In this article, we propose two asymmetry measures for stock returns. Unlike the popular skewness measure, our measures are based on the distribution function of the data rather than just the third central moment. We present empirical evidence that the greater upside asymmetries calculated using our new measures imply lower average returns in the cross section of stocks. In contrast, when using the skewness measure, the relationship between asymmetry and returns is inconclusive.

We identify a positive causal effect of healthy working environments on corporate innovation, using the staggered passage of U.S. state-level laws that ban smoking in workplaces. We find a significant increase in patents and patent citations for firms headquartered in states that have adopted such laws relative to firms headquartered in states without such laws. The increase is more pronounced for firms in states with stronger enforcement of such laws and in states with weaker preexisting tobacco controls. We present suggestive evidence that smoke-free laws affect innovation by improving inventor health and productivity and by attracting more productive inventors.

This paper investigates the relation between media coverage and offering yield spreads using a comprehensive dataset of 5,338 industrial bonds issued from 1990 to 2011. We find that media coverage is negatively associated with firms’ cost of debt. This association is robust to controlling for standard yield determinants, different model specifications, and endogeneity. We identify 4 economic channels through which media coverage influences the cost of debt: Information asymmetry, governance, liquidity, and default risk. Importantly, media coverage has an independent influence beyond the effects of these economic mechanisms and is not a proxy for other firm attributes.

We examine the potential for management-worker alliances when employees have substantial voting rights, and how such alliances affect the balance of power between managers and shareholders. We find that substantial employee voting rights exacerbate the manager-shareholder conflicts. Specifically, they entrench incumbent managers and allow them to pursue value-destroying acquisitions by undercutting the disciplinary influence of the corporate control market. Importantly, employee support for managers is conditional on favorable treatment of employees. Our findings are consistent with Pagano and Volpin’s theory of worker-management alliances and highlight the potential risks associated with large employee voting power.

Numerous papers have shown that developing economies are more volatile. We show that, despite greater aggregate and industry stability, performance and size of individual firms in developed countries are more volatile. In developing countries, market imperfections insulate incumbent firms from competition. Consistent with this, firms in developing countries have higher profit, higher market concentration, and less capital raising. Cross-country differences in operating risk and competition intensity are greater in industries that are dependent on external finance, where we expect higher impacts of capital-market imperfections. We show the inverse relation between aggregate and firm-level volatilities has important implications for international studies of cash holding.

We study how investor sentiment affects stock prices around the world. Relying on households’ Google search behavior, we construct a weekly measure of sentiment for 38 countries during 2004–2014. We validate the sentiment index in tests using sports outcomes and show that the sentiment measure is a contrarian predictor of country-level market returns. Furthermore, we document an important role of global sentiment in stock markets.

This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover announcements. Returns reflect post-turnover changes in operating performance. Further, CEOs’ and successors’ GAIs are significantly positively related, but only for non-sudden turnovers. Consistently, for sudden deaths, we find positive stock returns to appointments of generalist successors. The results provide a market-based explanation for the generalist pay premium.

Although venture capitalists (VCs) can choose from thousands of potential syndicate partners, many co-syndicate with small groups of preferred partners. We term these groups “VC communities.” We apply computational methods from the physical sciences to 3 decades of syndication data to identify these communities. We find that communities comprise VCs that are similar in age, connectedness, and functional style but undifferentiated in spatial location. Machine-learning tools classify communities into 3 groups roughly ordered by their age and reach. Community VC financing is associated with faster maturation and greater innovation, especially for early-stage firms without an innovation history.

We provide a new framework for valuing multidimensional real options where opportunities to exercise the option are generated by an exogenous Poisson process, which can be viewed as a liquidity constraint on decision times. This approach, which we call the Poisson optional stopping times (POST) method, finds the value function as a monotone sequence of lower bounds. In a case study, we demonstrate that the frequently used quasi-analytic method yields a suboptimal policy and an inaccurate value function. The proposed method is demonstrably correct, straightforward to implement, reliable in computation, and broadly applicable in analyzing multidimensional option-valuation problems.

We investigate whether firms’ corporate social responsibility (CSR) reputations and environmental lobbying efforts protect shareholder wealth in the event of environmental lawsuits. Using a sample of lawsuits filed in United States Federal Courts, we find that firms with superior CSR reputations suffer worse market reactions to environmental allegations. In contrast, lobbying cushions filing-date valuation losses, providing insurance-like protection against lawsuits. Our results are robust to subsample analyses, a falsification test, propensity score matching, and alternative empirical proxies and model specifications.