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The interview with Silicon Valley venture capitalist Mark Coopersmith explores the current landscape of privately funded fusion energy efforts. Coopersmith discusses the challenges and optimism surrounding the commercialization of fusion energy, highlighting the different perspectives of physicists, engineers, entrepreneurs, and investors. The interview delves into the role of venture capital in funding fusion startups, the need for government support in basic research, and the potential spin-off technologies that could emerge from advancements in fusion science. The discussion also touches on the intersection of Silicon Valley culture and the portrayal of tech startups in popular media. [Extracted from the article]

While the compressed workweek (CWW) has gained traction in recent years, its impact on firms' financial performance is not well understood. This study addresses this gap in the literature by examining the effect of the CWW on shareholder value. Drawing on social exchange theory and its norm of reciprocity, we introduce a conceptual model on the main effect of the CWW on shareholder value, and the moderating roles of the anticipated type and degree of employee reciprocation. To test the model's predictions, we exploit the announcement of Belgium's mandatory adoption of a CWW in February 2022 as the setting for a policy event study analysis. We find positive average stock price reactions of Belgian listed firms to the CWW's announcement, consistent with investors expecting the CWW to result in favorable employee reciprocation. Stock price reactions are more positive for firms with a lower ex ante employee productivity, suggesting employees are predicted to reciprocate with higher efforts. Stock price reactions are also more positive for firms with a higher reliance on knowledge workers, consistent with these employees deriving a greater utility from flexible working arrangements. Robustness tests, including a placebo analysis and an event study of international firms with Belgian subsidiaries, corroborate our results. Our study offers several theoretical contributions and has practical implications for HR managers and policymakers. [ABSTRACT FROM AUTHOR]

Myopic marketing spending—curtailing marketing and research and development expenses to boost earnings—damages firms' long-term value. Despite this, top management teams are often myopic, and by the time investors or boards detect such short-termism, it is too late to react or intervene. This research introduces a novel prediction method by analyzing the language top management teams use in earnings calls, specifically focusing on marketing and earnings emphasis, to predict future instances of myopic marketing spending. Through linguistic dependency parsing of almost 11 million sentences extracted from nearly 25,000 quarterly earnings call transcripts of 1,197 firms between 2008 and 2019, the authors demonstrate that the proposed approach can predict myopic marketing spending at a quarterly frequency for up to one year in advance. They find that an increase of one standard deviation in earnings emphasis is associated with a 23.68% increase in the likelihood of future myopic marketing spending. Investments based on the proposed approach produce 1.61% additional annual abnormal returns compared with models that exclusively use known predictors of myopic marketing spending, while offering earlier foresight and more frequent opportunities for intervention. This reduces information asymmetry for investors and boards of directors. [ABSTRACT FROM AUTHOR]

We provide a systematic empirical assessment of the Minsky hypothesis that business fluctuations stem from irrational swings in expectations. Using predictable firm-level forecast errors, we build an aggregate index of irrational expectations and use it to provide three sets of results. First, we show that our index predicts aggregate credit cycles. Next, we show that these predictable credit cycles drive cycles in firm-level debt issuance and investment and similar cycles between financially constrained and unconstrained firms, as Minsky predicts. Finally, we show more pronounced cycles in firm-level financing and investment for firms with ex ante more optimistic expectations. (JEL G31, G32, G40, E32, E44) [ABSTRACT FROM AUTHOR]

We study the quantitative impact of lender control rights on corporate investment, asset prices, and the aggregate economy. We build a general equilibrium model in which the breaching of a loan covenant (technical default) entails a switch in investment control rights from borrowers to lenders. Lenders optimally choose low-risk projects, thus mitigating borrowers' risk-taking incentives and lowering the cost of equity. This mechanism generates strong macroeconomic effects and mitigates the financial accelerator. Consistent with our model, proximity to technical default in the data is associated with 4.12% lower returns and lower exposure to systematic risk. [ABSTRACT FROM AUTHOR]

