We examine the product market spillover effects of hedge fund activism (HFA) on the industry rivals of target firms. HFA has negative real and stockholder wealth effects on the average rival firm. The effects on rivals' product market performance is commensurate with post-activism improvements in target's productivity, cost and capital allocation efficiency, and product differentiation. Financially constrained rivals accommodate these improvements but those facing high intervention threat respond effectively to them. The spillover effects are strengthened in less concentrated and low entry barrier industries. The results are robust to the alternative hypothesis of strategic target selection by hedge funds.

We study the dynamic implications of capital investment in innovative capacity (IC) on future stock returns, investment, and profitability by modeling the unique effects of IC investment on uncertain option generation/exercise and postexercise revenue. The model highlights the diverse effects of IC investment on expected returns in different postinvestment regimes and yields the novel prediction that, under the neoclassical assumption of nonincreasing revenue returns, IC investment is positively related to subsequent cumulative stock returns with a lag. The model also predicts a positive effect of IC investment on future investment and profitability. We find strong empirical support for these predictions.

We examine voluntary disclosure and capital investment by an informed manager in an initial public offering (IPO) in the presence of informed and uninformed investors. We find that in equilibrium, disclosure is more forthcoming—and investment efficiency is lower—when a greater fraction of the investment community is already informed. Moreover, managers disclose more information when the likelihood of an information event is higher, more equity is issued, or the cost of information acquisition is lower. Investment efficiency and the expected level of underpricing are non-monotonic in the likelihood that the manager is privately informed.

We study the performance of investments made at different points of an investment cycle. We use a large data set covering hotels in the United States, with rich details on their location, characteristics, and performance. We find that hotels built during hotel construction booms underperform their peers. For hotels built during local hotel construction booms, this underperformance persists for several decades. We examine possible explanations for this long‐lasting underperformance. The evidence is consistent with information‐based herding explanations.