John K. Wald

Stricter noncompete agreement enforceability has been shown to reduce labor mobility. Because employees may prefer environmentally responsible employers, labor mobility allows them to sort toward greener firms and gives firms an incentive to reduce pollution. We ask whether reductions in mobility related to noncompete agreement enforceability carries consequences for industrial pollution. Exploiting state variation in enforceability across 1.6 million U.S. plant-chemical-year observations from 1994-2020, we find that stronger enforcement is associated with greater pollution. These results hold regardless of whether pollution is measured in total pounds emitted, as a proportion of plant output, or using toxicity-related measures. Stacked difference-indifferences estimates support a directional interpretation. The effects are stronger in states where the population has stronger green sentiment and weaker when local labor markets are larger. Plantstate enforceability appears more important than headquarters-state enforceability. The findings are consistent with restrictions preventing environmentally conscious employees from moving to greener employers and identify employee-firm matching as a determinant of environmental performance.

We use country‐level shocks and a difference‐in‐differences framework to study how financial market liberalization is related to country‐level carbon dioxide, overall greenhouse gas, and sulfur dioxide emissions. Liberalization increases the number of foreign institutional investors, which could lead to a decrease in firm pollution. Alternatively, liberalization increases the proportion of public firms in the economy, which may result in higher emissions. After correcting for Gross Domestic Product (GDP), liberalizations lead to economically large and statistically significant increases in emissions: a 21.7% increase in CO ₂ emissions over 10 years. A placebo test suggests that the increase is due to corporate, not household, emission behavior.

We use country-level shocks and a difference-indifferences framework to study how financial market liberalization is related to country-level carbon dioxide, overall greenhouse gas, and sulfur dioxide emissions. Liberalization increases the number of foreign institutional investors, which could lead to a decrease in firm pollution. Alternatively, liberalization increases the proportion of public firms in the economy, which may result in higher emissions. After correcting for GDP, liberalizations lead to economically large and statistically significant increases in emissions: a 21.7% increase in CO2 emissions over 10 years. A placebo test suggests that the increase is due to corporate, not household emission behavior.

Research Question/Issue: For firms with institutional dual holders, is proxy voting affected by whether the vote is confidential? Does confidential voting affect firms' cost of debt?Research Findings/Insights: Consistent with social exchange theory and reciprocity norms, we find that, in the absence of confidential voting, firms with institutional dual holders gain more favorable votes for proposals and, in particular, for management‐sponsored compensation proposals. Further, these firms pay a higher cost of borrowing. This reciprocity relation does not exist if the firm has confidential voting in place.Theoretical/Academic Implications: The results are consistent with reciprocity norms creating a psychological obligation to repay valuable favors between firm managers and institutional dual holders when proxy votes are not confidential.Practitioner/Policy Implications: The findings support the popular position that confidential voting is in the best interests of shareholders and rigorous external corporate governance.

We use the unique nature of the director and officer liability protection law applicable to Nevada incorporated firms to study how liability protection is related to corporate tax avoidance. We find that firms incorporated in Nevada avoid 32% more federal corporate tax as a fraction of total assets than firms incorporated in Delaware, and 40% more than firms incorporated in other states. Nevada‐incorporated firms have a 15% lower cash effective tax rate and an 8% lower GAAP ETR. The results are robust to various specifications including instrumental variable and matching approaches. Greater tax avoidance is also associated with lower payouts to shareholders for Nevada‐incorporated firms. The findings are consistent with theories about the complementarity of managerial diversion and tax avoidance for firms with poor monitoring, and they demonstrate how increases in liability protection lead to the unintended consequence of greater firm tax avoidance.

Are all covenants equally effective at reducing the bondholder-shareholder conflict? Examining the most frequently used bond covenants, we document that four out of 24 restrictions are associated with significantly higher bankruptcy risk. The use of these Default Indicating covenants can be partly explained by faulty contract design, greater recovery in bankruptcy, or within-creditor conflicts. Firms that use In-House Counsel to help structure their bond issue and those that use Big 4 Auditors are also less likely to include Default Indicating covenants in their bonds. Further tests show that the use of these Default Indicating covenants is associated with higher bond and CDS spreads. Overall, the results help explain the prior evidence on the relation between covenant use and the cost of debt.

We find that independent directors in more corrupt countries receive greater pay. This relation could reflect outside directors in corrupt countries expropriating firm value, or it could reflect higher compensation for the additional effort required to lessen the negative effects of corruption. Acquirer acquisition announcement returns are lower in more corrupt countries, and this relation is mitigated by higher director pay. Higher director pay is also associated with greater sensitivity of CEO turnover to firm performance and moderates the negative effects of country‐level corruption on firm value. This evidence is consistent with higher director pay in corrupt countries incentivizing effort.