We show that firms’ R&D activities can predict the stock returns of their industry peers. When an industry experiences substantial R&D growth driven by the activities of a small group of firms, industry peers experience positive abnormal returns and abnormal operating performance despite having no aggressive R&D growth. Exogenous industry shocks to demand or productivity do not explain these results. Further, abnormal returns are concentrated in peer firms that receive low investor attention.

Does corporate governance affect the timing of large investment projects? Hazard model estimates suggest strong shareholder governance may deter managers from pursuing large investments. Controlling for investment opportunities, firms with good governance experience longer spells between large investments. However, in the presence of financial constraints or strong CEO incentives (high delta (δ)), we find no such timing differences. Finally, these higher investment hazard firms exhibit significantly negative long-run operating and stock performance. Overall, our findings are consistent with the notion that poor governance associates with overinvestment.

We study the effect of subsequent write-off tests on myopic managers’ investment decisions. Write-off tests discipline overinvestment when the likelihood of adverse events is high but can otherwise cause more severe underinvestment. Hence, tightening impairment stringency improves firm value when the likelihood of adverse events is high but destroys firm value when that likelihood is low. With intermediate levels of likelihood, firm value is hump-shaped in impairment stringency. To test the theory, we exploit an increase in goodwill impairment stringency following goodwill-related restatements by peer firms audited by the same auditor office, and we adopt a stacked difference-in-differences (DiD) design to control for any generic effects of peer restatements. Firms facing more stringent goodwill impairment reduce M&As relative to other types of investment, as well as in absolute amounts. The valuation of treated firms improves only during periods of high recession expectations or when facing high distress risk. Data Availability: Data are available from sources identified in the text.

We document a capital supply channel in peer effects, for the case of SEOs. Firms accelerate their SEOs – they have higher SEO hazards – when more of their peers conducted an SEO within the prior six months. The effect is stronger among older yet constrained firms than among younger yet unconstrained firms. It is also stronger after Russell index shocks that likely reduce indexer demand for a firm's equity. We document evidence of a potential underlying mechanism; information conveyed by underwriters that recently marketed SEOs of peers, thus reducing asymmetric information costs.