We document differences in human-capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses compared with workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.

We develop a strategic trading model in which an insider exploits noise traders' overreaction. A feedback effect arises from the insider's trading on fundamental information (the expected growth rate of dividends) and nonfundamental information (insider's inventory or noise supply). We find that the stock price is not fully revealing; a faster mean-reverting noise supply leads to a more volatile price; the price impact can increase with insider's risk-aversion; and a risk-averse insider can trade more aggressively on fundamental information than a risk-neutral one does. Insider's current trade and his previous inventory exhibit simultaneously positive forecasting powers for future stock returns.

We use unique worker-plant matched panel data to measure differences in wage changes experienced by workers displaced from closing plants. We observe larger losses among women than men, comparing workers who move from the same closing plant to the same new firm. However, we find a significantly smaller gap in hiring firms with female leadership. The results are strongest among women who are displaced from male-led plants and from less competitive industries. Our results suggest an important externality to having women in leadership positions: They cultivate more female-friendly cultures inside their firms.

We develop an optimal tax-timing model that takes into account asymmetric long-term and short-term tax rates for positive capital gains and limited tax deductibility of capital losses. In contrast to the existing literature, this model can help explain why many investors not only defer short-term capital losses to long term but also defer large long-term capital gains and losses. Because the benefit of tax deductibility of capital losses increases with the short-term tax rates, effective tax rates can decrease as short-term capital gains tax rates increase.

In this paper we investigate the impact of institutional ownership on UK mergers and acquisitions. We employ a comprehensive sample of M&As conducted by UK acquirers from 2000 to 2010, thus including a full cycle of peak and trough in M&A waves. We find that institutional investors increase the likelihood of an M&A to be a large, cross-border deal, opting for full control. Moreover, institutional ownership concentration and foreign institutional ownership increase the likelihood of cross-border M&As. In addition, we assess the influence of institutional shareholders’ investment horizon and find that while investment horizon have a negative influence in encouraging cross-border M&As, the presence of long-term investors encourages larger M&As. Finally, even after controlling for the 2007–08 financial crisis the market reacts negatively to the announcement of cross-border M&As.

We develop a strategic trading model in which an insider exploits noise traders' overreaction. A feedback effect arises from the insider's trading on fundamental information (the expected growth rate of dividends) and nonfundamental information (insider's inventory or noise supply). We find that the stock price is not fully revealing; a faster mean-reverting noise supply leads to a more volatile price; the price impact can increase with insider's risk-aversion; and a risk-averse insider can trade more aggressively on fundamental information than a risk-neutral one does. Insider's current trade and his previous inventory exhibit simultaneously positive forecasting powers for future stock returns.

We develop a dynamic contingent-claim framework to model S. Myers’s idea that a firm is a collection of growth options and assets in place. The firm’s composition between assets in place and growth options evolves endogenously with its investment opportunity set and its financing of growth options, as well as its dynamic leverage and default decisions. The firm trades off tax benefits with the potential financial distress and endogenous debt-overhang costs over its life cycle. Unlike the standard capital structure models of Leland, our model shows that financing and anticipated endogenous default decisions have significant implications of firms’ growth-option exercising decisions and leverage policies. The firm’s ability to use risky debt to borrow against its assets in place and growth options substantially influences its investment strategies and its value. Quantitatively, we find that the firm consistently chooses conservative leverage in line with empirical evidence in order to mitigate the debt-overhang effect on the exercising decisions for future growth options. Finally, we find that debt seniority and debt priority structures have both conceptually important and quantitatively significant implications on growth-option exercising and leverage decisions as different debt structures have very different debt-overhang implications.

We document differences in human-capital deployment between diversified and focused firms. We find that diversified firms have higher labor productivity and that they redeploy labor to industries with better prospects in response to changing opportunities. The opportunities and incentives provided in internal labor markets in turn affect the development of workers' human capital. We find that workers more frequently transition to other industries in which their diversified firms operate and with smaller wage losses compared with workers in the open market, even when they leave their original firms. Overall, internal labor markets provide a bright side to corporate diversification.