By signing a Shareholder Tender Agreement (STA) a shareholder pre-commits to tender her shares to a particular bidder, forsaking the right to tender to any subsequent bidder. In a representative sample of tender offers between 1995 and 2010, 60% of the offers contain an STA. STA deals are associated with lower premiums, greater ownership concentration, greater management ownership, and greater information asymmetry. The results support the hypothesis that STAs certify value to uninformed shareholders, thereby increasing the efficiency of the tender offer process. The evidence does not support the view that STAs expropriate value from shareholders of target companies.

In 1931, California became the last U.S. state to adopt limited liability. Prior to that, from its inception as a state in 1849, stockholders of California corporations faced pro rata unlimited liability. California's unique liability rule during 1849–1931 provides a natural experiment for testing Woodward's (1985) and Alchian and Woodward's (1987, 1988) hypothesis that limited liability reduces transaction costs and facilitates the transferability of shares. Using a small sample of publicly traded California firms and a corresponding sample of benchmark companies, we find that trading volume and share turnover were significantly lower for California firms when California had unlimited liability. After California adopted limited liability, trading volume and share turnover increased significantly for California firms relative to non-California firms. In addition, bid–ask spreads were significantly higher for California firms during the period of unlimited liability and they declined for California firms relative to non-California firms after California adopted limited liability. The results support Alchian and Woodward's hypothesis that limited liability reduces transaction costs and promotes the transferability of shares.

We find that CEO compensation increases following acquisitions only in those deals in which acquirer stock is used as the method of payment. These compensation increases are driven by increases in equity-based compensation and are concentrated in riskier acquirers, in riskier acquisitions, and in acquirers whose CEOs have low exposure to the stock price. We find little support for traditional agency cost explanations of changes in CEO pay following acquisitions. However, our findings are broadly consistent with compensation changes representing a contracting solution to a two-sided adverse selection problem that is present only in stock acquisitions.

This paper investigates the timing and source of anomalous positive long-run abnormal returns following repurchase authorizations. Returns between program authorization and completion announcements are indistinguishable from 0. Abnormal returns occur only after completion announcements. Long-run returns are largely attributable to announcement returns at subsequent authorizations and takeover attempts; that is, anomalous post-authorization returns are not persistent drifts but rather step functions. These findings have important implications for prior papers examining this most persistent and widespread anomaly. Further, our results serve to refocus the search for a rational explanation for the anomaly on subsequent repurchase announcements and takeover bids.

In the period surrounding World War I, US firms sharply increased investment in fixed assets and working capital to accommodate large increases in demand associated with the war. Concurrently, the US adopted an excess profits tax, which created a tax bias in favor of equity financing. Despite this tax bias, firms in need of external funds largely issued debt, not equity, to finance investment spikes when the excess profits tax was in effect. Further, we find these firms systematically reduced debt after the war, whereas other firms did not. The results support models that link the dynamics of firms’ financing decisions with the dynamics of their investment opportunities and are inconsistent with models that emphasize taxes as a primary determinant of financing decisions.

We empirically examine whether risk-taking by publicly traded US companies declined significantly after adoption of the Sarbanes-Oxley Act of 2002 (SOX). Several provisions of SOX are likely to discourage risk-taking, including an expanded role for independent directors, an increase in director and officer liability, and rules related to internal controls. We find several measures of risk-taking decline significantly for US versus non-US firms after SOX. The magnitudes of the declines are related to several firm characteristics, including pre-SOX board structure, firm size, and R&D expenditures. The evidence is consistent with the proposition that SOX discourages risk-taking by public US companies.

Though short sellers on average succeed at identifying overvalued equity, firms often signal disagreement with short sellers by repurchasing stock when short interest increases. We investigate whether this disagreement reflects a myopic defense of inflated prices, or positive private information. These repurchases appear motivated by managers’ private information, not agency issues, even when managerial benefits to short-termism are enhanced or monitoring is weaker. Managers’ informational advantage relates to subsequent news, earnings, and risk, but is attenuated if activists target management or insiders sell. A trading strategy based on our findings earns 7.5% annually.

We examine the relation between the trust that employees have in management and the M&A activity of firms. We measure this trust by using rankings compiled by the Great Place to Work Institute (GPWI) from 1998 to 2011. Although the volume of M&A activity is not significantly different for firms with strong cultures of trust (“SCT firms”) versus other firms, the relative size of acquisitions announced by SCT firms is significantly smaller than the size of acquisitions announced by other firms. Furthermore, when SCT firms announce relatively large acquisitions, bidder returns and the percent change in the combined values of bidders and targets are lower than the corresponding returns for other firms. Finally, when SCT firms make large acquisitions, they are significantly more likely to suffer a loss in their GPWI ranking as compared with other SCT firms. Overall, the results are consistent with the conclusion that the M&A policies of firms are influenced by a culture of trust between employees and management.

Accelerated share repurchases (ASRs) are credible commitments by firms to repurchase shares immediately. Including an ASR in a repurchase program reduces the flexibility that firms have to alter an announced program in response to subsequent changes in the price and liquidity of its shares, unexpected shocks to cash flow and/or investment, etc. Thus, we investigate whether firms' decisions to include ASRs in their repurchase programs are associated with factors expected to influence the costs of lost flexibility and the benefits of enhanced credibility and immediacy. We find robust evidence consistent with the costs of lost flexibility and the benefits of credibility and immediacy being important determinants of ASR adoption. Additionally, we find that ASR announcements are associated with positive average abnormal stock returns.

Filing agents—intermediaries used by 80% of U.S. firms—are associated with leakage of information that affects stock prices. Prior to the public release of a securities filing, most firms outsource the final processing and submission of the filing to a third-party filing agent. We find leakage is higher when firms use filing agents than when firms self-file, particularly pre-2018. Leakage is greater when the private information is more valuable and decreases when firms switch to self-filing. Our research suggests filing agents, and a firm’s choice to use them, are an important, understudied channel for the leakage of private information.