ABSTRACT We provide theory and experimental evidence consistent with an unintended, causal relation between Corporate Social Responsibility (CSR) performance and investors' estimates of fundamental value that can be attenuated by investors' explicit assessment of CSR performance. Consistent with “affect-as-information” theory from psychology, we find that investors who are exposed to, but do not explicitly assess, CSR performance derive higher fundamental value estimates in response to positive CSR performance, and lower fundamental value estimates in response to negative CSR performance. Explicit assessment of CSR performance, however, significantly diminishes this effect, indicating that the effect among investors who do not explicitly assess CSR performance is unintended; i.e., they unintentionally use their affective reactions to CSR performance in estimating fundamental value. Supplemental findings shed light on consequences of these fundamental value estimates: investors who do not explicitly assess CSR performance rely on their unintentionally influenced estimates of fundamental value to increase the price they are willing to pay to invest in the stock of a firm with positive CSR performance. Overall, our theory and findings contribute to the CSR and affect literatures in accounting by revealing the contingent nature of how and to what extent CSR performance influences investors' beliefs about firm value and the bids these investors are likely to make in equity markets. Data Availability: Contact the authors.

ABSTRACT We empirically analyze firm‐level uncertainty generated from extreme weather events, guided by a theoretical framework. Stock options of firms with establishments in a hurricane's (forecast) landfall region exhibit large implied volatility increases, reflecting significant uncertainty (before) after impact. Volatility risk premium dynamics reveal that investors underestimate such uncertainty. This underreaction diminishes for hurricanes after Sandy, a salient event that struck the U.S. financial center. Despite constituting idiosyncratic shocks, hurricanes affect hit firms' expected stock returns. Textual analysis of calls between firm management, analysts, and investors reveals that discussions about hurricane impacts remain elevated throughout the long‐lasting high‐uncertainty period after landfall.

ABSTRACT During 2005 to 2007, the SEC ordered a pilot program in which one‐third of the Russell 3000 index were arbitrarily chosen as pilot stocks and exempted from short‐sale price tests. Pilot firms’ discretionary accruals and likelihood of marginally beating earnings targets decrease during this period, and revert to pre‐experiment levels when the program ends. After the program starts, pilot firms are more likely to be caught for fraud initiated before the program, and their stock returns better incorporate earnings information. These results indicate that short selling, or its prospect, curbs earnings management, helps detect fraud, and improves price efficiency.

ABSTRACT The average cash‐to‐assets ratio for U.S. industrial firms more than doubles from 1980 to 2006. A measure of the economic importance of this increase is that at the end of the sample period, the average firm can retire all debt obligations with its cash holdings. Cash ratios increase because firms' cash flows become riskier. In addition, firms change: They hold fewer inventories and receivables and are increasingly R&D intensive. While the precautionary motive for cash holdings plays an important role in explaining the increase in cash ratios, we find no consistent evidence that agency conflicts contribute to the increase.

ABSTRACT We focus on public‐market investor participation to analyze the firm's decision to stay public or go private. The liquidity of public ownership is both a blessing and a curse: It lowers the cost of capital, but also introduces volatility in a firm's shareholder base, exposing management to uncertainty regarding shareholder intervention in management decisions, thereby affecting the manager's perceived decision‐making autonomy and curtailing managerial inputs. We extract predictions about how investor participation affects stock price level and volatility and the public firm's incentives to go private, providing a link between investor participation and firm participation in public markets.

ABSTRACT We analyze an entrepreneur/manager's choice between private and public ownership. The manager needs decision‐making autonomy to optimally manage the firm and thus trades off an endogenized control preference against the higher cost of capital accompanying greater managerial autonomy. Investors need liquid ownership stakes. Public capital markets provide liquidity, but stipulate corporate governance that imposes generic exogenous controls, so the manager may not attain the desired trade‐off between autonomy and the cost of capital. In contrast, private ownership provides the desired trade‐off through precisely calibrated contracting, but creates illiquid ownership. Exploring this tension generates new predictions.

Richard W. Baker, Jr., Leon T. Kendall, Walter C. Nelson, J. Charles Partee, David Fritz, Harry S. Schwartz, Changing Character of the Real Estate Mortgage Markets: Discussion, The Journal of Finance, Vol. 19, No. 2, Part 1: Papers and Proceedings of the Twenty-Second Annual Meeting of the American Finance Association, Boston, Massachusetts, December 27-29, 1963 (May, 1964), pp. 321-333

We study the effectiveness of pay-and-chase lawsuits and upfront regulations for combating health care fraud. Between 2003 and 2017, Medicare spent $7.7 billion on 37.5 million regularly scheduled ambulance rides for patients traveling to and from dialysis facilities even though many did not satisfy Medicare's criteria for receiving reimbursements. Using an identification strategy based on the staggered timing of regulations and lawsuits across the US, we find that adding a prior authorization requirement for ambulance reimbursements reduced spending much more than pursuing criminal and civil litigation did on their own. We find no evidence that prior authorization affected patients' health.

Views on the role played by banks in the economy have evolved greatly over the last 125 years, as have arguments on the need, as well as the best way, to regulate them. Some of the key insights in the debate have been published in the Journal of Political Economy. In what follows, we will outline the main contributions to the debate in recent years, with an emphasis on work done at the University of Chicago or published in the JPE. We want to emphasize work that has relevance today, but despite this caveat, we will probably end up doing injustice to work published long ago. We begin with a framework for organizing the theories of intermediation. We then draw out the implications for what the theories say about regulation and note that in many respects the motivation for regulation has been only loosely tied to the theory of intermediation. We close with some open questions for regulators and economists interested in banking. We do not survey the research that has followed up on work published in the JPE, nor will we attempt to provide a detailed overview of the entire academic literature on banking. For that, we refer the reader to the excellent work by Gorton and Winton (2003) and Freixas and Rochet (2008).

ABSTRACT We study managerial incentive provision under moral hazard when growth opportunities arrive stochastically and pursuing them requires a change in management. A trade‐off arises between the benefit of always having the “right” manager and the cost of incentive provision. The prospect of growth‐induced turnover limits the firm's ability to rely on deferred pay, resulting in more front‐loaded compensation. The optimal contract may insulate managers from the risk of growth‐induced dismissal after periods of good performance. The evidence for the United States broadly supports the model's predictions: Firms with better growth prospects experience higher CEO turnover and use more front‐loaded compensation.