We exploit the staggered adoption of universal demand (UD) laws, which hinders shareholders’ rights to initiate derivative lawsuits, by 23 states in the United States from 1989-2005 as a quasi-natural experiment to examine the effects of shareholder litigation as a corporate governance mechanism on corporate cash holdings and its implication for shareholder value. We find that reduced derivative lawsuit risk following the passage of UD laws leads to lower level and higher value of cash. Further analysis indicates investment as a channel through which UD laws affect the level and value of cash. Our evidence highlights the dark side of shareholder litigation, which induces firms to pursue a conservative liquidity policy that hampers shareholder value.

Despite dozens of studies, research on crime has struggled to reach consensus about the impact of right-to-carry (RTC) gun laws. With this in mind, we formalize and apply a class of bounded-variation assumptions that flexibly restrict the degree to which outcomes may vary across time and space. Using these assumptions, we present empirical analysis of the effect of RTC laws on violent and property crimes in Virginia, Maryland, and Illinois. Imposing specific assumptions that we believe worthy of consideration, we find that RTC laws increase some crimes, decrease other crimes, and have effects that vary over time for others.

We explore the market for lending to start-ups and two mechanisms that facilitate trade within it: (1) the salability of patent collateral and (2) the credible commitment of equity investors. Intensified trading in the secondary patent market is strongly related to lending, particularly for start-ups with more redeployable patent assets. Utilizing the crash of 2000 as a severe and unexpected capital supply shock for venture capitalists, we further show that lenders continue to finance start-ups with recently funded investors better able to credibly commit to refinance their portfolio companies while withdrawing from otherwise promising projects that could have needed their funds the most.

Representation on pension fund boards by state officials—often determined by statute decades past—is negatively related to the performance of private equity investments made by the pension fund, despite state officials’ relatively strong financial education and experience. Their underperformance appears to be partly driven by poor investment decisions consistent with political expediency, and is also positively related to political contributions from the finance industry. Boards dominated by elected rank‐and‐file plan participants also underperform, but to a smaller extent and due to these trustees’ lesser financial experience.

We explore the causes of the credit crunch during the European sovereign debt crisis and its impact on the corporate policies of European firms. Our results show that value impairment in banks’ exposures to sovereign debt and the risk-shifting behavior of weakly capitalized banks reduced the probability of firms being granted new syndicated loans by up to 53%. This lending contraction depressed investment, employment, and sales growth of firms affiliated with affected banks. Our estimates based on firm-level data suggest that the credit crunch explains between 44% and 66% of the overall negative real effects suffered by European firms. Received April 5, 2016; editorial decision February 3, 2018 by Editor Andrew Karolyi.

We examine whether the use of fair value measurement (FVM) for bank assets reduces information asymmetry among equity investors (bid-ask spread) and how this is affected by the recognition of own credit risk gains and losses (OCR). Our findings show that FVM of assets is associated with noticeably lower information asymmetry, and that this reduction is more than twice as large when banks also recognize OCR. In addition, we find that the bid-ask spread is incrementally lower for banks that provide more detailed narrative disclosures on OCR. The findings also indicate that the effects of asset FVM and OCR recognition on the bid-ask spread do not simply capture the differences in the characteristics of the banks and the quality of their information environments. Data Availability: All data are available from public sources.

Short sellers face unique risks, such as the risk that stock loans become expensive and the risk that stock loans are recalled. We show that short‐selling risk affects prices among the cross‐section of stocks. Stocks with more short‐selling risk have lower returns, less price efficiency, and less short selling.