This paper frames a normative theory of stewardship engagement by large institutional investors and asset managers in terms of their theory of investment management – “Modern Portfolio Theory” -- which describes investors as...
We establish that the labor market helps discipline asset managers via the impact of fund liquidations on their careers. Using hand-collected data on 1,948 professionals, we find that top managers working for funds liquidated after...
We use the reform process of the Sarbanes-Oxley Act of 2002 as a quasi-natural experiment to identify the impact of corporate governance reform on foreign exchange risk hedging, and find that the substantial improvements in governance...
We study how the existence of important production contracts affects the choice of CEO compensation contracts. We hypothesize that having major customers raises the costs associated with CEO risk-taking incentives and leads to lower...
We show that, in the presence of correlated investment opportunities across firms, risk sharing between firm shareholders and firm managers leads to compensation contracts that include relative performance evaluation. These...
What makes a CEO? Our study combines a near-exhaustive sample of CEOs of Swedish companies with data on their cognitive and non-cognitive ability and height at age 18. On average, CEOs, particularly large-company CEOs, have much higher...
We consider a model in which shareholders provide a risk-averse CEO with risk-taking incentives in addition to effort incentives. We show that the optimal contract protects the CEO from losses for bad outcomes, is convex for medium...
The financial crisis of 2008 focused increasing attention on corporate America and, in particular, the risk-taking behavior of large financial institutions. A growing appreciation of the ?public? nature of the corporation resulted...
We study a model in which firms compete preemptively for trading opportunities and risk management introduces latency in trading. As the time pressure faced by firms is endogenous to risk management choices, strategic...
Limited attention has been paid to the comparative fate of banks benefiting from TARP Capital Purchase Program (CPP) funding and less fortunate banks subject to FDIC resolution. We address this omission by investigating two core...
We consider a model in which the threat of bank liquidations by creditors as well as equity-based compensation incentives both discipline bankers, but with different consequences. Greater use of equity leads to lower ex ante bank...
This paper examines how governance and risk management affect risk-taking in banks. It distinguishes between good risks, which are risks that have an ex ante private reward for the bank on a stand-alone basis, and bad risks, which do not...