Using the staggered adoption of U.S. state-level pay transparency laws that improve pay transparency, we find that the probability of high-wage workers becoming entrepreneurs significantly increases following the adoption of such laws. Moreover, the salaries of high-wage workers significantly increase following the laws’ passage. These findings are consistent with theory suggesting that improved pay transparency increases the relative return of entrepreneurship for high-wage workers.

We investigate the impact of firm‐level political risk on loan contracting. We find that firm‐level political risk is positively associated with bank loan cost and that this effect is stronger for firms experiencing increased operational uncertainty and higher default risks. Firm‐level political risk also leads to more unfavorable non‐pricing loan terms. To alleviate endogeneity concerns, we use an instrumental variable approach and placebo tests. We further find that political connections and relationship‐based borrowing can attenuate the adverse effect of firm‐level political risk on loan contracting.