We argue that the root cause behind the recent corporate scandals associated with CEO pay is the technology bubble of the latter half of the 1990s. Far from rejecting the optimal incentive contracting theory of executive compensation, the recent...Read more
This paper looks at shareholder activism from the perspective of the revision of the EU Shareholder Rights Directive, which was approved by the European Parliament on 14 March 2017. The main findings are as follows.
First, the effective...Read more
We show that supply side effects arising from the bond holdings of open-end mutual funds affect corporate credit risk. In our model, funds exposed to flow-performance relationships are reluctant to refinance bonds of companies with poor cash flow...Read more
We model blockholder governance as a sequential process, from less hostile private intervention, to confrontational public intervention, and finally exit. When the blockholder faces short-term incentives, the threat of public intervention and...Read more
An emerging consensus in certain legal, business, and scholarly communities maintains that corporate managers are pressured unduly into chasing short-term gains at the expense of superior long-term prospects. The forces inducing managerial myopia...Read more
This paper studies the long-term consequences of actions induced by vesting equity, a measure of short-term concerns. Vesting equity is positively associated with the probability of a firm repurchasing shares, the amount of shares repurchased, ...Read more
This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies....Read more
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 standards...Read more
Stock-market–driven short-termism is crippling the American economy, according to legal, judicial, and media analyses. Firms forgo the R&D they need, cut capital spending, and buy back their own stock so feverishly that they starve themselves...Read more
Previous research shows that incentives to increase earnings-per-share cause firm to increase stock repurchases and reduce investment and employment. It is natural to expect firms to cut less productive investment and employment first, which...Read more
During 2007-2016, S&P 500 firms distributed to shareholders $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that "short-termism" is impairing firms' ability to invest and innovate. We show that...Read more
We show that following shocks that change an industry’s competitive environment, firms with more shortterm institutional investors experience smaller drops in sales and investment and have better long-term performance than similar firms affected...Read more