I study the effect of patent-infringement claims by patent trolls on acquisitions of small firms. Exploiting staggered adoption of state anti-patent troll laws, I find that the laws have two effects. First, the number of acquisitions of small firms declines after these laws are adopted. Second, the anti-troll laws increase the acquisition price for acquirers. The market reflects the increased cost of acquisition as measured by lower acquisition announcement returns. Large firms increase R&D after the adoption of state laws, replacing external innovation. Using a sample of acquisitions that are plausibly unaffected by the laws, I disentangle alternative explanations.

I show equity mutual funds invest less in companies with higher CEO inside debt, whereas corporate bond funds invest more in such companies. The effect persists after accounting for endogeneity using first-time mandatory disclosure of inside debt in 2007 as a quasi-natural experiment, and using state-level personal income tax rates as instruments for inside debt. This finding suggests that fund managers pay attention to incentive implications of inside debt when making portfolio decisions. The effect of inside debt on portfolio allocation is stronger in firms with higher likelihood of default and higher idiosyncratic risk, firms suffering from debt overhang, and firms with lower credit ratings. Lastly, equity funds that underweight high-inside debt firms and bond funds that overweight them deliver positive alphas.

We document two distinct mutual fund strategies: “Swinging for the Fences” (SF), in which managers hold stocks with extreme style-adjusted returns on either tail of the return distribution, and “Batting for Average” (BA), in which managers seek stocks with consistently moderate performance. We provide evidence that these strategies are persistent and deliberate. Existing measures of active management and known asset-pricing factors do not explain the strategies. SF attracts more flow, particularly when funds mention specific stock holdings in shareholder reports. SF funds charge higher fees and hold riskier portfolios; yet, they fail to deliver higher risk-adjusted returns. In falsification tests, SF strategies are not present in passive funds, supporting our conclusion that SF and BA are intentional strategies.