Publications
Executive compensation: the trend toward one-size-fits-all
Journal of Accounting and Economics (forthcoming).
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WFA 2021 Best PhD Student Paper
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Presentations: WFA (2021), SFS Cavalcade (2021), MFA (2021), FOM (2020)
I report and analyze a recent “one-size-fits-all” trend in the structure of executive compensation plans. Since 2006, 24% of the variation in the distribution of CEO compensation across pay components –salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites— disappeared. This uniformity might come at the expense of optimal incentives, as increases in pay structure similarity translate into lower shareholder value. Using panel data regressions and plausibly exogenous shocks, I find that institutional investors’ influence, proxy advisors’ recommendations, and expanded compensation disclosure are salient drivers of this standardization. The findings highlight an unintended consequence of recent regulations enhancing shareholders’ participation and expanding compensation disclosure.
Working Papers
Leaky director networks and innovation herding R&R - Review of Financial Studies
(with Gerard Hoberg)
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Presentations: NBER Big Data and Securities Markets (2023), AFA (2023)
We first document that, despite potential legal issues, overlapping directors are surprisingly prevalent among direct competitors. Using panel data regressions and plausibly exogenous shocks, we find that competing firms in markets with dense overlapping-director networks experience innovation herding, lose product differentiation, and ultimately perform poorly. Novel text-based network propagation tests of technologies show that intellectual property leakage plays a role as firms with dense overlapping director networks experience faster propagation of technologies to competitors. Our findings suggest a coordination problem where industry participants cannot stop rivals from earning small gains from leakage despite much larger community-wide negative externalities.
When the format matters: the effect of information processing costs on firm investment
This paper studies the effect of standardized disclosure formats on firms' financial constraints and investment policies. Based on a regulation that integrated the distinct disclosure system of smaller firms with the overarching standard disclosure framework, this paper runs a difference-in-difference analysis that isolates the impact of a change in disclosure format while holding the informational content constant. Firms transitioning to the standardized format not only receive greater investor attention but also issue more equity and invest more. The findings suggest that the processing costs of market participants can be significant enough to impact firms’ investment decisions.
Racial diversity and inclusion without equity? Evidence from executive compensation
(with Eliezer Fich and Lubomir Litov)
The compensation structure of top managers (except CEOs) varies according to ethnicity/race. On average, Blacks, Hispanics, and Asians receive less equity-based pay than Whites in the same C-suite. Companies in high racism locations have more dissimilar racial pay structures. Racial pay structure similarity improves when minority executives move from White-CEO-led-firms to racial-minority-CEO-led-firms or to firms headquartered near recent Black Lives Matter events. As the racial pay structure similarity improves, the pay gap between White and ethnic-minority executives decreases, and firms exhibit better stock market and accounting performance, less financial fraud, and lower CEO-to-median-worker pay ratios. Our evidence suggests that pay structure race-based disparities occur when a corporate culture tolerates racial inequality and not due to the preferences of racial minority executives.
The effect of mandatory information disclosure on financial constraints
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Presentations: AFA (2019), Trans-Atlantic Doctoral Conference (2019)
This paper examines the effects of mandatory disclosure systems on firms’ financial constraints and investment policies. I study a regulatory reform that eliminated the special disclosure system of small firms and integrated it into the standard disclosure system of large firms. Companies that voluntarily used the standard system before the reform become less debt-constrained, issue more debt and increase their investment. The findings are consistent with mandatory disclosure providing a commitment device for future disclosure that reduces the agency cost of debt.