This study explores how stock liquidity shapes a firm’s cost behavior using the Tick Size Pilot Program (TSPP) as a natural experiment. We find that an exogeneous increase in the minimum tick size for small cap stocks leads to an increase in SG&A cost stickiness in these pilot firms,...

Negative book value firms have become more prevalent in recent years, ranging from 0.41% of all Compustat firms in 1961 to 12.47% in 2016 with highest representations in the healthcare, telecommunication, and computer electronic industries. Since debtholders exercise strong scrutiny on...

We use the residual-income valuation model to simultaneously estimate firm-specific implied long-term growth rate in abnormal earnings and cost of capital by relating earnings-to-price and book-to-market ratios in a linear fashion. This simple framework estimates investors' consensus beliefs...

In this paper we investigate how incentives affect managers’ input resource expenditure decisions and how firms make equity grant decisions considering managerial behavior. Focusing on selling, general and administrative (SG&A) expenditure, we first document that SG&A expenditure creates...

Using terrorist attacks as an exogenous source driving psychological changes in managerial sentiment, we explore the causal effect of managerial sentiment on firms’ cost stickiness. We find that firms located in the attacked metropolitan areas experienced a significant decline in cost...

In this study, we follow the strategy typology proposed by Treacy and Wiersema (1995) and develop a textual measure of firms’ generic strategy along three dimensions: product leadership, customer intimacy, and operational excellence. Product-leadership firms emphasize innovation and confront...