We examine the impact of institutional democracy on firm value through the lens of dividend policies. Using instrumental variables, we find strong evidence that democracy improves dividends in an international sample of 18,410 unique firms across 63 countries over the 1991–2018 period. This effect is more pronounced for firms with high agency costs, or those in countries with weak legal protection for shareholders. Our evidence is robust to alternative measures of democracy and a battery of tests addressing the challenges associated with the instruments. Furthermore, dividends are capitalized at a higher rate in more democratic countries, especially for firms with high growth options. To the extent that investors are willing to pay a premium for firms that distribute more dividends, the democracy-induced dividends add to corporate value beyond the premium associated with shareholder rights-induced dividends. Overall, our results highlight that institutional democracy is an important, yet unexplored, determinant of corporate valuation.

The 2009 CARD Act limited credit card lenders' ability to raise borrowers' interest rates on the basis of new information. Pricing became less responsive to public and private signals of borrowers' risk and demand characteristics, and price dispersion fell by one‐third. I estimate the efficiency and distributional effects of this shift toward more pooled pricing. Prices fell for high‐risk and price‐inelastic consumers, but prices rose elsewhere in the market and newly exceeded willingness to pay for over 30% of the safest subprime borrowers. On net, average traded prices fell and consumer surplus rose at all credit scores. Higher consumer surplus was partly driven by a fall in lender profits, and partly by the Act's insurance value to borrowers who could retain favorable pricing after adverse changes to their default risk. The relatively high level of pre‐CARD‐Act markups was crucial for realizing these surplus gains.

Using VAR and Local Projections models, enhanced with macroeconomic factors and monetary policy shocks, we investigate the underlying mechanisms through which the Fed’s and ECB’s react to bank reactions of geopolitical risks between January 1994 and March 2024. Our findings reveal that central banks react to geopolitical risk events by tightening monetary policy to fend off potential inflationary pressures. However, the effect is often temporary, as policymakers typically adopt accommodative measures during economic expansions and shift to tighter policies during contractions. Analyzing reactions based on central bank presidents' tenures, we find that while earlier responses were limited, in recent years, both central banks have reacted more strongly and immediately, reflecting their growing concern over geopolitical risks. Furthermore, we document that the Fed adopted a more accommodative stance in response to bilateral geopolitical risk shocks between the US and China, driven by changes in capital flows and trade activities. In contrast, the ECB’s responses were more consistently contractionary, particularly in periods of heightened inflation concerns or when geopolitical tensions threatened price stability within the euro area.

We study the removal of information from a market, such as a job-applicant screening tool. We characterize how removal harms groups with relative advantage in that information: typically those for whom the banned information is most precise relative to alternative signals. We illustrate this using recent bans on employers’ use of credit report data. Bans decrease job-finding rates for Black job-seekers by 3 percentage points and increase involuntary separations for Black new hires by 4 percentage points, primarily because other screening tools, such as interviews, have around 60% higher standard deviation of signal noise for Black relative to white job-seekers.

We hypothesize that managers use their hierarchical role as reviewers of accounting judgments and estimates to manage earnings, which we call indirect earnings management (IEM). Across a series of experiments using highly experienced financial executives as participants, we provide evidence that IEM (1) is likely used by managers to achieve current and future earnings targets, (2) reduces both cognitive dissonance associated with managing earnings and the extent to which managers think that their behaviors constitute earnings management, and (3) is more likely to be used when corporate governance is strong than when corporate governance is weak. The results of this study suggest new directions for future research on earnings management and highlight the important role of the hierarchical structure of the accounting function in efforts to understand how earnings are managed.

Against the backdrop of an increasing threat of misinformation on social media, several countries have enacted regulations to curb the spread of misinformation. This study examines how corporate social media strategy responds to misinformation regulations. Using a large cross-country dataset of corporate tweets and a stacked regression analysis, we show that misinformation regulations lead to less corporate social media disclosure. This result suggests that, by deterring misinformation, these regulations reduce firms’ need to use social media to counteract its adverse effects. Additional analyses show that the effect strengthens among countries with higher social media usage and those with stronger investor protection but weakens for firms with stronger information environments. Finally, we provide direct evidence that firms post fewer tweets refuting misinformation about themselves following the enactment of these regulations.

This paper investigates how investors’ abnormal attention affects the cross-section of cryptocurrency returns in the period from 2018 to 2022. We capture abnormal attention using the (log) number of Twitter posts on individual cryptocurrencies on the current day minus a 30-day average. Our results reveal that abnormal attention is positively associated with contemporaneous and one-day ahead crypto performance. Among the different Twitter tweets, return predictability arises due to Ticker-tweets from investors, but not due to tweets from the cryptocurrency channel. These Official-tweets, however, are able to forecast technological innovations on the blockchain.

We show that political polarization among directors negatively affects corporate board effectiveness by reducing forced CEO turnover-performance sensitivity. Our results are more pronounced in presidential election years and for firms with more monitoring and advising needs. Polarization also increases the departure likelihood for directors who are ideologically distant from the rest of the board, making boards more politically homogeneous over time. Finally, we show that polarization in the boardroom lowers firms' investment- Q sensitivity and Environmental, Social and Governance (ESG) performance. Our findings highlight the real economic cost of political polarization.

This study uses valuation allowances (VAs) for deferred tax assets to examine whether hedge fund activists (HFAs) use and affect financial reporting of income taxes. Specifically, we investigate whether HFAs target firms with VAs and whether target firms are more likely to release VAs post‐intervention. We find that the existence, magnitude, and increases in VAs increase the marginal probability that HFAs will target a firm by between 12% and 24%. We also find that target firms are 4.6% more likely to release VAs following the intervention, and this effect persists for up to 2 years. Releases of VAs appear to stem from implemented tax avoidance strategies and changes in financial reporting of income taxes rather than real changes in operating performance or earnings management. Overall, HFAs appear to understand the interplay between tax planning and financial reporting of income taxes and use both to unlock value in target firms.