We investigate the structure of mutual funds’ corporate governance preferences as revealed by how they vote their shares in portfolio companies. We apply unsupervised learning tools from the machine learning literature to analyze mutual funds’ votes and find that a parsimonious two-dimensional model can explain the bulk of mutual fund voting. The dimensions capture competing visions of corporate governance and are related to the leading proxy advisors’ recommendations. Cluster analysis shows that mutual funds are organized into three “parties”—the Traditional Governance Party, Shareholder Reform Party, and Shareholder Protest Party—that follow distinctive philosophies of corporate governance and shareholders’ role. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

We estimate the impact of macroeconomic conditions on the childcare market. We find that the industry is substantially more exposed to the business cycle than other low-wage industries and responds more strongly to negative shocks than positive ones. Indeed, childcare employment requires more time to recover than the rest of the economy. Although the reduction in supply may pose difficulties for parents, we find evidence that center quality is countercyclical. When unemployment rates are higher, childcare workers have on average higher levels of education and experience, turnover rates are lower, and consumer reviews on Yelp are higher.

Using political corruption conviction data from the U.S. Department of Justice, we examine the impact of local corruption on firms’ debt maturity structure while exploring both demand-side and supply-side explanations. Our results support the demand-side story and indicate that firms in high corruption areas utilize less short-term debt to mitigate liquidity and refinancing risks. Consistent with this, we find the effect is more pronounced among firms with smaller size, lower asset redeployability, and higher volatility. Our findings remain robust to the inclusion of an array of controls expected to influence debt maturity preferences as well as time, industry, and state fixed effects. Moreover, a seemingly unrelated regression approach, instrumental variables regression, propensity score matching, placebo analyses, and alternative corruption measures corroborate our findings. Altogether, our results indicate that firms alter their debt maturity choices in response to local corruption to limit refinancing risk and the uncertainty created by corrupt government officials.

Hedge fund activists transfer relevant prior work experience to their activism campaigns. Categorizing activists based on past employment at investment banks (generalists), private equity or special situations partnerships (specialists), or other firms (nonfinancial experts), we relate activists’ prior work experience to their choices and outcomes. Both generalists with codifiable skills and specialists with tacit skills contribute to successful outcomes, but differences in these skills lead to differences in activism processes. Activist choices, market responses, target firm responses, and procedural aspects of activism vary with activist identity. Our analysis examines activists’ heterogeneous skills and highlights their importance in shaping activist interventions.

Despite the prevalence of private equity (PE) buyouts of private firms, little is known about how these transactions create value. We provide evidence that PE acquirers disproportionately target private firms with weak operating profitability and those that have growth potential but are highly levered and dependent on external financing. Target firms grow rapidly post-buyout, especially those undertaking add-on acquisitions, and profitability increases for both profitable and unprofitable targets. Our evidence suggests that PE acquirers create value by relaxing financing constraints for firms with strong investment opportunities and improving the performance of weak firms, while financial engineering plays a limited role.

We propose a new credit variable called probability of aggregate loan trend deviations (pltd) that forecasts crash risk in U.S. bank stock returns. Compared to more classic measures of credit, the main innovation in pltd is that it incorporates a large amount of macroeconomic information in the form of money and interest rate variables known to drive the aggregate loan supply. Positive changes in pltd increase the level of systemic risk in the economy and also trigger lower bank returns and cash flows up to horizons of one year. To disentangle the effect our credit variable has on future bank returns we break down the total variance into individual components and estimate series for news of discount-rates and cash flows. We find that pltd only leads the cash-flow news component without significant effects on the discount-rate news. Finally, we show that pltd is not only useful for predicting the mean of future bank stock returns in-sample and out-of-sample but is also an important driver of the tail of the return distribution proxied by CATFIN.

Evidence suggests a large proportion of profitable U.S. firms have low effective tax rates (i.e., an ETR between 0 and 10%). Despite widespread interest in how firms avoid paying taxes, we do not know how most firms attain low ETRs and whether they are primarily benefiting from benign or aggressive tax positions. Using a research design that explicitly examines low ETR firms, we predict and find that the majority are primarily benefiting from a benign tax position: large net operating loss carryforwards (NOLs). We also find that large NOLs allow firms to persistently retain low ETRs year after year. In contrast, we find that multinationals and tax haven firms, which should have more opportunities for aggressive tax planning, have a lower probability of attaining a low ETR (relative to domestic and non-tax haven firms). Collectively, these findings suggest that the typical low ETR firm does not incur significant tax risk. Consistent with this, we find that low ETR firms accrue unrecognized tax benefits at a similar rate as firms that pay the statutory tax rate and do not experience higher future tax rate volatility. Overall, the results shed light on the profile of the average low ETR firm and provide evidence that the majority are utilizing large NOLs rather than aggressive tax planning.