Two Faces of Corporate Lobbying: Evidence from the Pharmaceutical Industry

This paper addresses two side effects of corporate lobbying on firm value in the pharmaceutical industry. Employing corporate lobbying and the Food and Drug Administration (FDA) approval data for the period from 1998 to 2013, we find that lobbying firms have a 67.3 percent higher chance that their new prescription drugs are approved by the FDA than non-lobbying firms. On the 3-day window surrounding FDA approval announcements, lobbying firms yield, on average, a 1.1% higher market reaction than non-lobbying peers. However, we also find that insiders in lobbying firms abnormally purchase their own stocks prior to FDA approvals. These opportunistic purchases substantially increase a firm’s litigation risk. Our evidence highlights the ambivalence of lobbying. While lobbying enhances firm value, it also offers an opportunity for insiders to trade their shares first by exploiting private information that eventually hurts firm value

Natural Disaster Risk and Corporate Leverage

Firms located in more disaster-prone counties adopt more conservative leverage policies than those in less disaster-prone counties. Compared to peers in the least disastrous areas, firms in the most disastrous areas are less levered by 3.6 percentage points, equivalent of foregoing $13.47 million. We argue that this systematic difference in leverage is attributed to elevated operating disruption, increased cost of capital, and tightened financial flexibility. Our findings indicate that firms incorporate natural disaster risk in financing decision, which is consistent with the trade-off theory of capital structure

Shareholder Coordination and Stock Price Informativeness

We show that firm‐specific information is more likely to be incorporated into stock prices when firms have stronger shareholder coordination. The premise of our work is that geographic proximity reduces communication costs among shareholders, thereby leading to better coordination. The positive coordination‐informativeness relation is driven mainly by shareholder coordination among dedicated and independent institutions. We further show that the positive effect is more pronounced for firms with weaker governance mechanisms, suggesting that shareholder coordination could serve as a substitute conduit of price discovery. Lastly, we propose that shareholder coordination improves stock price informativeness through the channel of enhanced voluntary disclosure quality

Do Unions Affect Innovation?

We examine the effect of unionization on firm innovation, using a regression discontinuity design that relies on “locally” exogenous variation generated by elections that pass or fail by a small margin of votes. Passing a union election results in an 8.7% (12.5%) decline in patent quantity (quality) three years after the election. A reduction in R&D expenditures, reduced productivity of inventors, and departures of innovative inventors appear to be plausible underlying mechanisms through which unionization impedes firm innovation. In response to unionization, firms move their innovation activities away from states where union elections win. Our paper provides new insights into the real effects of unionization

Green Innovation and the Value of Multinationality

When do multinational corporations (MNCs) derive the most from internalizing the transfer of proprietary technological know how? We revisit this question, which lies at the core of theories on multinationality and performance, from the perspective of corporate strategy involving the mix of green versus non-green innovation effort and a foreign operations focus on countries with high-versus-low environmental standards. We find that high exposure to foreign markets with more stringent environmental regulations stimulates MNCs’ green patent applications. We further show that MNCs’ environmental competitive advantage obtained through green innovation activities, coupled with exposure to foreign countries with high environmental standards, increases firm value in the long run. However, this long-run advantage produces economic rents only when foreign countries have a common-law legal system, effective government, and high growth. Finally, the pursuit of green (or even non-green) innovation while competing in polluting industries is positively associated with market value. Overall, our study highlights that green technology development is a main source of value creation for multinationals

Environmental Regulation and the Cost of Bank Loans: International Evidence

Using a sample of 27 countries between 1990 and 2014, we find that banks charge a higher interest rate on their loans when lending to firms that face more stringent environmental regulations. Further, we show that firms facing such regulations maintain lower financial leverage, incur more operating expenses, and have fewer banks participating in their loan syndicate. The results of the subsample analysis suggest that the increase in the cost of bank loans is more pronounced for financially constrained firms, firms in industries with high environmental litigation risk, and those located in bank-based economies. Overall, our results provide evidence that the observed higher loan spread is the result of environmentally sensitive lending practices by banks

Corporate Political Strategies and Return Predictability

We assess whether observable corporate political strategies can serve as channels of value relevant political information flow into stock prices and form the basis for profitable return predictability strategies. We document that returns of politically connected firms’ stocks lead those of their non-connected peers, suggesting that information shocks associated with new policies and other political developments become evident first in the stock prices of firms that pursue political strategies and then, with delay, in those of similar non-connected firms

Human Activity Recognition as Time-Series Analysis

We propose a system that can recognize daily human activities with a Kinect-style depth camera. Our system utilizes a set of view-invariant features and the hidden state conditional random field (HCRF) model to recognize human activities from the 3D body pose stream provided by MS Kinect API or OpenNI. Many high-level daily activities can be regarded as having a hierarchical structure where multiple subactivities are performed sequentially or iteratively. In order to model effectively these high-level daily activities, we utilized a multiclass HCRF model, which is a kind of probabilistic graphical models. In addition, in order to get view-invariant, but more informative features, we extract joint angles from the subject’s skeleton model and then perform the feature transformation to obtain three different types of features regarding motion, structure, and hand positions. Through various experiments using two different datasets, KAD-30 and CAD-60, the high performance of our system is verified

Local Religiosity, Workplace Safety, and Firm Value

This paper examines the effect of local religiosity on employee treatment, proxied by workplace safety incidents. Using the establishment-level data compiling on the incidents of work-related injuries, we find that employees of the establishments in more religious counties get less injured than those in less religious counties. We further find that a reduction in occupational accidents is more evident for establishments in counties dominated by one religious denomination, strengthening our argument on community solidarity and homophily stemming from religious networks. Firms whose establishments are located in high religiosity counties are less likely to violate workplace conduct and more likely to take workplace safety measures. Moreover, firms with more work-related injuries exhibit poorer firm performance. Overall, our findings suggest that local religiosity has a value implication through human capital protection

Institutional Investors and Corporate Environmental, Social, and Governance Policies: Evidence from Toxics Release Data

This paper studies the role of institutional investors in influencing corporate environmental, social, and governance (ESG) policies by analyzing the relation between institutional ownership and toxic release from facilities to which institutions are geographically proximate. We develop a local preference hypothesis based on the delegated philanthropy and transaction-costs theories. Consistent with the hypothesis, local institutional ownership is negatively related to facility toxic release. The negative relation is stronger for local socially responsible investing (SRI) funds, local public pension funds, and local dedicated institutions. We also find that the relation is more negative in communities that prefer more stringent environmental policies and in communities of greater collective cohesiveness. Local institutional ownership, particularly local ownerships by SRI funds and public pension funds, is positively related to the probability that an ESG proposal is either introduced or withdrawn. The paper sheds light on the drivers behind institutions’ ESG engagement and their effectiveness in influencing ESG