Screening theory explains how decision-makers search for and use external cues to overcome information asymmetry problems under conditions of uncertainty. We introduce screen credibility, screen necessity, and screen salience to the screener as boundary conditions that determine screen efficacy. We test our ideas in the context of corporate venture capital (CVC) funding aimed at industries where firms do not yet compete. These decisions are fraught with uncertainty, so we suggest that CVC decision-makers use the industry shareholdings of a firm's quality shareholders, who are knowledgeable about many industries, as a screen to help them decide whether to continue or terminate CVC funding in that industry. We also hypothesize that screen credibility, screen necessity, and screen salience to the screener condition the fundamental screening relationship. Analysis of CVC funding termination over a period of two decades confirms our ideas. A policy-capturing study administered to executives with CVC experience offers additional support. Our study thus extends screening theory by identifying the factors that activate a screen within the decision-making process. We also add a unique element to the empirical body of CVC research as we uncover the influence of corporate ownership on CVC decision-making. [ABSTRACT FROM AUTHOR]

This paper studies tax-minimizing investment, whereby firms tilt capital purchases toward year-end to reduce taxes. We use this pattern to characterize how taxes affect investment behavior. We exploit variation in firm tax positions from administrative data to confirm that tax minimization causes spikes. Spikes increase when firms face financial constraints or higher option values of waiting. Cumulative investment does not completely reverse after spikes. We develop an investment model with tax asymmetries to rationalize these patterns. Both depreciation motives (later investments face lower effective tax rates) and option value motives (tax asymmetry implies time-varying opportunities to minimize taxes) are necessary to fit the data. (JEL G31, G38, H25) [ABSTRACT FROM AUTHOR]

We use close gubernatorial elections as a quasi-natural experiment to document a positive effect of political uncertainty on firm-level R&D. This finding is in contrast to the existing literature documenting a negative impact of political uncertainty on capital investment. We examine potential mechanisms and find that our results are consistent with the growth option view of R&D investment. The effect is stronger for politically sensitive and high-tech industries.The results are robust to different proxies for political uncertainty shocks. As predicted by models of investment under uncertainty, the real effects of political uncertainty critically depend on the type of the investment. JEL G18, G38, O31, O32 [ABSTRACT FROM AUTHOR]

We study how U.S. manufacturing firms' investment responds to tariff reductions in supplier industries. Our estimates, based on tariff reductions following multinational trade agreements, suggest that a hypothetical 10% reduction of all upstream tariffs would increase downstream investment by 4% to 6%. This estimate is not explained by decreasing uncertainty and stems from tariff reductions for homogeneous and low-R&D inputs, consistent with the investment response resulting from cost reductions rather than superior foreign technology embodied in imported inputs. Evidence from an instrumental variable estimation using the sudden increase in Chinese import penetration suggests that import competition also increases downstream investment. [ABSTRACT FROM AUTHOR]

In the contemporary digital age, continued online learning behaviors have become indispensable for fostering employee development. However, the learning and development literature predominantly focuses on traditional instructor‐led approaches. It remains unclear how organizations can shape employees' learning behaviors, particularly in the context of online learning. The current study clarifies this underexplored research area by investigating how organizational investment in employee developmental climate (IEDC) can promote employees' continued online learning behaviors. Drawing on social influence theory and employing a multilevel research design, we find empirical support for our research model, which specifies that IEDC positively affects employees' continued online learning behaviors through the effect of normative pressure. The findings also reveal the moderating role of online learning facilitating conditions. Specifically, in firms characterized by higher levels of online learning facilitating conditions, the positive relationship between IEDC and normative pressure becomes more pronounced when compared to organizations with lower levels of such facilitating conditions. [ABSTRACT FROM AUTHOR]

