This paper studies the impact of limited attention on investment decisions by venture capitalists (VCs). I find that startups funded by VCs during VCs’ IPO engagements tend to underperform: These startups are 9% less likely to go public or become acquired and have lower exit multiples. The effects of VCs’ busyness cluster around the active phase of the IPO engagement and are more pronounced in cases of higher workload intensity or higher information asymmetry. Overall, this performance gap induced by attention constraints provides new evidence on VCs’ ability to identify investment opportunities at the initial screening stage.

The dissemination of public information regarding an asset’s fundamental value can encourage the acquisition of private information by informed traders, leading to a crowding-in effect. Competing with the crowding-out effect analyzed in prior research, the crowding-in effect shapes the demand for private information in a hump-shaped curve against public information quality. I examine how a for-profit information seller strategically provides information, exploiting this hump-shaped demand curve, and offer theoretical support for the coexistence of free and paid information. The model yields distinctive insights into the equilibrium information structure and market quality when the crowding-in effect drives public information dissemination.

A firm’s role as lender to its customers (via trade credit) is influenced by the firm’s own lenders. With a novel data set of trade credit between U.S. public companies, I find that firms limit customer credit concentrations, extending less generous trade credit to customers as the firms’ sales dependence on them increases. Evidence points to lenders influencing firms to limit credit concentrations: First, cross-sectional variation shows stronger results with greater lender monitoring intensity. Second, analysis of granular loan contract details reveals that concentration limits in borrowing base formulas are a clear, previously unexplored way banks influence trade credit policies.

We show that a firm’s financial constraints trigger investment disruptions that propagate through the production network. Propagation effects account for about half of the total investment reduction due to constraints. Network rigidities such as high input specificity and the scarcity of alternative partners amplify these spillovers. Firms mitigate investment disruptions by supporting constrained partners through trade credit or equity stakes. To bolster identification, we employ a Network Regression Discontinuity Design that accounts for spillovers. Our estimates are robust to network measurement error, endogenous selection, and various constraint measures. The results demonstrate that interdependent investments amplify the consequences of capital-market frictions.

We document that firms with greater product similarity to their peers exhibit lower rates of financial fraud. We show that peer similarity is associated with better information environments, which is consistent with monitors’ enhanced ability to benchmark against other firms. The negative relation between product similarity and fraud remains after controlling for alternative mechanisms including incentive compensation structures, competition, and internal and external governance characteristics. Overall, our findings suggest that greater peer similarity increases the marginal cost of fraud, and therefore, ex ante disincentivizing managers from committing fraud.

Long-term growth expectations are central to investment analysis and corporate valuation. Despite a dominant effect on firm value, the academic literature and practitioner conventions provide little guidance on determining this long-term growth rate. This article takes a step in addressing this gap: we estimate the relationship between long-term growth and an extensive selection of firm, industry, and market characteristics. Market prices do not seem to fully capture long-term growth information. Cross sectional tests yield substantial positive abnormal returns for firms with high expected long-term growth.

Poison pills are among the most powerful antitakeover provisions, but studying their economic impact is challenging because of the obvious endogeneity concerns. We address the problem by studying U.S. states’ staggered adoption of poison pill laws (PPLs), which strengthen the right to adopt a pill (i.e., the shadow pill) and increase the validity of visible pills. We document that PPLs make visible pill policy aligned with economic incentives, increasing pill adoption among firms with a high likelihood of takeover, but decreasing it among firms with low takeover likelihood. We also document that PPLs positively impact firm value, especially for innovative firms with more intangible assets.

We study how professional fund managers’ growth expectations affect their equity investments and the consequent effects on prices. Using novel data on China’s mutual fund managers’ growth expectations, we show that pessimistic managers decrease equity allocations and shift away from more cyclical stocks. We identify a statistically significant link between managers’ growth expectations and returns on the stocks that they hold and trade. We also find that an earnings-based measure of price informativeness is increasing in forecasting managers’ investment and forecast-consistent trading, implying that active fund managers in China help move stock prices closer to underlying fundamentals.

This article proposes and estimates a tractable, arbitrage-free valuation model for corporate coupon bonds that includes a more realistic recovery rate process. Most existing studies use a recovery rate process that is misspecified because it includes recovery for coupons due after default. Misspecification errors from assuming recovery on all coupons can be substantial; they increase with recovery rates, coupons, maturity, and default probabilities. For a large sample of market transactions, i) our model has lower pricing errors than one assuming recovery on all coupons and ii) the magnitude of our model’s outperformance is linked to misspecification errors from assuming recovery on coupons.

