Investor protection is associated with greater investment-sensitivity to q and lower investment-sensitivity to cash flow. Finance plays a role in causing these effects; in countries with strong investor protection external finance increases more strongly with q, and declines more strongly with...

This study empirically examines the association between a firm’s cost structure and the discretionary investment (i.e., underinvestment or overinvestment) it makes in the short run. Consistent with higher fixed costs making managers more conservative in their investment behavior, we find that...

While extensive research examines the relation between option incentives in executive compensation and risk-taking by managers, the impact of capital structure on this relationship has received little empirical attention. Prior work suggests that heightened managerial career concerns arising...

U.S. financial development varies significantly over the last half century, primarily increasing since the 1980s. Difference-in-difference tests reveal that financial development has disproportionate effects on industries that depend more on external finance. Higher financial development...

Legal investor protection is associated with how firms choose to issue shares. The likelihood of private placements relative to rights offerings increases with investor protection, as does the likelihood of public offerings relative to both private placements and rights offerings. These findings...

U.S. financial development varies a good deal over the last half century, primarily increasing since the 1980s. We ask whether this variation had consequences for the real economy. Difference-in-difference tests reveal that increases in financial development have disproportionate effects on...