In firms with multiple blockholders governance via exit is affected by how blockholders react to each others' exit. Institutional investors, who hold the majority of equity blocks, are heterogeneous in their incentives. How do these incentives...Read more
This article explores how issuer liability reallocates fraud risk and how risk allocation may reduce the incidence of fraud. In the US, the apparent absence of individual liability of officeholders and insufficient monitoring by insurers...Read more
We present a model where firms compete for scarce managerial talent ("alpha") and managers are risk-averse. When managers cannot move across firms after being hired, employers learn about their talent, allocate them efficiently to projects and...Read more
We hypothesize that labor participation in governance helps improve risk sharing between employees and employers. It provides an ex-post mechanism to enforce implicit insurance contracts protecting employees against adverse shocks. Results based...Read more
We analyze holdings of public bonds by over 20,000 banks in 191 countries, and the role of these bonds in 20 sovereign defaults over 1998-2012. Banks hold many public bonds (on average 9% of their assets), particularly in less financially-...Read more
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 have...Read more
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 liquidity,...Read more
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...Read more
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 complementarities can...Read more
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 in a...Read more
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 outcomes, and...Read more
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 trait...Read more