While firms manage their capital structure to target credit ratings, how targeting impacts capital structure decisions is not well understood. We hypothesize that firms engage in ratings cushioning by preserving a leverage buffer against rating downgrades. We show that ratings cushions are sizable in magnitude. Following plausibly exogenous increases in cushion, firms increase leverage to consume their newfound cushion particularly when they have attractive investment opportunities and are less exposed to earnings shocks. These findings suggest that ratings cushioning restrains firms from pursuing otherwise more aggressive capital structure and investment choices.

We document that firms exhibit “excess” commitment to R&D projects and examine its consequences for innovation outcomes. Using detailed data on pharmaceutical firms’ clinical trial projects, we find that trial delays, empirically uncorrelated with multiple project-quality measures, substantially reduce firms’ subsequent project-termination propensity. This result remains robust when we use variation in clinical trial site congestion to instrument for unexpected delays. Excess commitment intensifies when CEO compensation has greater stock-price sensitivity and the CEO is responsible for the project’s initiation. Our findings have broader implications: delay-driven commitment reduces new drug project initiations, with further evidence suggesting efficiency losses for firms.

This paper investigates the effects of housing wealth shocks on workers’ career decisions related to job quality and long-term career outcomes. Using a novel data set of career histories in the film industry, we find that homeowners facing greater house price declines reduce participation in high-quality projects but increase involvement in low-quality films. Conversely, renters are not affected by these shocks. Consistent with individuals using home equity during job searches, these shocks have a greater impact on homeowners who extracted home equity during the housing boom. Moreover, house price declines from the housing crisis affect long-term career paths.

This paper studies how investing in venture capital (VC) affects the entrepreneurial outcomes of individual limited partners (LPs). Using comprehensive administrative data on entrepreneurial activities and VC fundraising and investments in China, we find that after investing in a successfully launched VC fund, individual LPs create significantly more ventures than do LPs in funds that failed to launch. These new ventures tend to be high-tech firms with better employment outcomes and more patent activity. Our results suggest that venture investments are a channel through which individual LPs learn.

Using firms’ online job postings, we identify economically related peer firms in the labor market. Firms’ labor peers are vastly different from their industry peers, where the overlap is about 20%. Returns of labor-linked firms strongly comove, suggesting common responses to labor market shocks on average. However, industry shocks can affect firms outside the industry through the labor network, leading to substitution effects between labor peers. Last, we show that investors do not promptly incorporate news about labor-linked firms, leading to predictable subsequent returns. A long-short strategy exploiting this delay generates an average annualized excess return of 9%.