Using a difference-in-differences methodology, this paper finds that greater stakeholder orientation due to the adoption of non-shareholder constituency statutes, which allow directors to consider non-shareholder stakeholders' interests in decision making, significantly reduces discretionary accruals. The main effect is more pronounced for firms with greater tension between shareholders and stakeholders, and with higher information acquisition costs for the board. Further analysis shows that stakeholder orientation increases the value-relevance of earnings, and curtails real earnings management to some extent. Overall, my findings indicate that improved financial reporting quality can be a specific channel through which stakeholder orientation increases shareholder value.

Exploiting the staggered removal of short-sale bans in China, we document unintended real effects of allowing short selling in an emerging market featured by concentrated ownership and weak investor protection. Pilot firms have worse short-term and long-term market performances after the removal of short-sale bans. Additionally, pilot firms undertake less risk and have worse performance following the launch of the program. The effect is stronger when controlling shareholders' private benefit is large and when corporate governance is weak. Faced with increased short selling threats, pilot firms cut capital investments and R&D expenditures, reduce equity financing, and lower debt ratios. Contrary to prior studies showing that short selling encourages value-enhancing risky investments in developed markets, our findings suggest that in emerging markets such as China, short selling can result in value losses by inducing firms to forgo profitable risky projects.

Exploiting the staggered adoption of universal demand (UD) laws as exogenous shocks to filing derivative lawsuits, we find that weakened shareholder litigation rights cause a significant increase in the cost of debt. Deteriorated corporate governance, increased information asymmetry, and heightened managerial risk-taking are the underlying channels. Shareholders respond to weakened litigation rights by providing managers with less risk-taking incentives. Overall, our findings suggest that the shareholder litigation rights are important to debtholders.

This study examines the effect of institutional common ownership on a firm's cost of equity capital. Recent literature on common ownership yields opposing predictions: increased strategic alliance in the product market could increase the non-diversifiable covariance risk of a firm's cash flows with other firms, leading to a higher cost of equity capital. However, reduced product market risk that is in part non-diversifiable could lead to a lower cost of equity capital. In both baseline and difference-in-differences settings, we document a negative and significant relation between common ownership and the cost of equity capital. We also provide direct evidence that common ownership reduces product market predation risk, distress risk, and overall risk while increasing stock liquidity. We do not find sufficient evidence that improved corporate governance drives the main findings. Overall, our findings indicate that institutional common ownership offers benefits to individual firms by reducing the cost of equity financing.

Stronger creditor rights in bankruptcy are often viewed as adding deadweight costs and leading to inefficient liquidation. However, ex ante, they also increase firms' borrowing capacity and reduce financial constraints. This study investigates shareholders' overall attitudes toward enhanced creditor rights in bankruptcy by examining the impact of the staggered adoption of anti-recharacterization laws across U.S. states on the cost of equity capital. We find that the strengthening of creditor rights leads to a significant reduction in the cost of equity capital, with the effect being more pronounced among financially constrained firms and firms with more growth opportunities and volatile cash flows. The reduction is stronger among firms that are more likely to utilize securitized debt. Overall, our results suggest that enhanced creditor rights in bankruptcy improve shareholder value through increased borrowing capacity.

This paper reconciles conflicting empirical findings in the takeover and firm transparency literature by utilizing a comprehensive takeover index from Cain, McKeon, and Solomon (2017). Examining a broad sample of U.S. public firms from 1970 to 2020, we document a negative relation between takeover susceptibility and firm opacity, measured primarily through stock price crash risk, and also through accrual/real earnings management, financial statement readability, analyst forecast dispersion, and voluntary disclosure. Stronger takeover threats mitigate crash risk by curtailing managerial empire-building incentives, promoting timely information disclosure, and constraining manipulative accounting practices. Our research confirms the effectiveness of the market for corporate control in addressing information-related agency problems and enhancing firm transparency. These findings persist across a broad range of firms and an extended time period, addressing the limitations of earlier studies. By employing a more holistic measure of takeover vulnerability and examining multiple facets of transparency, we provide a nuanced understanding of how corporate governance mechanisms influence firm performance and risk.

We employ a difference-in-differences estimation approach to examine the impact of stakeholder orientation on corporate payout policy. The empirical test exploits the enactment of US state-level constituency statutes, which allow directors to consider stakeholders and long-term interests in corporate decision making. We find that firms incorporated in states that have adopted constituency statutes significantly reduce share repurchases, whereas the effects of statute enactment on total payout and dividend payments are marginal and insignificant, respectively. We further show that the negative statute effect on share repurchases is more pronounced for firms that are in financial distress or are close to default, and firms in consumer-focused and high-polluting industries. Overall, our findings indicate that promoting stakeholder orientation can have a significant impact on corporate payout decisions.

Blockholding multiple firms within an industry generates an information advantage for institutional investors, who can better differentiate between the industry-wide and firm-specific nature of bad news released by peer firms and avoid selling on false spillover signals (i.e., “smart exit”). Empirically, we document that industry common ownership reduces future firm-level stock price crash risk. Our results can be explained by the attenuated spillover from industry peers' firm-specific bad news, as a complement to the monitoring effect that reduces the focal firm's hoarding of bad news. Our results suggest that the presence of industry common owners provides a stabilizing effect against stock price contagion.

Regulatory and technological (RegTech) developments have been changing the nature of financial markets in recent decades. This paper documents the real effects of RegTech in the market of corporate control. Exploiting the staggered implementation of the EDGAR system from 1993 to 1996 as quasi-exogenous RegTech shocks, we find that RegTech developments reduce firm acquisitiveness, especially for growth firms, solo-bidder deals, and stock-based acquisitions. Our main findings still hold when employing the stack-cohort approach to address concerns regarding biased staggered DiD estimators. In addition, EDGAR implementation discourages informed trading and lowers the acquirers' announcement returns. Overall, our deal-level analyses show how RegTech development matters for firm investment decisions with more granularities. Our paper differs from but complements recent empirical evidence that EDGAR implementation increases the level of overall investment, suggesting that dampened managerial learning induces firms to switch from highly risky and uncertain projects (M&As) to routine projects with less uncertainty (capital expenditures).