I show that an alignment in partisan affiliation, between a firm's management and the president, is associated with higher levels of investment. Using insider trading data, I find that managers become more optimistic about their companies' prospects when their preferred party is in power. This optimism-driven increase in investment is amplified by herding and associated with both lower profitability and stock returns. Overall, managers' political beliefs produce heterogeneous expectations about future cash flows and distort investment decisions. [ABSTRACT FROM AUTHOR]

It is well documented that since at least the 1970s investment-cash flow (I-CF) sensitivity has been decreasing over time to disappear almost completely by the late 2000s. Based on a neoclassical investment model with costly external financing, we show that this pattern can be explained by the gradual increase of capital adjustment costs, attributable to the accumulation of knowledge capital. The result is robust to a variety of approaches, including Euler equation estimation and the simulated method of moments. More generally, our findings demonstrate that I-CF sensitivity should only be interpreted as a joint measure of financial and real frictions. [ABSTRACT FROM AUTHOR]

Funds investing in illiquid assets report returns with spurious autocorrelation. Consequently, investors need to unsmooth these funds' returns when evaluating their risk exposures. We show that funds with similar investments share a common source of spurious autocorrelation not fully resolved by traditional unsmoothing methods and thereby leading to underestimation of systematic risk. Thus, we propose a generalized unsmoothing technique and apply it to hedge funds and private commercial real estate funds. Our method significantly improves the measurement of funds' risk exposures and risk-adjusted performance, especially for highly illiquid funds. Overall, the average illiquid fund alpha is lower than previously thought. (JEL G11, G12, G23) [ABSTRACT FROM AUTHOR]

This paper investigates the psychological effects from stock market returns. Using an FBI database of over 55 million daily reported crime incidents across the United States, crime is proposed as a measure of psychological well-being. The evidence suggests that stock returns affect the well-being of not only investors but also noninvestors. Specifically, a contemporaneous negative (positive) relationship between daily stock market returns and violent crime rates is found for investors (noninvestors). A similar relationship is also found between local earnings surprises and violent crime. The contrasting relationships for investors and noninvestors suggests that relative wealth may influence well-being. [ABSTRACT FROM AUTHOR]

We develop a dynamic model of corporate investment and financing, in which shocks to the value of collateralizable assets generate variation in firms' debt capacity. We show that the degree of similarity among firms' financial flexibility forecasts cross-sectional variation in return correlation. We test the implications of the model with firm-level data in two empirical analyses using i) an instrumental variable approach based on shocks to the value of collateralizable corporate assets and ii) the outbreak of the COVID-19 crisis as an event study. We find that firms in the same percentile of the cross-sectional distribution of financial flexibility have 62% higher correlation in stock-return residuals than firms 50 percentiles apart. [ABSTRACT FROM AUTHOR]

We examine the value of due diligence recommendations on Reddit's Wallstreetbets (WSB) platform. Before the Gamestop (GME) short squeeze, recommendations are significant predictors of returns and cash-flow news. This predictability is eliminated post-GME. Post-GME, the fraction of reports emphasizing price-pressure or attention-grabbing stocks dramatically increases, and the decline in informativeness is concentrated in these reports. Similarly, retail trade informativeness is particularly strong following DD reports in the pre-GME period, but not post-GME. Our findings are consistent with the view that the Gamestop event altered the culture of WSB , leading to a deterioration in investment quality that adversely affected smaller investors. [ABSTRACT FROM AUTHOR]

The number of short campaigns by hedge funds has dramatically increased over the last two decades. Nearly 80% of campaigns are undertaken by activist hedge funds, particularly those that employ hostile tactics in their long campaigns. Short campaigns are associated with negative abnormal returns of –7%, with aggregate valuation effects similar in magnitude to the gains from long activism campaigns. In contrast to long campaigns, public communication is a critical component of short campaigns. We do not find evidence that such communication is manipulative. Overall, our analysis highlights the importance of short campaigns for understanding the economic impact of activist hedge funds. [ABSTRACT FROM AUTHOR]

