This dissertation consists of three parts. The first documents that more innovative firms earn higher risk-adjusted equity returns and proposes a model to explain this. Chapter two answers the question of why firms would choose to issue callable bonds with options that are always "out of the money" by proposing a refinancing-risk explanation. Lastly, chapter three uses the firm-level evidence on investment cyclicality to help resolve the aggregate puzzle of whether R\&D should be procyclical or countercylical.
