Publication Type

Journal Article

Version

acceptedVersion

Publication Date

1-2023

Abstract

Information production associated with derivatives markets is not a sideshow; rather, it has significantly positive spillover effects on an array of corporate decisions of underlying firms. Using a regression-discontinuity design based on exogenous variation in options availability as an instrument for changes in the information environment, we show that options introductions have causal effects on corporate policies on both sides of the balance sheet. Through improved information efficiency, options availability reduces the need for debt and payout, increases efficient investment, and yields superior innovation. We conduct two independent experiments demonstrating that our instrument s impact is not derived from alternative channels.

Discipline

Corporate Finance | Finance and Financial Management

Research Areas

Finance

Publication

Journal of Financial and Quantitative Analysis

ISSN

0022-1090

Identifier

10.1017/S0022109023001229

Publisher

Cambridge University Press

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1017/S0022109023001229

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