Abstract We find evidence that insiders at resource constrained firms trade more often and in patterns indicating the use of private information. Our findings are driven by insider sales relative to cash‐based compensation. This indicates that when compensation is not directly tied to firm value, insiders are more likely to trade opportunistically, even if their trade transmits a negative market signal. Insiders also realize significant abnormal returns following transactions at resource constrained firms, indicating that insiders are trading with private information and consistently profiting. Overall, these results suggest that insiders at resource constrained firms utilize insider trading to supplement their compensation.

Abstract We investigate the effect of bond covenants on the speed of corporate capital structure adjustment. Based on manually collected bond covenant information from publicly listed Chinese firms between 2007 and 2019, we construct an index that measures the intensity of corporate bond covenants. Our results show that the greater the covenant intensity index of a firm's debt covenants, the faster the capital structure adjustment. Option covenants, restrictive asset transfer covenants, restrictive investment covenants, and event‐driven covenants all have a positive and significant association with the speed of capital structure adjustment, whereas no such effect is observed for financing covenants and repayment arrangement covenants. Furthermore, we examine the direction of adjustment and adjustment method, and demonstrate that bond covenants promote an upward adjustment in a firm's capital structure by increasing debt financing. An analysis of heterogeneity effects reveals that the positive relation between the intensity of bond covenants and speed of capital structure adjustment is more pronounced in state‐owned companies and companies headquartered in areas with higher legal standards. Finally, we show that information transparency, internal control, and environmental, social, and governance (ESG) performance are channels through which bond covenants affect the speed of capital structure adjustment.

Abstract We evaluate how purchases of wealth management products (WMPs) influence the performance of Chinese nonfinancial listed companies. Our main finding is that purchasing WMPs enhances firm performance, but the relation shows an inverted U‐shape: When WMP investment exceeds 62.57% of total assets, its positive effects diminish and ultimately harm performance. Heterogeneity analysis reveals that the performance gains are concentrated among non‐state‐owned enterprises (non‐SOEs), whereas state‐owned enterprises (SOEs) experience no significant benefits or even negative effects. Furthermore, the positive impact of WMPs is more pronounced in firms with higher leverage, abundant cash holdings, or lower top‐shareholder concentration.

Abstract Our findings reveal that subordinate executives with higher comparative confidence and competence in overseeing CEO actions drive greater corporate risk‐taking, notably through strategic investments and financing activities that enhance firm value. These include capital expenditures, research and development (R&D), intangible assets, advertising, and financing via cash, equity, and leverage, which collectively account for about 46.68% of return on assets volatility and 27.75% of cash flow volatility. The impact is particularly strong in competitive and complex business environments but diminishes with higher executive age and tenure.

Abstract In line with increased liquidity offered by asset sales, our findings show that firms selling large assets prior to acquisitions are more likely to use cash as payment method. Additionally, we find that in subsequent cash acquisitions, firms using cash stemming from asset sales experience higher announcement abnormal returns compared to firms using cash from other sources of funds, such as internally generated cash flows, debt financing, and equity issuance, which are linked to agency costs and information asymmetry effects. The higher wealth effects suggest that funds from asset sales are inflicted with relatively lower adverse valuation effects that are associated with other sources of funds.

Abstract We use exogenous changes in creditor rights from staggered enactments of anti‐recharacterization laws to show that enhanced creditor rights lead to economically significant increases in dividend payments. This impact is more pronounced for firms that are financially constrained, poorly governed, informationally opaque, and prone to agency problems. Our detailed loan‐contract results show that stronger creditor rights provide greater access to credit markets, and it is through this channel that firms are able to redirect more funds toward shareholder payouts. Overall, our findings suggest that improving the rights of one stakeholder can create positive spillover effects for other stakeholders.

Abstract We examine the effective contribution of internal capital markets (ICMs) within business groups during financial crises, focusing on Korean chaebols. Using panel data on Korean firms, we first confirm that chaebol‐affiliated firms show a lower probability of bankruptcy than stand‐alone firms during crises. We also find that chaebol‐affiliated firms with low bankruptcy risk are more likely to be capital providers, while firms with high growth opportunities but higher bankruptcy risks tend to be receivers in ICMs. Moreover, this capital reallocation contributes to improving post‐crisis group‐level performance. Overall, our study highlights the importance and effectiveness of ICMs for Korean business groups during financial crises.

Abstract We use a Japanese dataset with unique regulatory features to examine information absorption in stocks with short‐selling constraints. Japanese stock exchanges place short‐sales restrictions on a specific subset of stocks and have distinctive regulations pertaining to seasoned equity offerings (SEOs). In sharp contrast to the United States, no offer‐related information is released on the Japanese SEO issue date. We observe a significant price reaction on the issue date only for short‐ sales restricted stocks, manifested when additional shares are introduced. We posit that the phenomenon is attributable to short‐sales restrictions causing a delayed reaction to the stale publicly available information, to which the market has already reacted at its announcement.

Abstract Newborn funds disproportionately hold popular stocks, representing long‐lived strategic choices. This suggests that when choosing strategies in which to launch new funds, families do not consider only expectations for their own performance but also consider investor sentiment toward those strategies. The two motives for entry result in an interaction effect between competitive entry and strategy popularity, which affects performance and flows for both existing and newborn funds. Newborn funds' expectations for performance are partly driven by fund manager skill in those strategies, but this is not the only factor, leaving a role for time‐varying investment opportunities.

Abstract We examine the cross‐section of credit default swap (CDS) returns by forming CDS portfolios based on the implied volatility curves of equity options. We document that CDS protection sellers earn higher average returns for: (1) firms with higher at‐the‐money implied volatility and (2) firms with steeper volatility skew when conditioning on high implied volatility. We find that, relative to bond returns, CDS returns are better explained by our proposed measures interacted with standard credit determinants. Our reasoning is that the large degree of informed trading in the CDS market makes it more in sync with the equity options market, which is also known to attract informed traders.