I develop measures of firm-level pay disparity and examine their relation to firm performance. Using comprehensive compensation data for a large sample of firms, I find no statistically significant relation between the ratio of CEO-to-mean employee compensation and performance. I next create empirical models that allow me to separate the components of CEO and employee compensation explained by economic factors from those that are not, and use these models to estimate explained and unexplained pay disparity. After validating my estimate of unexplained pay disparity as a proxy for pay fairness, I find robust evidence of a negative (positive) relation between unexplained (explained) pay disparity and future firm performance.

We develop a measure of firm-year-specific human capital investment from publicly disclosed personnel expenses (PE) and examine the stock market valuation of this investment. Measuring the future value of PE (PEFV) based on the relation between lagged PE and current operating income, we first show that PEFV is positively associated with characteristics of human-capital-intensive firms. Next, we find that PEFV has a positive pricing coefficient, implying that the market recognizes some of its variation. In our main analysis, we find that market participants fail to fully impound the investment in human capital. The absolute value of analyst forecast errors is increasing in firm PEFV, and the signed value of these errors reveals that analysts are pessimistic for earnings of firms with high human capital investments. A long-short portfolio based on PEFV produces annualized value-weighted (equal-weighted) abnormal returns of 6.5% (3.5%). Portfolios formed by interacting PEFV with total PE, which combines the current potential investment in human capital with the historic portion of PE that created human capital, increase these returns to between 4.8% and 7.8%. These results are insensitive to numerous empirical choices.

We investigate whether U.S. House representatives and their staff seek financial information from constituent firms to inform their legislative decisions. We exploit shifts in U.S. congressional districts (i.e., the reconfiguration of federal district lines or redistricting) that introduce new constituent firms to legislators’ districts. To the extent that legislators and their staff collect and rely on firms’ financial statement information, we expect that a change in representation as a result of redistricting will result in a significant and observable change in searches for information about new constituent firms. Our evidence supports this prediction. We also find that the timing of searching coincides with legislators’ roll call votes, particularly ahead of more controversial bills and for bills lobbied by sample firms. Finally, we find that new constituent firms respond to increased information demands after a redistricting event by supplying more policy-relevant disclosures and increasing lobbying.

Using a novel dataset, we show that components of firms’ GAAP earnings stemming from ancillary business activities or transitory shocks are significant in frequency and magnitude. These components have grown over time and are dispersed across various sections of the 10-K. Excluding them from GAAP earnings yields a core earnings measure that distinguishes between the recurring and non-recurring components of net income and forecasts future performance. Analysts and market participants are slow to impound these earnings components’ implications, particularly the amounts disclosed in the footnotes. Trading strategies that exploit non-core earnings produce abnormal returns of 8% per year.