Hundreds of equity market intelligence financial technology firms (FinTechs) have formed in the last decade. We assemble novel data to describe their capabilities, users, and consequences. Our data suggest that these FinTechs i) aggregate many data sources, including nontraditional ones (e.g., Twitter, blogs), and synthesize such data using artificial intelligence to make investment recommendations, and ii) change Internet users’ information discovery by serving as substitutes for traditional information providers. We evaluate some nontraditional data and find evidence suggesting that such data contain valuable information or “crowd wisdom” that links to informational efficiency. Overall, our findings are consistent with this innovation benefiting investors and markets.

We examine the causal effect of stakeholder orientation on firms’ cost of debt. Our test exploits the staggered state-level adoption of constituency statutes, which allows directors to consider stakeholders’ interests when making business decisions. We find a significant drop in loan spreads for firms incorporated in states that adopted such statutes relative to firms incorporated elsewhere. We further show that constituency statutes reduce the cost of debt through the channels of mitigating conflicts of interest between residual and fixed claimants and between holders of liquid claims and holders of illiquid claims, limiting legal liability and lowering takeover threats.

When activist shareholders file Schedule 13D filings, the average stock-price volatility drops by approximately 10%. Prior to filing days, volatility information is reflected in option prices. Using a comprehensive sample of trades by Schedule 13D filers that reveals on what days and in what markets they trade, we show that on days when activists accumulate shares, option-implied volatility decreases, implied volatility skew increases, and implied volatility time slope increases. The evidence is consistent with a theoretical model where it is common knowledge that informed trading occurs only in the stock market and market makers update option prices based on stock-price and order-flow dynamics.

We examine whether climate change news risk is priced in corporate bonds. We estimate bond covariance with a climate change news index and find that bonds with a higher climate change news beta earn lower future returns, consistent with the asset pricing implications of demand for bonds with high potential to hedge against climate risk. Moreover, when investors are concerned about climate risk, they are willing to pay higher prices for bonds issued by firms with better environmental performance. Our findings suggest that corporate policies aimed at improving environmental performance pay off when the market is concerned about climate change risk.

Using Internet search volume for lottery to capture gambling sentiment shifts, we show that when the overall gambling sentiment is strong, investor demand for lottery stocks increases, these stocks earn positive short-run abnormal returns, managers are more likely to split stocks to cater to the increased demand for low-priced lottery stocks, and initial public offerings (IPOs) earn higher first day returns. Further, the sentiment-return relation is stronger among low institutional ownership firms, headquartered in regions where gambling is more acceptable and local bias is stronger. These results suggest that gambling sentiment has a spillover effect on the stock market.

This article studies dynamic compensation and risk management under cash-flow volatility shocks. The optimal contract depends critically on firms’ ability to make good on promised future payments to managers. When volatility is low, firms with full commitment ability implement high pay–performance sensitivity to motivate effort from managers, and they impose large penalties on the arrival of volatility shocks to incentivize prudent risk management. In contrast, firms with limited commitment may allow excessive risk taking in exchange for low pay–performance sensitivity. When volatility becomes high, firms with full commitment defer compensation more, whereas firms with limited commitment must expedite payments.

This paper reassesses two conflicting hypotheses on the valuation impacts of private placements of equity (PPEs), the monitoring/certification hypothesis and the managerial entrenchment hypothesis, by focusing on the shareholder approval, active buyer, and premium pricing features of PPEs. We find that PPEs with these features have significant positive announcement returns and insignificant mean long-run returns, while the corresponding announcement and long-run returns for PPEs without such features are significantly negative. Firms with value-enhancing PPE features are better governed and use proceeds more efficiently. Thus, the heterogeneous nature of PPEs helps reconcile the puzzling return patterns and conflicting hypotheses regarding PPEs.

Using data on the universe of U.S. based mutual funds, we find that two out of five fund families hold corporate bonds of firms in which they also own an equity stake. We show that the greater the fraction of debt a fund family holds in a given firm, the greater its propensity to vote in line with the interests of firm debtholders at shareholder meetings, even when against Institutional Shareholder Services (ISS) recommendation. Voting has direct policy consequences as firms that receive more votes in favor of creditors make corporate decisions more in line with the interests of debtholders.

This paper investigates hedge funds’ ability to time industry-specific returns and shows that funds’ timing ability in the manufacturing industry improves their future performance, probability of survival, and ability to attract more capital. The results indicate that the best industry-timing hedge funds in the manufacturing sector have the highest return exposure to earnings surprises. This, together with persistently sticky earnings surprises, transparent information environment in regards to earnings releases, and large post-earnings-announcement drift in the manufacturing industry, explain to a great extent why best-timing hedge funds can generate significantly larger future returns compared to worst-timing hedge funds.

We trace a corporate governance channel of bank shock transmission into the real economy. Using 1,245 U.S. bank enforcement actions (EAs) issued between 1990 and 2017, we show that when a nonfinancial firm (NFF) and bank share a common director, NFF stock prices fall around bank EAs. Severe EAs elicit more negative returns. During enforcement, valued directors substitute NFF board meeting attendance with bank board meeting attendance. Impaired credit relationships, director reputational damage, and endogenous director selection cannot fully explain our results. These findings imply that shared directors could transmit larger bank shocks into the real economy.

How households shift spending across firms in response to income fluctuations is an important source of firm risk. Using transaction-level data, we study how households interact with the universe of retailers following income changes. We find that income increases within and across households result in substitution toward retailers in a category that are higher quality; smaller; more profitable; and have higher labor intensity, research and development (R&D) intensity, and equity betas. Although not all shifts are economically large, they do not average out across retailers. Thus, retailer choice has implications for key financial and macroeconomic outcomes, such as aggregate profitability and labor demand.

The liquidity-coverage ratio (LCR) requires banks to hold enough liquidity to withstand a 30-day run. We study the effects of the LCR on broker-dealers, the financial intermediaries at the epicenter of the 2007–2009 crisis. The LCR brings some financial-stability benefits, including a significant maturity extension of triparty repos backed by lower-quality collateral, as well as the accumulation of larger liquidity pools. However, it also leads to less liquidity transformation by broker-dealers. We also discuss the liquidity risks not addressed by the LCR. Finally, we show that a major source of fire-sale risk was self-corrected before the introduction of postcrisis regulations.

We propose an explanation for why corporate investment used to be sensitive to cash flow and why the sensitivity declined over time. The sensitivity stems from the informational role of cash flow in inferring the productivity of tangible capital in the old economy. Over time, however, more new-economy firms enter the market. These firms have reduced tangible capital productivity and reduced cash-flow predictability, which drives the decline in the average investment–cash flow sensitivity. Theoretical and empirical analyses support this explanation.