Financial markets reveal information that firm managers can utilize when making equity value-enhancing investment decisions. However, for firms with risky debt, such investments are not necessarily socially efficient. Despite this friction, we show that learning from prices improves investment efficiency. This effect is asymmetric, however, as investors learn less about projects that decrease the riskiness of cash flows: efficiency is lower for diversifying investments than for focusing (risk-increasing) investments. This also implies that investors' endogenous learning further attenuates risk shifting but amplifies debt overhang. Our model provides a novel channel through which learning from financial markets affects agency frictions between stakeholders. [ABSTRACT FROM AUTHOR]

The paper aims to assess the macroeconomic impacts of government investment in Research and Development (R&D) and more generic fiscal policies by quantifying the Gross domestic product (GDP) and business R&D investment multipliers. Following the recent literature on fiscal policy, we combine the Local Projection approach with fiscal shocks estimated using Structural Vector Autoregressive modeling by focusing on a panel of 15 Organization for Economic Co-operation and Development (OECD) countries for the 1981–2017 period. Our findings support the idea that expansionary fiscal policies can positively and persistently affect the GDP level and crowd in business R&D investment. Additionally, our results show that public investment in R&D generates the largest multiplicative effect both on GDP and business R&D than the one associated with more generic public expenditures, even when fiscal expectations are considered. [ABSTRACT FROM AUTHOR]

This article examines the relation between internal audit function (IAF) quality and investment efficiency, a recurring value-added corporate activity critical to firm survival and profitability. We argue that an IAF, unlike other information intermediaries, is uniquely positioned to have access to firm-specific, private information—particularly related to localized, firm-specific risks. If a more competent IAF incrementally improves the information that is generated and communicated to management (while not participating directly in decision-making), we should observe more productive capital investment decisions from firms with higher quality IAFs relative to firms with lower quality IAFs. Through this enhanced information channel, we find that IAF quality is associated with investment efficiency. This result holds for both under- and overinvestment, although not in tests of all subsamples. We also document that this effect is more pronounced for firms with more complexity and for firms with greater investment opportunities. Our evidence indicates that IAF quality provides measurable and economically meaningful value to an organization. [ABSTRACT FROM AUTHOR]

Health care costs for U.S. employers have tripled over the past 20 years. Using firm-specific health expense data, I show that firms negatively adjust capital expenditures and R&D expenses in response to increases in health care costs. The effects are more pronounced for firms that are financially constrained, employ more high-skilled workers, and have less bargaining power relative to insurers. Furthermore, policy uncertainty surrounding health care costs is substantial and discourages capital investment. These findings suggest that an elevated level of health care costs and the associated uncertainty limit a firm's ability to expand physically or through innovation. [ABSTRACT FROM AUTHOR]

Cybersecurity presents non-negligible challenges for firm collaboration and supply chain viability, as information exchange among nodes introduces potential interdependent risks. How to make appropriate decisions on security investments and information exchange modes is a significant issue for supply chain members. Considering two information exchange modes: system interconnection and system independence, this study develops two game models to investigate the cybersecurity investments in a vertical supply chain composed of a retailer and n suppliers. Initial analysis shows that although firms learn investment decisions mutually in the face of a changing cybersecurity environment, suppliers always take a free ride on the efforts of retailer in two cases and the increased interdependent risks will damp nodes enthusiasm for security investments. Next, to compare the two cases, we introduce information exchange efficiency as the mediate parameter to link degree of system interconnection and proportion of information shared. We found that under the system independence mode, firms with high information-exchanging demand in the large-scale supply chain are more motivated to invest in cybersecurity. Furthermore, we extend our models to a centralised decision-making scenario. We find that security investment efficiency is greatly improved, and the free-riding behaviour of supplier is significantly reduced when systems are interconnected. [ABSTRACT FROM AUTHOR]

