We study how government control affects the roles of the media as an information intermediary and a corporate monitor. Comparing a large sample of news articles written by state-controlled and market-oriented Chinese media, we find that articles by the market-oriented media are more critical, more accurate, more comprehensive, and timelier than those by the state-controlled media. Moreover, only articles by the market-oriented media have a significant corporate governance impact. Subsample analyses, interviews with journalists, and a survey of university students suggest that the market-oriented media’s superior effects are explained by their operating efficiency and independence.

We hypothesize that short selling has a disciplining role vis-à-vis firm managers that forces them to reduce earnings management. Using firm-level short-selling data for thirty-three countries collected over a sample period from 2002 to 2009, we document a significantly negative relationship between the threat of short selling and earnings management. Tests based on instrumental variable and exogenous regulatory experiments offer evidence of a causal link between short selling and earnings management. Our findings suggest that short selling functions as an external governance mechanism to discipline managers.

We study the role of logistics information in the stock price discovery process. Using a proprietary dataset on parcel-level express delivery service records from one of the largest express service providers in China, we find that express delivery contains firm-specific information for stock pricing. A long/short portfolio of buying (selling) stocks with high (low) quarterly growth in the number of parcels sent by firms generates an 8.23 percent risk-adjusted annual return. The return predictability is more significantly driven by document, light, and business-to-business parcels, which reflects the intensity of a firm’s overall operations (rather than just sales growth), and by parcels sent to new addresses, which represents new business expansion. Echoing this return predictability, parcel growth also predicts firm growth, profitability, and earnings surprises. Finally, we provide evidence on return predictability associated with topology of logistic network identified by parcel delivery data.

Practical real-world activities consume energy and emit thermal infrared radiation (TIR). Leveraging this physical fact, we develop a direct, real-time measure of firms’ operating activity using satellite data. Tracking 28,236 factories of Chinese listed firms, we find TIR declines significantly following operational shocks and strongly forecasts subsequent sales growth, costs, investment, employment, and profits. TIR also predicts future stock returns, especially among opaque firms and those with limited investor access, yet sophisticated investors largely ignore this information. Our findings highlight TIR as a distinctive, under-exploited indicator of corporate fundamentals.

We study how investor sentiment affects stock prices around the world. Relying on households’ Google search behavior, we construct a weekly measure of sentiment for 38 countries during 2004–2014. We validate the sentiment index in tests using sports outcomes and show that the sentiment measure is a contrarian predictor of country-level market returns. Furthermore, we document an important role of global sentiment in stock markets.

We examine the effect of media coverage on firm innovation. Using a comprehensive sample of corporate news coverage and patenting over the period from 2000 to 2012, we find a negative relation between media coverage and firm innovation. We further document the two offsetting economic mechanisms underlying the impact of media coverage on innovation: the media’s role of short-term pressure on managers relates negatively to innovation, while its role of mitigating financial constraints is positively associated with innovation. Our findings provide new insights into the effect of news coverage on firms’ long-term growth.

Theoretical arguments suggest that as the degree of a country's home bias increases, the global risk sharing between domestic and foreign investors will reduce and thereby increase the country's cost of capital. Consistent with this prediction, we find international differences in the cost of capital to be strongly and positively related to varying degrees of home bias for 38 markets. This finding is robust to different cost of capital proxies, different control variables, alternative home-bias measures, international tradability of stocks, and alternative specifications. Therefore, the overall evidence implies that countries may enjoy a significantly lower cost of capital by reducing the extent of their home bias and hence, increasing global risk sharing.

This study explores whether a firm’s auditor choice affects its ability to access foreign equity capital. Using the equity holdings of 35,665 foreign mutual funds from 30 countries for the period 1998–2009, we find evidence that appointing a Big 4 auditor is associated with the increased level of foreign mutual fund ownership in firms. Our results are robust when conditioned on firm-level information asymmetries, country-level information disclosure quality, and when employing the Enron–Andersen fiasco as the natural experiment. Furthermore, appointing Big 4 auditors is particularly important for firms to attract foreign capital during the 2008 global financial crisis.

We investigate the effect of stock market liberalization on technological innovation. Using a sample of 20 economies that experience stock market liberalization, we find that these economies exhibit a higher level of innovation output after liberalization and that this effect is disproportionately stronger in more innovative industries. The relaxation of financial constraints, enhanced risk sharing between domestic and foreign investors, and improved corporate governance are three plausible channels that allow stock market liberalization to promote innovation. Finally, we show that technological innovation is a mechanism through which stock market liberalization affects productivity growth and therefore economic growth. Our paper provides new insights into the real effects of stock market liberalization on productivity growth and the economy.

We study the impact of political relations on media coverage. Using a sample of 3,290 American Depository Receipts (ADRs) from 45 countries, we find that deteriorating political relations between the US and an ADR firm's home country induce negative coverage by the US media of the ADR firm. To alleviate endogeneity, we adopt France's and Germany's opposition to the Iraq War and the inauguration of the US president as two shocks to bilateral political relations between the US and foreign countries. In placebo tests, we show no negative effect of political relations on ADR firms’ press releases or non-US media coverage. We further document the three economic mechanisms underlying the impact of political relations on media coverage: US journalists’ country sentiment, a country's popularity among US readers, and the US media's political beliefs. Finally, we document two consequences of negative coverage by the US media: investors respond less to negative news of firms from countries with deteriorating political relations with the US, and negative coverage leads to a greater likelihood of firms terminating their ADRs.