Cash- and stock-financed takeover bids induce strikingly different target revaluations. We exploit detailed data on unsuccessful takeover bids between 1980 and 2008, and we show that targets of cash offers are revalued on average by +15% after deal failure, whereas stock targets return to their pre-announcement levels. The differences in revaluation do not revert over longer horizons. We find no evidence that future takeover activities or operational changes explain these differences. While the targets of failed cash and stock offers are both more likely to be acquired over the following eight years than matched control firms, no differences exist between cash and stock targets, either in the timing or in the value of future offers. Similarly, we cannot detect differential operational policies following the failed bid. Our results are most consistent with cash bids revealing prior undervaluation of the target. We reconcile our findings with the opposite conclusion in earlier literature (Bradley, Desai, and Kim, 1983) by identifying a look-ahead bias built into their sample construction.

A number of researchers have argued that men and women have different attitudes toward and behavioral responses to competition; that is, women are more likely to opt out of jobs in which performance pay is the norm and to under-perform in some competitive situations. Laboratory experiments suggest that these gender differences are rather large. To check these hypotheses and findings against differences in the field, the authors use performance pay as an indicator of competition in the workplace and compare the gender gap not only in incidence of performance pay but also in earnings and work effort under these contracts. They find that although women are less likely than men to work under performance pay contracts, the gender gap is small. Furthermore, the effect of performance pay on earnings is modest and does not differ markedly by gender. Consequently, the authors argue, the ability of these competition hypotheses to explain the gender pay gap seems very limited.

In labor markets, some individuals have, or believe to have, less data on the determinants of success than others, e.g., due to differential access to technology or role models. We provide experimental evidence on when and how informational differences translate into performance differences. In a laboratory tournament setting, we varied the degree to which individuals were informed about the effort-reward relationship, and whether their competitor received the same or a different amount of information. We find performance is adversely affected only by worse relative, but not absolute, informedness. This suggests that inequity aversion applies not only to outcomes but also to information that helps achieve them, and stresses the importance of inequality in initial information conditions for performance-dependent outcomes.

Firms face a trade-off between patenting, thereby disclosing innovation, and secrecy. We show that this trade-off interacts with firms’ financing choices. As a shock to innovation disclosure, we study the American Inventor’s Protection Act that made firms’ patent applications public 18 months after filing, rather than when granted. We find that such increased innovation disclosure helps firms switch lenders, resulting in lower cost of debt, and facilitates their access to syndicated-loan and public capital markets. Our evidence lends support to the idea that public-information provision through patents and private information in financial relationships are substitutes, and that innovation disclosure makes credit markets more contestable.

We show that negative policy rates affect the supply of bank credit in a novel way. Banks are reluctant to pass on negative rates to depositors, which increases the funding cost of high-deposit banks, and reduces their net worth, relative to low-deposit banks. As a consequence, the introduction of negative policy rates by the European Central Bank in mid-2014 leads to more risk-taking and less lending by euro-area banks with a greater reliance on deposit funding. Our results suggest that negative rates are less accommodative and could pose a risk to financial stability, if lending is done by high-deposit banks.

Using variation in bank scope generated by the stepwise repeal of the Glass–Steagall Act in the US, we show that the deregulation of universal banks allowed them to finance firms with 14% higher volatility. This increase in risk is compensated by lasting improvements in firms’ total factor productivity of 3%. Using bank scope-expanding mergers to identify shocks to universal banks’ private information about borrower firms, we provide evidence that informational economies of scope across loans and non-loan products account for the firm-level real effects of universal banking.

We explore whether lenders’ decisions to provide liquidity in periods of distress are affected by the extent to which they internalize the negative spillovers of industry downturns. We conjecture that high-market-share lenders are more likely to internalize negative spillovers and show that they provide liquidity to industries in distress when fire sales are likely to ensue. High-market-share lenders also provide liquidity to customers and suppliers of distressed industries when the disruption of supply chains is expected to be costly. Our results suggest a novel channel to explain why credit concentration may favor financial stability.