Research

Working Papers

Executive Compensation: The Trend Toward One Size Fits All     
WFA Trefftzs Award for Best Paper
Presentations: WFA (2021), SFS Cavalcade (2021), MFA (2021), FOM (2020)

 

This paper reports the prevalence of a "one-size-fits-all" trend in the structure of executive compensation plans. The way firms distribute total compensation across different components of pay -salary, bonus, stock awards, option awards, non-equity incentives, pensions, and perquisites- has become more similar since 2006. In particular, 25% of the variation across firms disappeared in the last thirteen years. Using close votes surrounding Say-on-Pay's implementation, I find that shareholders' influence on management decisions causes part of this convergence. This finding is robust in both difference-in-difference and RDD estimations. Additional evidence suggests that proxy advisors play a role by pushing towards standardization. I find evidence suggesting that standardization leads to a sub-optimal design of contracts. The more similar a firm's compensation structure becomes to the others, the lower its market value. Additionally, I find a negative impact on delta and vega and a positive impact on total compensation and financial misstatements.

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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 on firms’ financial constraints and investment policies. I study a regulatory reform requiring firms of a certain size to file a standard 10K instead of choosing between the standard form and an abbreviated 10K. Companies that voluntarily used the standard 10K form before the reform become less debt-constrained but more equity-constrained afterward. These firms also issue more debt and increase their investment. The findings are consistent with mandatory disclosure providing a commitment device for future disclosure. However, this comes at the cost of losing the possibility of signaling high quality through voluntary disclosure.

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Directors Networks and Innovation Herding   (with Gerard Hoberg)
Presentations: AFA (2023, scheduled), FMCG (2022)

This paper examines the role of overlapping director networks on firm innovation, competition, and performance.  First, we document that, despite potential legal challenges, overlapping directors are surprisingly most prevalent among direct competitor firm-pairs. Using panel data regressions with rigid controls and plausibly exogenous shocks, we find that competing firms in markets with dense director overlaps engage in innovation herding, experience losses in product differentiation, and ultimately perform poorly.  Novel network propagation tests of individual technologies show that intellectual property leakage plays a role as firms with overlapping directors experience faster propagation of technologies to their competitors.  Our results are most consistent with an agency conflict that is new to the literature, as directors can realize better career outcomes by leaking sensitive information across boards, even though a consequence can be value destruction for shareholders.

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