ABSTRACT We study how listing status affects investment behavior. Theory offers competing hypotheses on listing‐related frictions affect decisions. use detailed data 74,670 individual projects in the U.S. natural gas industry to show that private firms respond less than public changes opportunities. Private adjust drilling activity for low capital‐intensity investments. However, they do not increase response new capital‐intensive growth Instead, sell these firms. Our evidence suggests...

I empirically test whether firms engage in risk-shifting. Contrary to what risk-shifting theory predicts, find that reduce investment risk when they approach financial distress. To identify the effect of distress on risk-taking, use a natural experiment with exogenous changes leverage. Risk reduction is most prevalent among have shorter maturity debt, bank and tighter loan covenants. These findings suggest debt composition covenants serve as important mechanisms mitigate debt-equity agency...

We exploit an exogenous change in basis risk the oil and gas industry to analyze channels through which hedging affects firm value. Using a difference-in-differences framework, we find that firms affected by shock reduce investment, have lower valuations, sell assets, debt. Our findings are driven with ex ante high leverage. Overall, our results provide evidence reducing probability of financial distress underinvestment first-order Received October 5, 2015; editorial decision December 22,...

Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets. We find banks exposed to booms increase their mortgage in non-boom counties by 0.93% per 1% deposits. This effect is present only markets where have branches strongest for mortgages are hard securitize. Our findings suggest contracting frictions limit the ability of arm’s length finance credit fully. Branch continue play an important role...

Using exogenous deposit windfalls from oil and natural gas shale discoveries, we demonstrate that bank branch networks help integrate U.S. lending markets.We find banks exposed to booms increase their mortgage in non-boom counties by 0.93% per 1% deposits.This effect is present only markets where have branches strongest for mortgages are hard securitize.Our findings suggest contracting frictions limit the ability of arm's length finance credit fully.Branch continue play an important role...

Abstract We study the effect of personal wealth on entrepreneurial decisions using data mineral payments from Texas shale drilling to individuals throughout United States. Large cash windfalls increase business formation by 0.8 2.1 percentage points, but do not affect transitions self-employment. By contrast, significantly extend self-employment spells, duration ownership. Our findings help reconcile contrasting in prior work: liquidity constraints have different effects activity that may...

I use oil and natural gas shale discoveries as a experiment to identify whether local access finance matters for economic outcomes. Shale lead large unexpected personal wealth windfalls, which result in an exogenous increase bank deposits positive credit supply shock. Using this shock examine influences outcomes how banking market structure affects the importance of supply. After shock, number business establishments industries more reliant on external increases 4.6% relative those less...

ABSTRACT This paper documents a previously unrecognized debt‐related investment distortion. Using detailed project‐level data for 69 firms in the oil and gas industry, we find that highly levered pull forward investment, completing projects early at expense of long‐run project returns value. behavior is particularly pronounced prior to debt renegotiations. We test several channels could explain this evidence consistent with equity holders sacrificing enhance collateral values and, by...

Abstract We study when and why firms exercise real options. Using detailed project-level investment data, we find that the likelihood a firm exercises option is strongly related to peer behavior. Peer decisions are as important in explaining behavior variables commonly associated with standard theories, such volatility. identify effects using localized exogenous variation project evidence consistent information externalities being for (JEL G30, G31, G32)

I exploit exogenous changes in local credit supply from shale discoveries to identify where and when access finance is economically important for firms. find that the real effects of a shock are linked lending market characteristics. Changes have significant markets dominated by small banks, while there no effect other markets. These results suggest which do not benefit deep internal capital markets, face meaningful frictions accessing external interbank fund loans. The large multimarket...

I empirically test whether firms engage in risk-shifting. Contrary to what risk-shifting theory predicts, find that reduce investment risk when they approach financial distress. To identify the effect of distress on risk-taking, use a natural experiment with exogenous changes leverage. Risk reduction is most prevalent among have shorter maturity debt, bank and tighter loan covenants. These findings suggest debt composition covenants serve as important mechanisms mitigate debt-equity agency...

We derive a measure that captures the extent to which overlapping ownership structures shift managers’ incentives internalize externalities. A key feature of is it allows for possibility not all investors are attentive whether manager’s actions benefit investor’s overall portfolio. Empirically, we show potential drivers overlap, including mergers in asset management industry and growth indexing, could fact diminish managerial motives. Our findings illustrate importance accounting investor...

We exploit a unique dataset of onshore North American natural gas producers to study how private and public firms differ in investment behavior. employ two distinct empirical strategies. First, we find that are less sensitive changes prices, an exogenous measure captures marginal q this industry. Second, use county-specific shale discoveries as experiment react significantly positive opportunity shock. These results not driven by heterogeneity product markets, pricing, firm size, location,...

Hydraulic fracking generated unexpected shale oil and gas booms. After these booms, voter support for Republicans rises, leading to win seats from Democrats. Roll-call voting by House members becomes more conservative after across issues extending beyond energy or the economy. The results suggest that changes in preferences on specific can have broad spillover effects a wide range of policy outcomes.

We exploit a unique dataset of onshore North American natural gas producers to study how private and public firms differ in investment behavior. employ two distinct empirical strategies. First, we find that are less sensitive changes prices, an exogenous measure captures marginal q this industry. Second, use county-specific shale discoveries as experiment react significantly positive opportunity shock. These results not driven by heterogeneity product markets, pricing, firm size, location,...

We quantify the effect of a significant technological innovation, shale oil development, on asset prices. Using stock returns major news announcement days allows us to link aggregate price fluctuations technology innovations. exploit cross-sectional variation in industry portfolio oil-related announcements construct mimicking portfolio. This can explain amount market returns, but only during time period which begins 2012. Our estimates imply that $3.5 trillion increase U.S. equity...

We exploit an exogenous change in basis risk the oil and gas industry to analyze channels through which hedging affects firm value. Using a difference-in-differences framework, we find that firms affected by shock reduce investment, have lower valuations, sell assets, debt. Our findings are driven with ex ante high leverage. Overall, our results provide evidence reducing probability of financial distress underinvestment first-order

On April 20, 2020 the flagship North American benchmark price for crude oil, West Texas Intermediate (WTI) delivery in Cushing, OK, fell below $0 first time its history. We explore causes and consequences of this event. Using a simple theoretical model, we argue that negative prices were result constraints on physical storage, but these precipitated by positions financial traders unable to take prior expiration May futures contract. then provide evidence event impacted decisions oil...