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We study the dynamics of borrower reputation in bank loan markets following revelations of financial misreporting by the borrower. Misreporting firms pay greater loan spreads than matched firms for at least six years following revelation of the misreporting, and there is no evidence of a downward trend in the misreporting premium. Following revelation, misreporting firms are more likely to engage in various actions to potentially rebuild their reputations, but even firms that engage in multiple actions continue to pay greater loan spreads for at least six years. Our results suggest that misreporting causes long-lasting and costly reputation losses that firms find very difficult or prohibitively costly to restore. Data and the online appendix are available at https://doi.org/10.1287/mnsc.2017.2739 . This paper was accepted by Wei Jiang, finance.

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We examine the relation between institutions' investment horizons on firms' financing and investment decisions. Firms with larger short‐term institutional ownership use less debt financing and invest more in corporate liquidity. In contrast, firms with larger long‐term institutional ownership use more internal funds, less external equity financing, and preserve investments in long‐term assets. These results are primarily driven by the variation in informational preferences of different institutions. We argue that short‐term (long‐term) institutions collect and use value‐neutral (value‐enhancing) information.

Suppliers that are farther away from their customers make more relationship-specific investments (RSI). This association is more pronounced when it is less costly for the customer to switch to alternative suppliers and when the supplier operates in relatively opaque information environments. Using the introduction of new airline routes as an exogenous shock to the distance between supply chain partners, we show that the relation between supplier RSI and distance may be causal. We also provide evidence that suppliers with larger RSI are better able to maintain long-distance business relationships and are associated with higher firm value. These findings suggest an important dimension of supplier commitment: Suppliers use RSI as a signal of their willingness to fulfill on-going implicit claims.

We find that Treasury futures volume contains information about future economic and financial market conditions. Short‐ and long‐term volumes are economically different: A relatively higher volume in short‐term (long‐term) Treasury futures is counter‐cyclical (procyclical), preceding worse (better) economic and financial conditions. Further, we construct a single factor from futures volumes of different maturities that forecasts the performances of Treasury securities and the corporate debt and equity markets, as well as macroeconomic conditions. Our results are consistent with the notion that futures volumes from different market segments reflect differences in beliefs and contain different information about future financial and economic activity.