Does the availability of monitoring capital influence private firms’ decision to go public? Using a geographic framework, we measure the amount of monitoring capital provided by institutional investors and banks in each U.S. region. When the capital of institutional investors in a region is abundant, young collateral-poor resident firms are more likely to go public. They also do so at a younger age. In contrast, when regional bank capital is abundant, these firms are less likely to go public. To sharpen our empirical analysis, we design a quasi-exogenous experiment using out-of-state pension flows and banking deregulation to show that regional economic factors do not drive our findings. Overall, the evidence is consistent with the theoretical prediction that monitoring capital alleviates collateral constraints and provides firms with the opportunity to obtain financing (Holmstrom and Tirole, 1997).

This paper analyzes cash flow and cost of capital dynamics around share repurchase announcements of publicly traded US firms by decomposing stock returns into news related to cash flows and discount rates. After repurchase announcements, the cost of capital decreases significantly, while cash flows do not change. The decrease in the cost of capital is largest for firms that appear underpriced. These firms also experience the highest long-term returns after repurchase announcements. The volatility of the discount rate and cash flows also decreases but is not systematically related to long-term returns. The findings suggest that market participants learn about a temporary overestimation of the cost of capital when firms announce share repurchases.

We analyze how the adoption of the California Consumer Privacy Act (CCPA), which limits the acquisition, processing, and trade of consumer personal data, heterogeneously affects firms with and without previously gathered customer data. Exploiting a novel and hand-collected data set of 11,436 conversational-AI firms with rich personal information on U.S. consumers, we find that the CCPA gives a strong protection and advantage to firms with previously accumulated (in-house) data. First, products of these firms generate more customer feedback and exhibit higher product ratings after the adoption of the CCPA. Second, publicly traded firms with in-house data exhibit higher valuations, profitability, asset utilization, and they invest more after the adoption of the CCPA. Third, earnings of such firms can be more accurately predicted by analysts. To rationalize these empirical findings, we build a general equilibrium model where firms produce intermediate goods using labor and data in the form of intangible capital. Data can be traded with other firms subject to a cost representing regulatory and technical challenges. Firms differ in their ability to collect data internally, driven by their business models and/or the size of their customer base, and reliance on data. When the introduction of the CCPA increases the cost of trading data, firms with a low ability to collect in-house data and high reliance on data suffer the most as they cannot adequately substitute the previously externally purchased data.