We investigate whether managers' religious affiliations affect corporate decisions. We hand collect data on the religious affiliations of chief executive officers (CEOs) and find that firms with Catholic CEOs have less leverage, issue debt less often, increase business and geographic diversification, and invest less than firms with Protestant CEOs. We also find that the decisions of Catholic CEOs are associated with lower firm value. These corporate actions are also reflected in the CEOs’ personal decisions, such as owning fewer company stocks and playing less risky sports.

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This research separates out the incentive and entrenchment effects of executive pay and uses it to test if the agency cost is that of underinvestment or overinvestment. I find that investments increase with dollar value of stock and options owned by the CEO but decrease with percentage of shares owned by the CEO. These results are robust to alternate measures of investments such as R&D, acquisitions, and change in assets. It appears that the positive relationship between investment and percentage of stocks owned by the CEO, as observed in the literature, is because of the omitted variable of dollar value of stock and options. I also find that the increases in dollar value of stock and options owned by the CEO reduces agency costs; while increases in percentage of stocks owned by the CEO increases entrenchment. These results are robust to endogeniety and a battery of relevant tests. This research concludes that, for the average firm, the agency cost is that of underinvestment, while the concerns about overinvestment are overstated.

We offer a new perspective on why initial public offerings (IPOs) occur in waves and propose that the customer-supplier relationships among industries help propagate IPO waves. Our empirical tests provide evidence that demand shocks increase the number of IPOs in an industry. The shocks then spread upstream through customer relationships leading to an increase in the number of IPOs in more central and connected industries. These findings contribute to the IPO literature by demonstrating the channel through which IPO waves propagate.