We document numerous occurrences of pump-and-dump schemes (P&Ds) targeting cryptocurrencies, which tend to trigger short-term episodes that feature dramatic increases in prices, volume, and volatility, followed by quick reversals. The evidence we document, including price run-ups before P&Ds start, suggests wealth transfers from outsiders to insiders. Our findings based on wallet-level data are consistent with the reasoning that gambling preferences, overconfidence, and naïve reinforcement learning help explain P&D participation. Finally, exploiting two natural experiments in which exchanges altered P&D policies, we find evidence consistent with the idea that P&Ds contribute to reduced cryptocurrency liquidity and lower prices.

Using a relational leadership lens, this study aims to gain a deeper understanding of empathic conversations with a focus on leadership ethics. It adopts an entitative perspective in relational leadership and examines leadership conversations as a two-way influence relationship, highlighting their interdependencies and collective role in the co-construction of meaning. Data from facial expression software and perception surveys are analyzed. The results of this study reveal the influence of gendered leadership on emotions, emotional bonding moments triggered by humor, and cultural dynamics in leadership conversations. Leaders’ feeling-based questions and participants’ willingness to share their emotions, coupled with emotion synchronization, create a constructive space where both feel invited, cared for, and valued. The study shows that emotional bonds foster the expression of generosity, care, and responsibility, enhancing satisfaction for both leaders and participants. Overall, this study enriches relational leadership theory and practice by underscoring the connection between empathy and leadership ethics.

Consumers play an important role in regulating labor rights in global supply chains, either by punishing companies that violate labor rights or rewarding those that market fair labor practices. There is, however, currently limited understanding of how consumer demand can be effectively harnessed to protect freedom of association and collective bargaining (FACB) rights in garment-exporting countries. Through a series of conjoint experiments, we test the strength of consumer demand for FACB rights relative to other labor and environmental standards, and manipulate price and information frames to analyze the extent to which a business case exists to promote FACB rights. We find that consumers display willingness to pay premiums for various ethical labels around labor protections, indicating a business case for promoting ethical labor standards in supply chains. However, we also find that consumer demand for certain labor rights—including FACB rights and payment of a living wage—can diminish considerably in the context of price increases, thus limiting the profits firms might accrue by marketing labor rights protections. Our results open up the black box of consumer demand for different labor standards and evaluate the different modes through which consumers can influence labor protections in the global economy.

We develop a model to perform a cost–benefit analysis of bus fare subsidies under financial constraints that preclude the purchase of additional buses. Our model considers users’ costs in the provision of bus services and the lack of road pricing to internalize urban transport externalities in a context where financial constraints severely limit the institutional ability to plan and design the bus system. Because of financial constraints, the bus system can hardly accommodate demand during peak times: buses travel overcrowded, passengers cannot board the first bus to arrive at the bus stop, and they cannot arrive at their destination at their desired time. Another salient aspect of our model is the inclusion of motorcycles as a second private transport mode. Motorcycles are typical in many urban agglomerations in the emerging world and engender many negative transport externalities. According to our results, fare subsidies provide social benefits in Metropolitan Asunción. During peak hours, a higher subsidy is justified as the reduction of the unpriced external costs of substitute modes compensates for the increased cost created by an additional bus passenger. In the off-peak, a higher subsidy is justified (i) as the higher frequencies induced by the new bus ridership reduce waiting times and (ii) because of the reduction of the unpriced external costs of substitute modes. Although our model does not explicitly include inequality aversion, we discuss the distributional aspects of subsidies in the context of middle-income countries.

This study investigates how institutional origin affects the dot tax haven (DTH) internationalization of Chinese family firms (FFs). Drawing on institutional theory and the mixed gamble perspective, we propose that restructured FFs (RFFs), originating from state-owned enterprises (SOEs), are more likely to engage in DTH internationalization than entrepreneurial FFs directly established by family founders. This propensity is attributed to the institutional legacies inherited from their SOE predecessors, which create a distinct potential gain-loss calculus. Our empirical analysis of publicly listed Chinese FFs from 2012 to 2021 demonstrates that restructured FFs are 30% more likely to use DTH and establish 43% more DTH subsidiaries than entrepreneurial FFs. This tendency, however, is mitigated by the firms’ economic ties to financial institutions. Our study enhances understanding of FFs’ global entrepreneurial decision-making, contributing to FF heterogeneity research. A novel aspect of our study is examining the impact of institutional legacies on FFs – a topic less explored in family business literature. Furthermore, our findings provide insights for policymakers and regulators, emphasizing the importance of tailored policies that consider the intricate interplay between institutional origin and contemporary entrepreneurial goals in FFs.