Prior theoretical work generates conflicting predictions with respect to how CEO age impacts risk-taking behavior. Consistent with the prediction that risk-taking behavior decreases as CEOs become older, I document a negative relation between CEO age and stock return volatility. Further analyses reveal that older CEOs reduce firm risk through less risky investment policies. Specifically, older CEOs invest less in research and development, make more diversifying acquisitions, manage firms with more diversified operations, and maintain lower operating leverage. Further, firm risk and the riskiness of corporate policies are lowest when both the CEO and the next most influential executive are older and highest when both of these managers are younger. Although older CEOs prefer less risky investment policies, I document results suggesting that CEO and firm risk preferences tend to be aligned. Lastly, I find that a trading strategy that goes long in a portfolio of stocks consisting of firms managed by younger CEOs and short in a portfolio of stocks comprised of firms led by older CEOs would generate positive risk-adjusted returns. Overall, my results imply that CEO age can have a significant impact on risk-taking behavior and firm performance.

I exploit the adoption of state‐level labor protection laws as an exogenous increase in employee firing costs to examine how the costs associated with discharging workers affect capital structure decisions. I find that firms reduce debt ratios following the adoption of these laws, with this result stronger for firms that experience larger increases in firing costs. I also document that, following the adoption of these laws, a firm's degree of operating leverage rises, earnings variability increases, and employment becomes more rigid. Overall, these results are consistent with higher firing costs crowding out financial leverage via increasing financial distress costs.

A firm with less redeployable assets, which are assets that have fewer alternative uses outside the firm, is more likely to borrow from banks than issue public debt. These findings are consistent with firms with less redeployable assets valuing the ability to renegotiate bank debt contracts instead of selling assets in the event of default. Consistent with this mechanism, firms with lower asset redeployability sell fewer assets following covenant violations. Our results contribute to work on the determinants of which debt markets a firm chooses to borrow from and the role that banks play as intermediaries.

During market-wide shocks that cause large drops in stock prices, firms with more state-endorsed antitakeover provisions (ATPs) experience smaller declines in value. Two channels appear to drive this finding. First, by giving boards more bargaining power to fight opportunistic bids, firms with more ATPs extract higher takeover premiums during market shocks. Second, having more ATPs attenuates the effect of market shocks on firm value by protecting relationship-specific investments with stakeholders from disruptive takeovers. Our results suggest that ATPs benefit shareholders during market shocks when firm values are abnormally low and represent one advantage of incorporating in states with more ATPs.

After medical marijuana legalization (MML) by U.S. states, firms’ cost of equity (COE) decreases, especially for those with more growth opportunities, higher productivity, or a more skilled workforce. This policy change also reduces firm risk and leads to an increase in labor supply through increased labor force participation, employment, hours worked, and net migration. Further, home prices rise after MML, reflecting increased local housing demand due to a growing supply of workers. These findings align with theoretical models that link asset prices to labor markets and suggest that MML can lower firms’ COE by mitigating labor search frictions.

Economic downturns create uncertainty about a firm's operations and make it disproportionately harder for outside market participants to assess the firm's prospects. We posit that in this environment, management earnings forecasts will be more informative to investors and analysts. Consistent with this prediction, we find larger stock price reactions and analyst forecast revisions to news in management forecasts during downturns. Holding the amount of news in forecasts constant, stock price reactions to management forecasts are also greater than those to analyst forecasts. We also find that relative to analyst forecasts, management forecast accuracy increases during downturns, suggesting that investors justifiably assess management forecasts as more informative. Overall, we document that macroeconomic conditions create time‐series variation in the informativeness of different sources of information to outside market participants.

This study investigates the relation between customer concentration and a supplier׳s cost of equity capital. We hypothesize that a more concentrated customer base increases a supplier׳s risk, which results in a higher cost of equity. Our results show a positive association between customer concentration and a supplier׳s cost of equity, and this relation is more pronounced for suppliers that are more likely to lose major customers or that are more prone to larger losses if they lose such customers. Further, results from a propensity score matched sample analysis and instrumental variables regressions imply that our findings are robust to accounting for endogeneity. We also provide evidence that a supplier with a concentrated base of safer government customers has a lower cost of equity. Finally, we document a positive relation between corporate customer concentration and a supplier’s cost of debt. Overall, our findings suggest that the composition and concentration of a supplier’s customer base significantly impact its financing costs.

We show that firms located in states where property crime is more prevalent have more uncertain earnings and higher financing costs. Specifically, firms located in states with higher property crime rates have more volatile and less persistent earnings as well as lower quality analysts' earnings forecasts. Firms located in states with higher property crime rates also have a higher cost of equity and debt capital. These results are robust to accounting for econometric and endogeneity concerns in various ways. Overall, our results suggest that a potentially large and overlooked cost of crime is a higher cost of capital.

We show that time-series variation in investment opportunities and labor demand create heterogeneity in the effects of labor mobility on corporate investment over the business cycle. To isolate variation in labor mobility, we create an annual state-level index from 1984 through 2017 that captures the degree to which state courts enforce covenants not to compete. We find that firms located in more mobile labor markets increase investment rates more during economic expansions but have similar investment rates during periods of low or negative growth. This increased investment during expansions is greater for firms that rely more on recruiting skilled and experienced workers to grow their businesses, and it translates into higher sales growth rates, profits, and valuations. Overall, our results suggest that the benefits of being able to recruit qualified workers with relevant experience during expansions outweigh the costs associated with losing key workers.

Because of clear economic links among industry peers, prior work has focused on documenting industry peer effects in various settings. Yet, while links also exist among firms in the same geographic area, few studies document geographic peer effects. We fill this gap by examining whether there are geographic peer effects in management earnings forecasts. We find that the likelihood that a firm voluntarily provides an earnings forecast is sensitive to the extent to which other firms in the same geographic area provide earnings forecasts. This geographic peer effect in forecasting is stronger for firms with greater exposure to local institutional investors, and when firms do forecast, liquidity improves more when a larger fraction of their geographic peers forecast. Furthermore, we use instrumental variable techniques to help alleviate the concern that these geographic peer effects are driven by omitted local economic factors that can lead firms to make similar disclosure decisions. Overall, our findings suggest that geographic peer effects in disclosure choices arise in part due to firms responding to capital market incentives created by local investors. Our study, therefore, contributes to the literature by documenting a unique dimension of forecasting decisions.