Abstract Neither theory nor existing empirical evidence support the notion that wealth taxation reduces saving. Theoretically, the effect is ambiguous due to opposing income and substitution effects. Empirically, the effect may be masked by misreporting responses. Using geographic discontinuities in the Norwegian annual net-wealth tax and third-party-reported data on savings, I find that wealth taxation causes households to save more. Each additional NOK of wealth tax increases annual net financial saving by 3.76, implying that households increase saving enough to offset both current and future wealth taxes. This positive effect on saving is primarily financed by increases in labour earnings. These responses are the combination of small negative effects of increasing the marginal tax rates and larger positive effects of increasing average rates. My findings imply that income effects may dominate substitution effects in household responses to rate-of-return shocks, which has implications for both optimal taxation and macroeconomic modelling.

Corporate insiders often become aware of hedge fund attention prior to a 13D filing. We find abnormal buying activity by insiders in the months leading up to hedge fund 13D filings. Whereas 13D announcement abnormal returns are 7.72 %, profits to insiders who buy average 12.09 %. Insider buying is not linked to common firm characteristics that predict activist targeting. Our findings indicate that insiders are benefiting from private knowledge that their firm has become the focus of hedge fund activism, and sometimes this knowledge comes directly from the activist. However, insiders largely refrain from trading when there is formal communication with the activist. Profits to insiders who buy when there are no talks prior to the 13D filing are 14.49 %, triple the amount for insiders who have had early talks with the hedge fund. Insider trading is linked to indicators of poor corporate culture, but not related to outcomes of activism campaigns.

Abstract Public firms that go private are no longer subject to SEC financial reporting requirements. This study examines peer firms' disclosure responses following the lost information spillover from going‐private events. We first support the lost information transfer, finding evidence that analyst forecasts of peers' earnings are less accurate and more disperse and that peer liquidity is lower immediately following going‐private transactions. In response, industry peers increase disclosure quality in mandatory filings. Peers that enhance disclosure regain some of the lost informational benefits. The disclosure response is most evident in firms that rely more on intra‐industry information spillover, firms with lower competitive concerns, and firms with the greatest deteriorations in their information environments after going‐private activity. Our study examines an underexplored aspect of going‐private transactions—the loss of public disclosure—and finds that the lost information imposes a negative externality that prompts peers to increase self‐disclosure to regain informational benefits.

The Sustainability Accounting Standards Board (SASB) has classified sustainability topics as material or not material for investors. We leverage the staggered release of the SASB classifications from 2013 to 2016 to examine whether and how they prompt changes in U.S. firms' sustainability performance. We measure sustainability performance using RepRisk scores, which reflect environmental, social, and governance (ESG) incidents. We find that RepRisk scores on sustainability topics classified as material decrease following the release of SASB classifications. Conversely, incident scores on nonmaterial sustainability topics increase. This suggests that firms improve their sustainability performance on topics the SASB deems relevant for investors while simultaneously performing worse on irrelevant topics. Firms adjust their internal sustainability policies to mirror these changes. The changes in sustainability performance occur primarily through two channels. We document that higher exposure to the classifications from shareholder pressure and sustainability-linked executive compensation prompts managers to prioritize sustainability topics classified as relevant for investors over irrelevant ones.

Abstract Financial reporting fraud continues to cost companies millions of dollars annually and is a major source of concern for regulators, stakeholders, and auditors. While academic research has largely focused on external auditors' fraud detection efforts, we analyze whether auditors can help prevent occurrences of fraud through low‐cost reputational signals of higher “strategic reasoning”; strategic reasoning refers to strategies that individuals take in light of the anticipated actions of others (see van der Hoek et al., 2005, A logic for strategic reasoning, AAMAS '05, 157−164). Specifically, we consider the potential impact on manager behavior of signaling whether audit professionals use zero‐, first‐, and second‐order audit approaches. Zero‐order audit approaches involve making decisions based mostly on the auditor's incentives, first‐order approaches involve decisions based mostly on the client's incentives, and second‐ or higher‐order audit approaches involve decisions based on the client's incentives while recognizing that the client will respond to the auditor's decisions (see Wilks & Zimbelman, 2004, Accounting Horizons , 18 (3), 173–184). Using a context‐rich experiment in which manager participants have no history of interacting with the auditor, we find that the likelihood of fraud occurring is lower when it is signaled that audit partners and their teams use a first‐ or second‐order strategic audit approach compared to a zero‐order approach, due to an increase in the perceived likelihood of the auditor detecting fraud. We also consider whether signaling an auditor's level of strategic reasoning influences the level of effort used to conceal fraud and find an increase in the expected level of fraud effort for managers in the first‐ and second‐order audit conditions.

Using financial account data linking small businesses to their owner households, we examine how business owners’ consumption responded to changes in business revenues during the COVID-19 crisis. In the first two months following the National Emergency, business revenues declined by 40 percent, largely driven by national factors rather than local infection rates or policies. However, the pass-through of revenue losses to owner consumption was limited: each dollar of revenue loss resulted in only a 1.6-cent decline in consumption. This muted pass-through persisted through 2021, even after the introduction of COVID-19 vaccines. Our findings suggest that federal subsidies and pandemic-induced reductions in spending opportunities explain the limited impact.

We estimate financial institutions’ portfolio tilts related to U.S. stocks’ environmental, social, and governance (ESG) characteristics. From 2012 to 2023, ESG-related tilts consistently total about 6% of the investment industry’s assets and rise from 17% to 27% of institutions’ total portfolio tilts. Significant ESG tilts arise from the choice of stocks held and, especially, the weights on stocks held. The largest institutions tilt increasingly toward green stocks, while other institutions and households tilt increasingly brown. Divestment from brown stocks is typically partial rather than full, even for individual mutual funds. UNPRI signatories and European institutions tilt greener; banks tilt browner.

Abstract I exploit a Dutch reform in the regulatory discount curve that makes the liabilities of pension funds and insurance companies (P&Is) more sensitive to changes in 20-year interest rates but less so to longer maturity rates. Following the reform, P&Is reduced their longest maturity bond holdings but increased those with 20-year maturities, steepening the long end of the yield curve. Using the reform as a shock to identify price elasticities of demand at the sector level based on holdings across maturity buckets and time, I show that banks are more price elastic than other investors and absorb demand shocks.

Abstract Evaluating organizational effectiveness is a significant challenge for nonprofit donors making donation allocation decisions. Donations may be misallocated if organizational effectiveness is inadequately assessed, and donors, who are often organizational outsiders, rely on nonprofit disclosures on IRS Form 990 to make such assessments. We examine whether donors value volunteer commitment, as measured by the number of volunteers that nonprofits disclose on Form 990, alongside financial and governance disclosures in assessing organizational effectiveness. Donors and volunteers prefer to make respective gifts of money and time to nonprofits that are effective in furthering their missions. Based on the premise that volunteers, as organizational insiders, are better positioned than donors to judge the impact of their contributions, we hypothesize that volunteer commitment provides value‐relevant information to donors for use in assessing imprecise effectiveness signals—namely, the program ratio and corporate governance disclosures. Consistent with this, we find that the value relevance of the program ratio and corporate governance disclosures to donors is increasing with the level of volunteer commitment. These results suggest that donors view volunteer commitment as a signal of effectiveness, useful in interpreting other signals of effectiveness. The evidence is more pronounced among nonprofits that report more credible volunteer disclosures, have a larger proportion of sophisticated donors, and are more complex. These findings have implications for regulators considering nonprofit disclosure policies, as well as nonprofit managers and directors engaging volunteers.