We develop a general equilibrium model to study how corporate tax avoidance affects firm policies and aggregate outcomes. Tax avoidance and investment are complementary inputs, leading the largest firms to engage in the most avoidance and face the lowest effective tax rates, consistent with the data. We find that tax avoidance significantly increases both the average firm size and concentration, disproportionately benefiting large firms. Tax avoidance also generates capital misallocation, lowering productive efficiency and welfare. We estimate the model to quantify the costs and benefits of tax avoidance and evaluate the equilibrium effects of changes to the statutory tax rate and costs of avoidance.

Using data on firm managers' beliefs about cashflow growth (g) and discount rates (k) in M&A transactions, we examine what they learn from target stock prices. Before correcting for endogeneity, both appear sensitive to prices-positively for g, negatively for k, and with equal magnitude-suggesting managers learn about both. However, using noise in prices as an instrument, only k reacts-with corrected estimates indicating that 89% of managers' information about k comes from prices. Therefore, stock markets provide insights into risk and the compensation it requires, but not cashflows, which managers already understand well. Cross-sectional tests reinforce this conclusion.

We compare the effects of external financing shocks on patient mortality at nonprofit and for-profit hospitals. Using confidential patient-level data, we find that patient mor tality increases to a lesser extent in nonprofit hospitals than at for-profit ones facing exogenous, negative shocks to debt capacity. Such an effect is not driven by patient characteristics or their choices of hospitals. It is concentrated among patients with out private insurance and patients with higher-risk diagnoses. One potential economic mechanism is that nonprofit hospitals’ have deeper cash reserves and use their cash reserves to maintain spending on medical staff and equipment. Overall, our evidence suggests that nonprofit organizations can better serve social interests during financially challenging times