Researchers are often interested in modeling binary decisions made by firms (e.g., the yes or no decisions to split the shares, initiate a dividend, or acquire another firm) as functions of economy-wide variables (common factors). Although factor models for continuous dependent variables are...

Finance research suggests that firms cater to investors' time-varying preference for low-priced stocks by managing nominal share prices. We show that the existing empirical tests of such catering use highly persistent data that may lead to finding significant relations between variables that are...