We propose a new function of stock market – to align voters’ preferences to politicians’ policies. We build a model with politicians’ ability to abate negative disaster shocks. Pro-business politicians are more likely to get re-elected when voters hold firm equity, and because of less...

Abstract We study the classical relationship between a firm’s investment and Tobin’s q for which unobserved productivity is another factor of a firm’s decision. Besides the potential measurement problem of Tobin’s q, controlling unobserved productivity is a new challenge. We develop an...

This paper investigates whether network effects on investment exist and whether firms strategically herd their connected firms. Using novel data on board members, we utilize board-interlock networks where two firms share at least one common board member and estimate network effects on firms'...

Existing literature offers opposing views on the effects of financial crises on firm innovation. We provide evidence supporting the Schumpeter’s view of the creative destruction of crises. We identify one specific channel, the internal compensation mechanism that firms use to motivate managers...

In recent years, the majority of additions to and deletions from the S&P 500 index have been stocks that were previously or subsequently included in the S&P 400 index. The announcement returns of these changes have been the opposite of what has been documented for all S&P 500 additions and...

This paper studies the effect of climate policy uncertainty on firm polluting behavior. I find that firms reduce toxic emissions and close toxic facilities during the heightened climate policy uncertainty periods. Firms respond to climate policy uncertainty by adopting abatement technology to...

This paper studies the effect of natural disasters on corporate lease financing. On the one hand, destruction in natural disaster makes firms collateral constrained. On the other hand, disaster-affected firms demand funds for post-disaster reconstruction. Although obtaining external financing is...