The literature provides conflicting arguments and mixed results regarding whether capital markets punish managerial myopia. Using managers cutting research and development (R&D) investments to meet short-term earnings goals as a research setting, this study reveals that capital markets penalize managerial myopia, especially for firms with high investor sophistication. Moreover, the negative market reactions to managerial myopia are weaker for firms with overinvestment problems than for those without such problems. Overall, the results support the notion that security markets are not shortsighted. In further analysis, we document that compensation, especially earnings-based compensation, may cause managers to behave myopically. Our study contributes to the literature, reconciling previously mixed findings by capturing managers' myopic behavior in a more targeted way and showing that markets punish myopic R&D cutting. [ABSTRACT FROM AUTHOR]

We document fragile demand for socially responsible investments (SRIs) by retail mutual fund investors. Using COVID-19 as an economic shock, we show funds with higher sustainability ratings experienced sharper declines in retail flows during the pandemic, controlling for fund characteristics. The decline in retail SRI fund flows is sharper than that of institutional flows, more pronounced when economies are hit harder by COVID-19, and unlikely to be driven by fund performance, past flows and size, or shifting investor attention. Corroborated by out-of-sample survey evidence, our findings highlight the high sensitivity of SRI demand by retail investors with respect to income shocks. [ABSTRACT FROM AUTHOR]

We propose a loglinear present-value identity in which investment ("scale"), profitability ("yield"), and discount rates determine a firm's market-to-book ratio. Our identity reconciles existing influential market-to-book decompositions and facilitates novel insights from three empirical applications: (1) Both investment and profitability are important contributors to the value spread and stock return news variance. (2) Any cross-sectional return predictability has a mirror image in cash-flow fundamentals, providing asset pricing theories with additional moments to match. (3) The investment spread significantly improves the predictability of time-series variation in the value premium and justifies the poor performance of value in recent years. [ABSTRACT FROM AUTHOR]

We test the signaling view of corporate social responsibility (CSR) engagement using two complementary quasi-natural experiments that impose exogenous negative pressure on stock prices. Firms under such adverse price pressure increase CSR activities compared to otherwise similar firms. This effect concentrates among firms with stronger signaling incentives, namely, those facing greater information asymmetry, more product market competition, higher shareholder litigation risk, and higher stock price crash risk. Firms under the exogenous negative price pressure mainly improve CSR strengths, including costly environmental investments. We also find that CSR engagement attracts socially responsible investors and lowers the cost of capital for signaling firms. [ABSTRACT FROM AUTHOR]

This article proposes a new method for examining the impact on a firm's investment of uncertainty reflected in its stock-return volatility. We simultaneously address the endogeneity of uncertainty and mismeasurement in Tobin's Q , but earlier empirical work often neglects one of the two issues. Our nonparametric estimates further suggest that the relation between investment and uncertainty is significantly decreasing and strongly concave. This result contrasts with the existing literature that widely adopts linear regressions. Ignoring nonlinearity or measurement error in Q can lead to a substantial estimation bias. However, the bias due to the endogeneity of uncertainty is small. [ABSTRACT FROM AUTHOR]

The opening of equity markets to foreign investment by developing countries appears to generate an enormously large positive growth effect (see Bekaert, Harvey, and Lundblad (2005), Journal of Financial Economics 77, 3–55) in spite of a relatively small role of such markets for financing investment in most economies. We propose a spillover channel from equity market opening to lower costs of bank loans, which helps to explain this puzzle. From analyzing bank loan data associated with China's introduction of the Qualified Foreign Institutional Investors program, we find significant support for this channel. Furthermore, we show that a reduction in the risk premium in loans is an important mechanism. [ABSTRACT FROM AUTHOR]

Exploiting demand shocks from changes in federal government spending, we examine how the organizational structure of a firm affects its investment behavior. Government spending shocks affect the investment of government-dependent conglomerate segments less than matched stand-alone firms. Investment also increases in lower government-dependent segments when other segments within the same firm experience positive demand shocks, indicating cross-subsidization between segments. We further show that this cross-subsidization leads to worse operating performance and increases the diversification discount. Our findings are robust after addressing the endogeneity of government spending. [ABSTRACT FROM AUTHOR]

