We examine institutional investors' responses to corporate disclosure quality conditional on market states. Transient institutions react more positively to corporate disclosure quality during market downturns than during normal market periods, as better disclosure practices lower information asymmetry and are thus associated with reduced uncertainty, enhanced liquidity, and weakened impacts of crises, which are the most desirable features of assets during market downturns. Dedicated institutions are insensitive to corporate disclosure quality in both normal and market downturn periods, as they have access to inside information and rely less on public disclosures. Their reliance on corporate disclosures in market downturns, however, increases sharply after the implementation of Regulation Fair Disclosure, which removes their inside information advantage. We further show that corporate disclosure reduces information asymmetry to a greater extent in market downturns than in normal market periods and that transient ownership in market downturns provides strong price support and stabilizes return volatility, whereas dedicated ownership does not possess such functions. Finally, we show that the results are not simply driven by endogeneity and are robust to alternative corporate disclosure quality measure and to the control of other determinants of institutional holdings.

We document a substantial customer complaint gap between stock and mutual financial firms. To assess whether this 21% per year complaint gap stems from complaint-prone customers in stock insurers, we examine state-adjudicated complaint success. To further delineate between customer selection or treatment explanations, we exploit within insurer complaints around random claims (natural disasters) and attention shocks (media scrutiny). Further tests reveal the complaint gap widens with greater competition, near insolvency thresholds, and with more price regulation. Overall, the results are inconsistent with the hypothesis that mutual financial firms exhibit low customer satisfaction, suggesting customers find this a beneficial organizational structure.

We examine how short sellers affect long‐run management forecasts using a natural experiment (Regulation SHO) that relaxes short‐selling constraints on a group of randomly selected firms (referred to as pilot firms). We find that compared to other firms, the pilot firms issue more long‐run good news forecasts but do not change the frequency of long‐run bad news forecasts. The increase in good news forecasts is greater when the pilot firms have higher‐quality forecasts, greater uncertainty about firm value, or higher manager equity incentives. Overall, these results and the results of additional analyses indicate that the reduction in short‐selling constraints and the increase in short‐selling threat induce managers to enhance disclosures through more long‐run good news forecasts to discourage short sellers.

We examine the impact of internal coalition, measured by the appointment of the top executives and directors by the CEO after he assumes office, on stock crash risk during 2000–2014. The appointment-based internal coalition has a positive and significant impact on stock crash risk. Internal coalition is a more important factor than measures of CEO power, such as CEO tenure and duality, in predicting stock price crash. We address the endogeneity concerns by utilizing an exogenous shock to the internal coalition to conduct difference-in-differences (DID) regressions. The main results survive numerous robustness tests.