We provide evidence that managerial incentives to manipulate real activities can influence the effectiveness of fiscal policy. Increases in federal spending lead government-dependent firms to expand research and development (R&D) investment whereas industry-peer firms contract. The net result is a reduction in industry-level R&D investment. We find evidence of a novel mechanism for the crowding out of peer-firm investment: peer-firm managers respond to falling relative performance by cutting R&D to manage current earnings upward. We show that these differential responses manifest in firm value. These findings are robust to endogeneity and selection concerns as well as a battery of alternative explanations.

我们提供的证据表明，操纵实际活动的管理激励可以影响财政政策的有效性。联邦支出的增加导致依赖政府的公司扩大研发 (R&D) 投资，而行业同行公司则收缩。最终结果是行业级研发投资减少。我们发现了一种挤出同行公司投资的新机制的证据：同行公司经理通过削减研发以向上管理当前收益来应对相对业绩下降的反应。我们表明，这些不同的反应体现在公司价值中。这些发现对于内生性和选择问题以及一系列替代解释都是稳健的。