Democracy and stock market returns (Spring 2025)
Xun Lei & Tomasz Piotr Wisniewski

In this article, we empirically examine the relation between democracy level and stock index returns in a sample of 74 countries. Compared with democracies, autocratic states are characterized by lower returns despite exhibiting higher return volatility. Even though this higher volatility can be mostly attributed to diversifiable country-specific risk, the capital asset pricing model cannot explain the return differential. Instead, it is the level of investor protection that can fully account for the phenomenon described here. Autocratic leaders may be reluctant to promulgate regulations shielding investors, and the resultant expropriation depresses the returns realized by outsiders.
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Insider trading restriction enforcement, investor protection, and innovation (Summer 2025)
D. Brian Blank, Jiawei Chen, Valeriya Posylnaya

US Securities and Exchange Commission (SEC) enforcement actions are intended to protect investors and limit expropriation by firm insiders, but these SEC actions could affect insiders’ incentives to contribute to value-enhancing activities. Therefore, we explore how corporate innovation and performance respond to insider trading restrictions imposed by regulators and firms. Using manually collected data on SEC indictments against corporate insiders, we document more innovative activity following external insider trading restrictions. External restrictions are also followed by higher corporate investment, capital access, and operating performance. Similarly, internal blackout restrictions to insider trading are linked to more innovation as well. We use SEC and congressional rule changes as quasi-natural experiments resulting in shocks in enforcement and indictments for identification and inference. Our results suggest insider trading restrictions and enforcement actions affect subsequent firm activities and managerial decisions by protecting outside investment, resulting in more investment in innovation.
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Debt financing, the pandemic, and Federal Reserve interventions (Fall 2025)
Grace E. Arnold, Takeshi Nishikawa, Meredith E. Rhodes

Using data on newly issued corporate bonds and syndicated loans, we investigate the effects of the Federal Reserve’s interventions during the pandemic on corporate debt activity. We document heterogeneous effects for participation rates across firm credit ratings and debt maturity, consistent with a default risk channel of policy transmission. Investment-grade firms disproportionately participate in debt markets following the Fed’s announcements, which is driven by the riskiest firms (A and BBB ratings). We also find that BBB and BB-rated firms drive increased participation in short-term debt markets. These results provide evidence that the Fed’s interventions improved credit market access to investment-grade firms and the highest-rated noninvestment-grade firms.
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Academic CEOs and corporate innovation (Winter 2025)
George J. Jiang, Wenquan Li, Yaohua Li, He Wang

In this article, we examine the impact of academic CEOs (i.e., CEOs with academic experience) on corporate innovation. We find that firms managed by academic CEOs have strong aspirations for innovation and generate more patents with higher citations. We employ exogenous CEO turnover to alleviate endogeneity concerns. In addition, whereas corporate innovation gradually increases following the entry of new academic CEOs, there is a clear decrease in innovation output after the departure of academic CEOs. This net effect concentrates in innovation-intensive industries. Moreover, academic CEOs enhance innovation by leveraging their network with academic community and ability to secure government funding.
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