We document that return anomalies related to management discretions are mitigated for firms followed by more experienced analysts. Nonetheless, only experience directly covering the firm matters while experience covering other firms is not associated with greater price efficiency. Focusing on the accrual anomaly, we then examine research and monitoring as possible channels through which experience mitigates mispricing. For firms followed by more experienced analysts, we find that forecast revisions and stock prices respond more positively to the accrual component of earnings. We further find that accrual quality is higher in firms followed by more experienced analysts, which holds after using both propensity score matching and exogenous events of brokerage closures and mergers to control for endogeneity. Collectively, our results are consistent with monitoring being the primary mechanism by which experienced analysts reduce accrual mispricing.

Informal risk sharing within social networks and formal financial contracts both enable households to manage risk. We find that financial contracting reduces participation in social networks. Specifically, increased crop insurance usage decreased local religious adherence and congregation membership in agricultural communities. Our identification utilizes the Federal Crop Insurance Reform Act of 1994 that doubled crop insurance usage nationally within a year, although changes in usage varied across counties. Difference-in-difference and Spatial First Difference tests confirm that households substituted insurance for religiosity. This substitution was associated with reductions in crop diversification and crop yields, indicating an increase in moral hazard.

We measure financial literacy and study its impact on household use of digital finance using the 2015 and 2017 China Household Finance Survey. We find that financial literacy significantly boosts the use of digital finance, including mobile payments, online borrowing, and online financial products. This effect is more pronounced for online borrowing and online financial products than for mobile payments. This result suggests that the impact of financial literacy increases with the complexity of digital finance. Furthermore, financial literacy plays a more important role in promoting the use of digital financial services among disadvantaged groups, such as families with low income and wealth, the elderly, and residents in rural areas, compared with their counterparts.

This article investigates how transportation networks shape firms’ geographic footprint by reducing monitoring costs of distant investments. Exploiting the staggered expansions of China’s passenger high-speed rail (HSR) network, we document that the amount of intercity investment between a pair of cities increases by 45% with the introduction of an HSR line connecting the cities. We enhance the causal inference by applying high-dimensional fixed effects, and focusing on city pairs that are “accidentally” connected in the network. The HSR effect is the strongest in industries that require on-site monitoring, as well as for controlling stakes in large distant investments.

This study examines whether the proportion of equity-based compensation in outside director compensation is associated with corporate strategic alliances. We hypothesize that equity incentives provided to outside directors mitigate potential agency conflicts between outside directors and shareholders that arise from the strategic alliance decision-making process, thus resulting in more alliance activities. Our empirical evidence indicates that the percentage of equity in outside director compensation is positively associated with the incidence and the number of strategic alliance activities. Additionally, when the proportion of outside directors' equity in total compensation is higher, firms with strategic alliances generate better future stock returns. Overall, our findings suggest that providing equity incentives in outside director compensation mitigates the agency problems inherent in corporate strategic alliance decisions and enhances the quality of alliance activities.

The literature on corporate social responsibility (CSR) disclosure focuses on its economic consequences, but little is known about motivations—especially CEO personal incentives—behind such disclosure. Using an array of CSR reporting measures, we find that career concerns of CEOs early in their tenure motivate them to use voluntary CSR reporting as a signaling mechanism. The negative association between CEO tenure and CSR reporting is more pronounced in firms with stronger information intermediaries—that is, a higher level of socially responsible investors, a higher number of analysts following, and a higher level of media coverage. We also find that CEOs early in their tenure receive more personal benefits after voluntary CSR reporting, in terms of higher total compensation, better reputation, and less turnover, than CEOs later in their tenure. Taken together, the findings of our study lend support to the conjecture that CEO career concerns early in their tenure can be an important determinant of firms' voluntary CSR reporting.

Following management theory on organizational legitimacy, we predict that managers mimic the accounting of industry-leading companies to gain legitimacy. Such demand for legitimacy is expected to be greater for new managers because stakeholders are more uncertain about the managers’ ability. Using a sample of CEO turnovers, we find that a firm increases financial statement comparability with industry leaders after the new CEO assumes office. This relation is stronger when (1) new managers lack executive experience at larger firms, are younger, or belong to an underrepresented group (i.e., are female or nonwhite); (2) networks that facilitate imitation are more intense, such as when firms and peers are located in the same metropolitan statistical area (MSA) and when they share auditors or blockholders; and (3) firms’ operating environments are more volatile. These findings support the idea that CEOs’ demand for legitimacy leads to more comparable accounting. Data Availability: Data are available from the public sources cited in the text.

Child marriage remains common even where female schooling and employment opportunities have grown. We experimentally evaluate a financial incentive to delay marriage alongside a girls' empowerment program in Bangladesh. While girls eligible for two years of incentive are 19 percent less likely to marry underage, the empowerment program failed to decrease adolescent marriage. We show that these results are consistent with a signaling model in which bride type is imperfectly observed but preferred types (socially conservative girls) have lower returns to delaying marriage. Consistent with our theoretical prediction, we observe substantial spillovers of the incentive on untreated nonpreferred types.

We investigate circumstances in which referral-based hiring can exacerbate rather than mitigate agency problems. When incentive contracts cannot fully align employees’ incentives with the interests of the firm, employees may behave opportunistically. Referred job candidates likely obtain inside information from existing employees about opportunistic incentive responses, and it is this information that exacerbates agency problems. Our research setting enables us to distinguish between referred and nonreferred employees. It also features a context in which the incentive contract consists of two measures with different properties (efficiency and quality), which allow for opportunistic incentive responses, i.e., sacrificing quality for efficiency. We find that referred employees focus more on efficiency and less on quality than nonreferred employees. We further document the persistence of this behavior and the differential departure likelihood of referred and nonreferred employees. Our findings suggest that referral-based hiring can exacerbate agency problems when incentive contracts allow for opportunistic gains. Data Availability: All data are proprietary. Confidentiality agreements prevent the authors from distributing the data.