We exploit the staggered introduction of liability waivers when investors hold stakes in conflicting business opportunities as a shock to venture capital (VC) investment and director networks. After the law changes, we find increases in within-industry VC investment and common directors serving on startup boards. Despite the potential for rent extraction, same-industry startups inside VC portfolios benefit by raising more capital, failing less, and exiting more successfully. VC directors serving on other startup boards are the primary mechanism associated with positive outcomes, consistent with common VC investment facilitating informational exchanges in VC portfolios. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This article investigates the impact of heterogeneous foreign investment on home market stock price informativeness. Evidence from China's nascent A-share market shows non-segmented foreign investment reduces firms' stock return synchronicity, while segmented foreign investment does not. Using the Shanghai (Shenzhen)–Hong Kong Stock Connect program as a natural experiment that exogenously increases non-segmented foreign ownership, we find that synchronicity drops significantly for program stocks relative to the control stocks. Our results are most consistent with an "informed trading" explanation, rather than a "learning" or "governance" explanation. These results have policy implications for stock market liberalization programs. [ABSTRACT FROM AUTHOR]

We compare the investment of standalone firms across regions after a positive shock to the investment opportunities generated by a large-scale highway development project. We show that the standalones' investment sensitivity is lower in regions with a higher density of business groups in the local area. We investigate mechanisms driving our results and find support for a financing mechanism whereby banks allocate capital preferentially to group-affiliated firms in responding to the increase in credit demand. Overall, our study documents that business groups have spillover effects on standalone firms. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

This paper examines how labor mobility restrictions like noncompete agreements affect firms' investment decisions. Using matched employee-employer data from LinkedIn, I show that increases in the enforceability of noncompete agreements lead to widespread declines in employee departures, specifically in knowledge-intensive occupations. Established firms that rely more on these knowledge-intensive occupations increase their investment rate in physical capital. However, new firm entry in corresponding sectors declines. I provide evidence for different mechanisms to explain these patterns. Together, the findings show that labor frictions play an important role in investment decisions. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

China’s remarkable rise as an international technology and innovation powerhouse comes courtesy of domestic efforts to upgrade its scientific enterprise. In this brief, Cong Cao, a professor in innovation studies at Nottingham University Ningbo China, argues that the globalization of science has also played a significant role, fostering links between Chinese and international researchers, allowing Chinese students to study abroad, and attracting foreign direct investment to China’s research sector. However, as pressures in Western countries to decouple from China mount, the future of China’s science, technology, and innovation system faces strong headwinds.

While the causal impact of limited attention to macroeconomic news is difficult to detect, this article proposes one solution: exploiting when foreign investors are "distracted" by risk factors in their home markets. I demonstrate that financial activity in the average foreign investor's home market decreases foreign attention paid to 21 emerging economies, measured using Google search volume for economy-specific financial terms that emanate from outside each economy's border. Exploiting this effect using an instrumental variables approach, I find that an exogenous increase in foreign attention preceding a scheduled monetary policy rate announcement raises preannouncement stock returns and announcement day turnover. [ABSTRACT FROM AUTHOR]

This article uses FAS 123R regulation to examine how reduction in CEO compensation incentives affects managerial "playing it safe" behavior. Using proxies reflecting deliberate managerial efforts to change firm risk, difference-in-difference tests show that affected firms drastically reduce both systematic and idiosyncratic risks, leading to an 8% decline in total firm risk. These reductions in risk are achieved by shifting to safer, but low-Q, segments while closing the riskier ones, without significant changes in investment levels. Our findings suggest that decrease in risk-taking incentives provided by option compensation, when not compensated for by alternative incentives or governance mechanisms, exacerbates risk-related agency problem. [ABSTRACT FROM AUTHOR]