This study examines the spillover effect of bank financial misconduct on the uninsured deposits of peer banks within local markets. We first validate that misconduct banks experience an increase in deposit spreads and a corresponding outflow of deposits following the misconduct. We then show local peer banks exhibit divergent deposit responses, contingent on how misconduct is perceived by information recipients in different economic contexts. During normal periods, depositors receiving a negative signal about bank misconduct reallocate their funds from misconduct banks to local peers, a local reallocation effect that decreases deposit spreads and increases deposit inflows for peer banks. Cross‐sectional analysis further reveals that this local reallocation effect is more pronounced for financially sophisticated depositors, amplified when peer banks have strong fundamentals, but attenuated when misconduct banks are financially sound. During financial crisis periods, however, bank misconduct leads to withdrawals from both misconduct banks and their peer banks, a local contagion effect whereby local peer banks face increased deposit spreads and deposit outflows following the misconduct.

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.

Despite persistent academic and regulatory concerns, collateralized loan obligations (CLOs) have consistently demonstrated resiliency over the past two decades. We document that firms whose loans are acquired by CLOs are less likely to experience adverse credit events within 12 months of inclusion in the CLO portfolio, particularly when CLOs maintain institutional-level relationships with originating banks (through repeated transactions) or when individual-level relationships exist (as evidenced by personnel flows between originating banks and CLOs). The effects of these relationships are more pronounced when banks likely possess superior private information about borrowers. Furthermore, conditional upon filing for bankruptcy, borrowers whose loans are held by CLOs with institutional- or individual-level relationships are more likely to successfully reorganize under Chapter 11. Collectively, our findings highlight the dual information channels, both institutional and personnel based, that mitigate information frictions in the leveraged loan market. Data Availability: Data are available from commercial sources cited in the text.

We examine the impact of abortion restrictions on the geographic mobility of college‐educated skilled women. Exploiting the staggered adoption of Targeted Regulation of Abortion Providers (TRAP) laws across US states that restrict women's access to abortion, we find that skilled women who relocate exhibit a greater propensity to move to states without TRAP laws (non‐TRAP states) than they did prior to the TRAP law adoption. This pattern is stronger among women in more liberal and less religious areas than among women in more conservative and more religious areas. These findings are consistent with the view that relocation decisions are often driven by the alignment between personal values and the local policy environment. We use the audit industry as a specific setting to address the implications for employer performance. We find that TRAP law adoption increases female auditor turnover at local offices relative to same‐firm offices in non‐TRAP states, and the resulting loss of human capital lowers audit quality.

This paper examines the credit supply-side effect of the U.S. 2003 dividend tax cut on the real economy through the banking sector. We show that C-corporation banks (treatment group), particularly those capital-constrained, increase the supply of small business loans more than S-subchapter banks (control group) following the tax cut, aligning with the old view of dividend taxation and the supply-side effect rooted in credit rationing. Such an enhanced small business loan supply stemming from the tax cut translates into real effects on the economy. We find that areas with a greater presence of C-corporation banks exhibit more small business formations, employment, and innovations. The positive real effects are concentrated in subsamples when business growth opportunities are more abundant or international trade exposures are higher. Overall, our findings add to the literature on the real effects of the tax cut by showing an important yet unexplored bank credit supply channel.