Abstract We study whether the constraints on firms’ operations imposed by labor unions affect firms’ costs of equity. The cost of equity is significantly higher for firms in more unionized industries. This effect holds after controlling for several industry and firm characteristics, is robust to endogeneity concerns, and is not driven by omitted variables. Moreover, the unionization premium is stronger when unions face a more favorable bargaining environment and is highly countercyclical. Unionization is also positively related to various measures of operating leverage. Our findings suggest that labor unions increase firms’ costs of equity by decreasing firms’ operating flexibility.

Abstract We examine whether higher accounting comparability between public and private firms leads to higher value relevance of private firms’ reported financial information. To help develop our hypotheses, we conduct a series of interviews with M&A valuation experts. The experts indicate that comparable accounting between public and private firms allows them to apply public firms’ valuation multiples directly to private firms, which facilitates the use of private firms’ financial reporting in their valuations. Using a large sample of M&A transactions with private target firms in the European Union around the mandatory adoption of IFRS by public firms, we find that private firms’ reported financial information has higher value relevance when it has higher accounting comparability to that of public firms. Furthermore, we find that the impact of accounting comparability is stronger when public peer information is more precise. Our findings are consistent with higher accounting comparability facilitating a spillover of valuation information from public to private markets, which leads to greater value relevance of private firms’ reported financial information.

ABSTRACT The SEC prohibits the presentation of non‐GAAP measures before corresponding GAAP measures; however, a large proportion of non‐GAAP reporters present non‐GAAP EPS before GAAP EPS in their earnings announcements. This noncompliance raises questions about whether firms use prominence to highlight higher or lower quality non‐GAAP information. For firms reporting non‐GAAP EPS between 2003 and 2016, prominent non‐GAAP EPS is associated with higher quality non‐GAAP reporting. Further tests reveal that nonregulatory incentives, rather than regulatory costs, explain this relation. Specifically, prominence is associated with higher quality non‐GAAP reporting in settings where prominence is not regulated, investors ignore prominence when non‐GAAP reporting quality is lower, and the minority of firms using prominence to mislead exhibit characteristics associated with weaker investor monitoring. Overall, we provide evidence that regulatory noncompliance can reflect an intent to inform, and that most firms use prominence to highlight higher quality non‐GAAP information despite prohibitive regulation.