We study optimal liquidity management, innovation, and production decisions for a continuum of firms facing financing frictions and the threat of creative destruction. We show that financing constraints lead firms to decrease production but may spur investment in innovation (R&D). We...

This paper documents that underpriced firms substitute R&D spending with share buybacks to the detriment of innovation. To identify underpriced firms, I introduce a novel measure of non-fundamental price pressure induced by indirect exposure to industry-level shocks. This measure addresses...

We examine whether corporate decisions such as share repurchases influence a firm's intangible assets and their production. We find a significantly negative relationship between share repurchases and firm innovation. The negative relationship survives all considered robustness tests. We further...

We study how incentives to boost short-term performance affect longer-term innovation output. Share repurchases that are motivated by an incentive to meet current-quarter EPS targets are associated with an increase in the quality of innovation outputs such as forward citation counts and the...

Eighty-two percent of public firms have golden parachutes (or “chutes”) under which CEOs and senior officers may be paid tens of millions of dollars upon their employer's change in control. What justifies such extraordinary payouts?Much of the conventional analysis views chutes as excessive...

This paper investigates how flexibility in payout decisions affects firm innovation. Firms which make payout mainly in the form of share repurchase have greater flexibility in making payouts compared to firms which make payout mainly in the form of dividends. I show that firms with greater...

This study examines the relation between the degree of innovation disclosed in new product announcements (NPAs) and future firm performance. Using a new text-based measure of the amount of innovation disclosed in NPAs, we find that higher innovation disclosure predicts favorable future sales and...

Large corporations dominate economic and social life in the United States and around the globe. The mainstream corporate governance ideology of “shareholder primacy” claims that the exclusive purpose of a corporation is to generate returns for shareholders, which means that governance...

This paper investigates how flexibility in payout decisions affects firm innovation. Firms that make payout mainly in the form of share repurchase have greater flexibility in making payouts compared to firms that make payout mainly in the form of dividends. I show that firms with greater payout...