Advertising is a critical competitive tool that shapes interactions among firms in the product market. Using third-party tracked data on advertising outlet costs, I find that a nontrivial portion of public firms, even those with intense advertising activities, do not disclose advertising expenses in their financial statements, indicating significant disclosure discretion. I further use product category-level advertising data to develop a firm-specific measure of advertising rivalry. I predict and find that advertising rivalry is negatively associated with the likelihood of disclosing advertising expenses. This negative association is more pronounced when firms advertise on less trackable media outlets or have more mature products. These findings suggest that firms consider their advertising expenses proprietary and that concerns about advertising competition discourage the disclosure of advertising expenses.

I examine the impact of state-contingent allocation of creditor control rights on financial reporting. Using a discontinuity analysis, I find that firms' financial reporting becomes more conservative immediately after covenant violations and this effect persists for at least eight quarters. The conservatism effect is more pronounced when creditors possess greater bargaining power, when firms' operations are more volatile, and when creditors put Chief Restructuring Officers in place. My findings identify a specific channel through which debt financing shapes corporate financial reporting and provide direct evidence supporting the debt contracting explanation for conservatism posited in Watts (2003).

We examine how corporate payout policy is affected by managerial stock incentives using data on more than 1,100 nonfinancial firms during 1993–97. We find that management stock ownership is associated with higher payouts by firms with potentially the greatest agency problems – those with low management stock ownership and few investment opportunities or high free cash flow. We also find that management stock options are related to the composition of payouts. We find a strong negative relationship between dividends and management stock options, as predicted by Lambert et al (1989), and a positive relationship between repurchases and management stock options. Our results suggest that the growth in stock options may help to explain the rise in repurchases at the expense of dividends.

Using a regression discontinuity design, we provide evidence that there are sharp and substantial employment cuts following loan covenant violations, when creditors gain rights to accelerate, restructure, or terminate a loan. The cuts are larger at firms with higher financing frictions and with weaker employee bargaining power, and during industry and macroeconomic downturns, when employees have fewer job opportunities. Union elections that create new labor bargaining units lead to higher loan spreads, consistent with creditors requiring compensation when employees gain bargaining power. Overall, binding financial contracts have a large impact on employees and are an amplification mechanism of economic downturns.

Private equity for rapidly growing small business is raised primarily from the organized venture capital market and the informal market, comprised of high-net worth individuals or “angel” investors. We discuss commercially and publicly available data on private equity, the research findings of studies that use these data, and some of the more important questions that the available data have been unable to address.