We document differences in human-capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses compared with workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.

Using unique data on employee ownership plans, we find that negative shocks lead to changes in portfolio choices among previously inattentive investors. Employees within employee ownership plans did not actively select into ownership, but instead received grants upon employment. Many employees remain initially passive within these plans. However, following the 2008 Financial Crisis, they become more likely to exercise options, sell restricted stock, and participate in an Employee Stock Purchase Plan (ESPP). These changes likely improve welfare. For example, nonparticipation in an ESPP leaves money on the table. Our results improve our understanding of how investors’ personal return experiences affect investment choices. Negative shocks can increase attention among previously passive investors, yielding decisions that are closer to the optimum.

We use unique worker-plant matched panel data to measure differences in wage changes experienced by workers displaced from closing plants. We observe larger losses among women than men, comparing workers who move from the same closing plant to the same new firm. However, we find a significantly smaller gap in hiring firms with female leadership. The results are strongest among women who are displaced from male-led plants and from less competitive industries. Our results suggest an important externality to having women in leadership positions: They cultivate more female-friendly cultures inside their firms.

The benefits of internal labor markets are largest when they include industries that utilize similar worker skills, thereby facilitating cross-industry worker reallocation and collaboration. We show that diversifying acquisitions occur more frequently among industry pairs with higher human capital transferability. Such acquisitions result in larger labor productivity gains and are less often undone in subsequent divestitures. Moreover, acquirers retain more high-skill workers and more often transfer workers to jobs in other industries inside the merged firm. Overall, our results link human capital reallocation with the value created by corporate diversification and provide an explanation for seemingly unrelated acquisitions.

Using unique data on employee stock purchase plans (ESPPs), we examine the influence of networks on investment decisions. Comparing employees within a firm during the same election window with metro area fixed effects, we find that the choices of coworkers in the firm's ESPP exert a significant influence on employees’ own decisions to participate and trade. Moreover, we find that the presence of high‐information employees magnifies the effects of peer networks. Given participation in an ESPP is value‐maximizing, our analysis suggests the potential of networks and targeted investor education to improve financial decision‐making.

Using a novel data set of over 3,500 public and private firms, we construct the network of executive and director connections prior to the 1929 financial market crash. We find that more connected firms have 17% higher 10-year survival rates. Consistent with a working capital channel, the results are strongest for small, private, cash-poor firms, and firms located in counties with high bank suspension rates. Moreover, connections to cash-rich firms that increase accounts receivable matter the most. Our results suggest that network connections can play a stabilizing role during a financial crisis by easing the flow of capital to constrained firms.

We document differences in human-capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses compared with workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.

Compensation, status, and press coverage of managers in the United States follow a highly skewed distribution: a small number of “superstars” enjoy the bulk of the rewards. We evaluate the impact of CEOs achieving superstar status on the performance of their firms, using prestigious business awards to measure shocks to CEO status. We find that award-winning CEOs subsequently underperform, both relative to their prior performance and relative to a matched sample of non-winning CEOs. At the same time, they extract more compensation following the awards, both in absolute amounts and relative to other top executives in their firms. They also spend more time on public and private activities outside their companies, such as assuming board seats or writing books. The incidence of earnings management increases after winning awards. The effects are strongest in firms with weak corporate governance. Our results suggest that the ex post consequences of media-induced superstar status for shareholders are negative.

We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.

We argue that managerial overconfidence can account for corporate investment distortions. Overconfident managers overestimate the returns to their investment projects and view external funds as unduly costly. Thus, they overinvest when they have abundant internal funds, but curtail investment when they require external financing. We test the overconfidence hypothesis, using panel data on personal portfolio and corporate investment decisions of Forbes 500 CEOs. We classify CEOs as overconfident if they persistently fail to reduce their personal exposure to company‐specific risk. We find that investment of overconfident CEOs is significantly more responsive to cash flow, particularly in equity‐dependent firms.