiated commission rates and that time variation in ex‐day returns during the negotiated commission rates era is consistent with corporate tax‐based dividend capture. Ex‐day returns are more negative when the tax advantage to corporate dividend capture is greatest and more positive when increases in transaction costs and risk reduce incentives to engage in corporate tax‐based dividend capture.

Using an improved measure of a common stock's annualized dividend yield, we document that risk‐adjusted NYSE stock returns increase in dividend yield during the period from 1963 to 1994. This relation between return and yield is robust to various specifications of multifactor asset pricing models that incorporate the Fama–French factors. The magnitude of the yield effect is too large to be explained by a “tax penalty” on dividend income and is not explained by previously documented anomalies. Interestingly, the effect is primarily driven by smaller market capitalization stocks and zero‐yield stocks.

Corporate managers often invest in activities that are deemed to be socially responsible. In some instances, these investments enhance shareholder value. However, in other cases, altruistic managers or managers who privately benefit from the positive attention arising from these activities may choose to make socially responsible investments even if they are not value enhancing. Given this backdrop, we investigate the various factors that motivate firm managers to make socially responsible investments. We find that larger firms, firms with greater free cash flow, and higher advertising outlays demonstrate higher levels of corporate social responsibility (CSR). We also find that companies with stronger institutional ownership are less likely to invest in CSR — which casts doubt on the argument that these investments are designed to promote shareholder value. Consistent with the literature that explores how CEO personal attributes influence corporate decision making, we find that female CEOs, younger CEOs, and managers who donate to both Republican and Democratic parties are significantly more likely to invest in CSR. This latter result suggests that CSR investments may not be driven solely for altruistic reasons, but instead may be part of a broader strategy to create goodwill and/or help maintain good political relations. Finally, we find a strong positive connection between the level of media scrutiny surrounding the firm and its CEO, and the level of CSR investment. This finding suggests that media attention helps induce firms to make socially responsible investments.

This paper examines the relationships between split ratings and ratings migration. We find that bonds with split ratings are more likely to have future rating changes. A one-notch (more-than-one-notch) split rating increases the probability of rating change within one year of initial issuance by about 3% (6%). Furthermore, we find that about 30% of split rated bonds have their two ratings converge after four years of initial issuance. The rating convergence tapers off after three years, and the rating agency with a higher (lower) initial rating generally maintains a higher (lower) rating in subsequent years if the two ratings do not converge. We also show that rating transition estimation can be improved by taking into consideration split ratings. We find that one-year rating transition matrices are significantly different between non-letter-split rated bonds and letter-split rated bonds, and we show that the difference has an economically significant impact on the pricing of credit spread options and VaR-based risk management models. Overall, our results suggest that split ratings contain important information about subsequent rating changes.

Trade credit is an important source of firm financing, yet its rich informational content pertaining to payment timeliness is under-explored in asset pricing. Using an extensive data set from a leading private information exchange on business payment performance, we study the effects of trade credit payment timeliness on stock returns. We document two distinct channels through which trade credit payment behavior impacts future stock returns — slow diffusion of information and risk stemming from a customer firm’s vertical bargaining power position in the supply chain. Consistent with our first channel, a sudden delay in a firm’s payment to its suppliers predicts significantly lower future returns for its stock. Consistent with our second channel, firms that pay their bills moderately late on a consistent basis relative to terms earn significantly higher stock returns.