Skewness preference, the tendency to overweight the probability of extreme tail events, can affect managerial decision making. We find that Chinese listed firms managed by CEOs who experienced a largely unpredictable rare event, namely the outbreak of Severe Acute Respiratory Syndrome (SARS) in...

This paper theoretically illustrates and empirically examines how listed non-financial firms use financial assets as an earnings manipulation tool with bad-news-hoarding motives. China created its first accounting standards for financial instruments in 2007, which classify financial assets based...

Based on the evidence after the outbreak of SARS in 2003, which is caused by the same family of viruses as COVID-19, we show that due to the “probability weighting” phenomenon, i.e., decision makers tend to overweight the probability of extreme tail events, the epidemic experience induces...

Using a unique regulatory change (the enactment of the Labor Contract Law) in China, we find that the strengthening of labor protection leads to a significant increase in firm transparency. Further analyses indicate that stronger labor protection reduces operating flexibility, which can exert...

We examine whether labor market frictions affect firms' tax aggressiveness. Exploiting the adoption of U.S. state-level Wrongful Discharge Laws as a quasi-exogenous shock to a firm's firing costs, we document a decline in tax aggressiveness for firms located in states that increase employment...

Employing the news-based economic policy uncertainty (EPU) Index of Baker, Bloom, and Davis (2016) and quarterly data of Chinese listed companies, we find that an increase in EPU raises the average debt-to-asset ratio of state-owned enterprises (SOEs) but lowers that of private-owned enterprises...

Exploring the turnovers of city heads in China, I find that local policy uncertainty can encourage firm innovation. This positive relation is concentrated in state-owned enterprises (SOEs), which possess competitive advantages (especially resource-based) due to innate government connections....

We document that an increased likelihood of losing important stakeholders like key talents can lead to a higher stock price crash risk. Our test exploits U.S. state courts’ staggered rejections of the inevitable disclosure doctrine (IDD), which improves the ability of key talent to switch...

We examine how waiving managers’ duty of loyalty affects the discharge of their duty of care in view of firms’ acquisition decisions. Exploiting the staggered introduction of Corporate Opportunity Waivers (COWs) that allow boards to waive their managers’ duty of loyalty, in a...

We highlight that the inalienable nature of human capital can crucially determine corporate payouts. Exploiting the staggered rejections of the inevitable disclosure doctrine (IDD) across 15 U.S. states as exogenous shocks that potentially increase the mobility of key talents, we find that...