We study the behavior of the U.S. labor share over the past 90 years. We find that the observed decline of the labor share is entirely explained by the capitalization of intellectual property products in the national income and product accounts.

Using data on nearly 20,000 restaurants in China during the COVID-19 outbreak, we find evidence that the government-sponsored rent reduction program reduced debt overhang problems. Rent reductions, which averaged 36,000 RMB per restaurant, increase the open rate of restaurants by 3.7%, revenue by 11,000 RMB, and the number of employees by 0.36. Larger restaurants with higher committed costs benefit more from the rent reduction. The stimulus has a positive spillover effect that boosts the revenue of restaurants in the immediate vicinity of subsidized restaurants. The treatment effect varies with organizational structure in a manner consistent with an information frictions hypothesis.

ABSTRACT This study examines the impact of political corruption on the provision of CEO risk-taking incentives. We hypothesize that firms adjust their CEO’s risk-taking incentives to reflect the influence of local political corruption on the firms’ desired level of risk-taking. Using U.S. Department of Justice data on local political corruption, we find that the sensitivity of CEO wealth to stock volatility (vega) is lower in firms located in high-corruption districts. The negative impact of corruption on vega is more pronounced among (1) firms operating in industries that are more dependent on government procurement, (2) firms operating in more innovative industries, and (3) firms without political connections. Our study offers new insights into how the institutional environment shapes executive compensation design. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: G32; G38; J33; J41; M52.

ABSTRACT While prior studies generally support that equity-based compensation induces CEOs to manipulate financial reporting, there is limited direct empirical evidence on whether financial misreporting concerns affect compensation design. A key challenge for establishing a causal relationship is that misreporting incentives and compensation policies are often endogenously determined. Exploiting the exogenous reduction in litigation threat following a 1999 ruling of the U.S. Ninth Circuit Court of Appeals, we examine how heightened misreporting concerns in a less litigious environment affect CEOs' compensation design. Consistent with the theoretical prediction that misreporting concerns prevent companies from providing more powerful incentive pay that is otherwise optimal, we find that firms headquartered in Ninth Circuit states decreased CEOs' equity portfolio vega relative to the control firms after the ruling. We further document that this reduction was concentrated among firms facing greater misreporting concerns post-ruling. JEL Classifications: J33; K22; M52.

We analyze the relationship between greater bank competition and the screening of potential borrowers. Using a large sample of Chinese private firms and China's entry into the WTO as a unique setting leading to greater bank competition, we find the following. First, the sensitivity of bank credit to prior borrowing-firm performance increases after China's WTO entry. This sensitivity increase is greater in more bank-dependent industries and smaller in Chinese regions with greater financial sector development. Second, the increase in the sensitivity of bank credit to firm performance is much greater for state-owned firms compared to private firms. Third, the effect of bank credit on subsequent firm productivity and performance is greater for loans given after China's WTO entry compared to those given prior to WTO entry. Overall, the results of our empirical analysis suggest that the stringency of bank screening of borrowers in China increased with greater banking sector competition.