We examine the relation between public firm presence and import competition. The information created by public firm presence may provide importers with insights they can use for competing with domestic firms. Consistent with this possibility, we document a positive relation between public firm presence and import competition. We find similar results when using differences in the expected costs of the Sarbanes‐Oxley Act as a source of plausibly exogenous variation in public firm presence after the act. We use differences in the proportion of German firms reporting publicly around a major enforcement reform as a natural mechanism experiment, and find evidence that financial reporting is a channel through which public firm presence relates to import competition. Additional mechanism tests and a falsification test estimated in the United Kingdom, where public and most private firms report publicly, further support this inference. In total, our evidence is consistent with foreign competitors using the information created by public firm presence, including what public firms disclose in financial reports, to compete with domestic firms. Consequently, our results provide evidence of competitors using the proprietary information disclosed in financial reports to compete with the disclosing firms and of information frictions affecting trade.

We examine how executives' ability to control their firms' exposure to risk affects the design of their incentive-compensation contracts. Our natural experimental evidence shows that exchange-traded weather derivatives allow executives to control their firms' exposure to weather risk. Once these derivatives became available, those executives who use them to hedge experience relative reductions in their total compensation and equity incentives. The decline in compensation is consistent with a reduction in the risk premium that executives receive for exposure to weather risk. The decline in equity incentives is consistent with the relation between risk and incentives shifting in a complementary direction when executives can better control their firms' exposure to risk. Collectively, our findings provide evidence that executives' ability to control their firms' exposure and, by extension, their own to an important source of risk influences the design of their incentive-compensation contracts.