Research
Working Papers
Executive Compensation: The Trend Toward One Size Fits All
WFA Trefftzs Award for Best Paper
2nd round R&R, Journal of Accounting and Economics
Presentations: WFA (2021), SFS Cavalcade (2021), MFA (2021), FOM (2020)
I report a "one-size-fits-all" trend in the structure of executive compensation plans. The distribution of compensation across pay components —salary, bonus, stock awards, options, non-equity incentives, pensions, and perquisites— has become more similar since 2006. 24% of the variation across firms disappeared in the last thirteen years. Using panel data regressions and plausibly
exogenous shocks, I find that institutional investors' influence on management decisions and proxy advisors' recommendations are salient sources of this standardization. Finally, I find evidence suggesting that uniformity might come at the expense of optimal incentives, as increases in compensation similarity translate into lower shareholder value.
Leaky Director Networks and Innovation Herding (with Gerard Hoberg)
Presentations: NBER Big Data and Securities Markets (2023), AFA (2023), SFA (2022), FMCG (2022)
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.
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. When racial minority executives move from White-CEO-led-firms to ethnic-minority-CEO-led-firms, their racial pay structure similarity improves by 32%. Companies in high racism locations have more dissimilar racial pay structures. 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.
When the Format Matters: Information Processing Costs, Investor Engagement, and Firm Financial Constraints
This paper studies the role of standardized disclosure formats in easing firms' financial constraints and investment policies. Based on a regulatory shift 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 format change in disclosure while holding the informational content constant. Firms transitioning to the standardized format not only receive greater investor attention but also secure enhanced equity funding and invest more. The findings are consistent with the existence of information processing costs that hinder investors from gathering all the available financial information.
The Effect of Mandatory Information Disclosure on Financial Constraints
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.