This paper examines the relationship between focal firms’ corporate social responsibility (CSR) and the financial constraints of their industry peers. We find that focal firms reduce their CSR investments in response to an increase in competitor financial constraints. Our findings are robust to two exogenous shocks: the 2008 financial crisis and the American Jobs Creation Act of 2004. We further show that product market competition drives our results by motivating firms to reallocate resources and prioritize investing in core business activities rather than CSR when peers face difficulty accessing funds. Intriguingly, the fading of such virtues does not necessarily lead to a decline in firm performance. We find that the reduction in CSR induced by peer financial constraints improves the profitability, operating efficiency, and market power of focal firms while attracting more institutional investors.

We decompose the idiosyncratic volatility of stock returns into “good” and “bad” volatility components, which are associated with positive and negative returns, respectively. Using firm characteristics, we estimate a cross-sectional model for the expected idiosyncratic good minus bad volatility (EIGMB). The EIGMB outperforms expected idiosyncratic skewness (EISKEW) and standard time-series models in capturing conditional idiosyncratic return asymmetry. EIGMB is negatively and significantly associated with future stock returns, even after controlling for EIKSEW and exposure to systematic-skewness-related factors. Separating the role each specific characteristic plays in driving the predictive power of EIGMB for returns, we find that return on equity and momentum are two important elements of variation in EIGMB.

Using a novel measure that captures negative ESG incidents at both listed and private suppliers, we provide large-scale evidence on the value implications of supply chain ESG. We find that firms with fewer supply chain ESG incidents exhibit higher future accounting performance and that this effect is stronger in the presence of more conscious customers and vulnerable supply chains. We also find that firms with robust supply chain ESG exhibit higher future stock returns and that this effect is more pronounced when information frictions are higher, which suggests that it takes time for the market to understand the value implications of supply chain ESG. Overall, we highlight the benefits of managing supply chain ESG and the decision usefulness of the related information.

This paper explores the impact of executive compensation structure on firm debt choices. To analyze the relationship between executive compensation and firm debt structure via the managerial effort channel, we extend the theoretical model developed by Boot et al. (1991) by incorporating an agent-principal model. We employ data from US Equity Real Estate Investment Trusts (REITs) to empirically assess the model's implications. The evidence presented in this study reveals that when executive compensation exhibits a higher sensitivity to the firm's stock price (represented by a higher Delta), the firm tends to use a greater proportion of secured debt within its overall debt structure. This phenomenon can be attributed to the managerial effort channel: firms with higher Delta values tend to engage in investments that are more effort-sensitive, and these investment choices are positively associated with increased utilization of secured debt, where the collateral plays the role of incentivizing the manager to put more effort into projects – an “effort-lifting” behavior. These findings hold for an expanded sample consisting of firms from all industries. Our analysis offers a fresh perspective on the use of collateral and executive compensation as a tool to mitigate principal-agent problems.

An initial public offering (IPO) can have diverse impacts on incumbent firms. We identify a valuation channel using a pairwise measure of technological proximity between the new entrant and incumbent firms. By analyzing the patent data of firms listed on the Shanghai Stock Exchange’s STAR Board, we find a significant increase in the valuation of the incumbent firm when its patent portfolio exhibits a higher degree of similarity to the IPO firm. This positive spillover effect differs from other well-documented peer effects of IPO shocks, suggesting a novel mechanism that operates through technological linkages, particularly among technology-intensive firms.

This paper investigates the effects of a regulatory change in China of the presentation format for research and development (R&D) expense, which mandates public firms to explicitly present R&D expense on their income statements. We predict that this regulation will impact nonstate-owned enterprises (non-SOEs), which care about stock market valuation, more than state-owned enterprises (SOEs). We find that non-SOEs report significantly higher R&D expense post regulation. Furthermore, the R&D increase strengthens for firms facing higher peer pressure to pursue R&D and high-tech firms and weakens for firms with higher institutional investment. The positive valuation implication of R&D diminishes post regulation, suggesting that investors discount the increase in R&D expense. An additional analysis shows that firms’ innovation efficiency decreases post regulation.

We build cross‐sections of asset returns for a given set of characteristics, that is, managed portfolios serving as test assets, as well as building blocks for tradable risk factors. We use decision trees to endogenously group similar stocks together by selecting optimal portfolio splits to span the stochastic discount factor, projected on individual stocks. Our portfolios are interpretable and well diversified, reflecting many characteristics and their interactions. Compared to combinations of dozens (even hundreds) of single/double sorts, as well as machine‐learning prediction‐based portfolios, our cross‐sections are low‐dimensional yet have up to three times higher out‐of‐sample Sharpe ratios and alphas.

We show that financial reporting influences consumer behavior by drawing consumer attention to announcing firms. Analyzing global positioning system (GPS) data, we document upticks in foot traffic to firms’ commercial locations immediately following their earnings announcements. This increase is more pronounced for announcements with substantial media attention, fewer concurrent announcements, heightened internet search volume, and extreme stock price jumps and earnings surprises—indicating that announcement coverage impacts consumer behavior by capturing attention. Furthermore, foot traffic increases with positive earnings for firms offering durable goods, suggesting consumers respond to news about firms’ financial prospects. Consumer attention patterns increase revenues and advertising effectiveness, ultimately suggesting that financial reporting serves a marketing function. Data Availability: All other data are available from the public sources cited in the text.