[We study the relation between investment behavior and competitor financial constraints. Using interfirm patent citations and text-based product market similarities to identify intransitive competitor networks, we find that firms increase investment spending, patenting activity, and opportunistic hiring when competitor constraints become more binding. In addition, firms shift their investment composition (product market and patent portfolios) to compete more aggressively with relatively constrained competitors. To mitigate endogeneity concerns, we exploit the 2004 AJCA tax holiday and the 1989 junk bond crisis as exogenous shocks to competitor constraints, and we find similar effects.]

This paper investigates the effects of housing wealth shocks on workers’ career decisions related to job quality and long-term career outcomes. Using a novel data set of career histories in the film industry, we find that homeowners facing greater house price declines reduce participation in high-quality projects but increase involvement in low-quality films. Conversely, renters are not affected by these shocks. Consistent with individuals using home equity during job searches, these shocks have a greater impact on homeowners who extracted home equity during the housing boom. Moreover, house price declines from the housing crisis affect long-term career paths.

A common method of calculating economic magnitudes is to multiply the regression coefficient of the variable of interest by its sample standard deviation. This method is often problematic in finance settings when researchers use granular fixed effects. We show that in many recently published finance papers and for many common finance variables, the sample standard deviation is much larger than the within-group variation that identifies the regression coefficient, and that within-group changes of this magnitude are rare. Without additional assumptions, this common approach can significantly inflate the economic magnitude of the identified effect and impact the comparison of effects among different variables of interest. We recommend using within-group measures of variation to improve the interpretation of economic magnitudes in this setting.

We study the relation between investment behavior and competitor financial constraints. Using interfirm patent citations and text-based product market similarities to identify intransitive competitor networks, we find that firms increase investment spending, patenting activity, and opportunistic hiring when competitor constraints become more binding. In addition, firms shift their investment composition (product market and patent portfolios) to compete more aggressively with relatively constrained competitors. To mitigate endogeneity concerns, we exploit the 2004 AJCA tax holiday and the 1989 junk bond crisis as exogenous shocks to competitor constraints, and we find similar effects. Received August 11, 2017; editorial decision November 6, 2018 by Editor David Denis.

We investigate how access to capital relates to the firms' investment decisions and project characteristics. We use project-level hydraulic fracturing (fracking) data from the energy industry to show that privately held firms more intensely invest in newer, non-proven areas while publicly-traded firms tilt investment toward well-established, proven areas. Furthermore, we find that exogenous improvements in private firms' access to finance decrease the investment wedge between private and public firms. Our results suggest that private firms minimize their financial disadvantages by targeting investment opportunities that have greater uncertainty.

This paper assesses different econometric approaches to working with count-based outcome variables and other outcomes with similar distributions, which are increasingly common in corporate finance applications. We demonstrate that the common practice of estimating linear regressions of the log of 1 plus the outcome produces estimates with no natural interpretation that can have the wrong sign in expectation. In contrast, a simple fixed-effects Poisson model produces consistent and reasonably efficient estimates under more general conditions than commonly assumed. We also show through replication of existing papers that economic conclusions can be highly sensitive to the regression model employed.