We propose and test an alternative explanation for the existence of the positive governance–return relation in the 1990s and its disappearance in the 2000s: The governance–return relation is positive under good states of the economy and negative under bad states. Corporate governance mitigates investment distortions so that firms with strong governance have more valuable investment options during booms and more valuable divestiture options during busts than the ones with weak governance. Because investment options are riskier and divestiture options are less risky than assets in place, the expected returns of strongly governed firms are higher during booms but lower during busts than the weakly governed ones. Empirical evidence is consistent with our hypothesis. This paper was accepted by Neng Wang, finance.

In the realm of multichannel digital retailing, free shipping has gained popularity as a promotion strategy. However, few studies have investigated how retailers make decisions regarding free shipping. Furthermore, concerns have arisen regarding the sustainability of free shipping promotions for manufacturers. This research employs a simultaneous equation model with fixed effects to explore the determinants of market structure concerning the proportion of retailers offering free shipping and its impact on manufacturers’ product sales. As per our current knowledge, this research is pioneering in establishing a causal relationship between the percentage of free-shipping retailers and manufacturers’ product sales. Specifically, an increase in the percentage of retailers employing free shipping leads to higher product sales, while lower product sales drive increased retailers to adopt free shipping. Our findings indicate that competition among products has a significant positive effect on the percentage of retailers offering free shipping in the interactive relationship. Furthermore, increased competition among retailers results in more retailers adopting free shipping strategies. These results affirm the efficacy of free shipping as a promotional approach to increase manufacturers’ product sales, particularly in highly competitive markets.