This research investigates the impact of cyberattacks on tax aggressiveness using a difference-in-differences analysis with a matched sample. We find that firms experiencing cyberattacks are more likely to have lower cash effective tax rates and greater discretionary book-tax differences. We further show that cyberattacks have a greater impact on corporate tax aggressiveness when firms are more exposed to financial distress. Additional analyses show tax aggressiveness increases less when firms are in states with enactments of notification laws and firms with ex ante higher cybersecurity investment. Our aggregate results suggest that firms take more tax risky positions in response to greater financial distress and information asymmetry, which are attributed to the consequences of cyberattacks.

This research examines the effect of product market threats on firms’ leverage adjustments. We find that competitive pressures from the product market accelerate the leverage speed of adjustment (SOA) toward the target capital structure. To establish the causal effect of competitive threats on SOA, we exploit a quasi-natural experiment provided by large import tariff reductions in the U.S. manufacturing sector and show a significant increase in firms’ leverage adjustments after large tariff cuts. The impact of product market threats on leverage adjustments is more pronounced for firms with poor governance quality and exposed to product market threats. Finally, to the extent that reaching the target capital structure enhances firm value, we note that the faster SOA following competition translates into higher firm value. Overall, our study highlights the “bright side” of product market competition and suggests that agency conflicts between managers and shareholders are attenuated by intensified competition.

This research empirically examines how customer concentration affects stock market liquidity of supplier firms. We find that firms with a concentrated customer base are strongly and positively associated with stock market liquidity, which is robust to a battery of model specifications and endogeneity issues. The positive relationship between customer concentration and liquidity is concentrated among firms with relatively small size, high financial constraints, and high information asymmetry. Further analyses provide supportive evidence on the monitoring role of principal customers in improving firms’ stock liquidity. Overall, these findings suggest that relationships with principal customers serve as valuable signals for the underlying quality of firms, and thus firms in such relationships are able to achieve favorable economic outcomes.