Instead of assuming that investors exhibit rational expectations or a specific behavioral bias, we allow them to choose how to interpret the information contained in their private signals and in prices. In an otherwise standard, dispersed information model of financial markets, we show that...

Stock prices reflect firm performance and aggregate investor information about investment opportunities. We show that these dual roles are in tension: when prices are more informative about future investment, they are less effective at incentivizing managerial effort. Overall firm value need not...

Using matched employee-employer US Census data, we examine the effect of a successful initial public offering (IPO) on employee departures to startups. Accounting for the endogeneity of a firm’s choice to go public, we find strong evidence that going public induces employees to leave for...

We document firm-level changes following mergers and acquisitions (M&As) which mirror aggregate shifts in the US labor market observed in response to greater use of automation. Specifically, we show post M&A establishments become less routine task intensive, more high-skilled, and pay more...