Executive Compensation: The Trend Toward One Size Fits All
(Job Market Paper; WFA Trefftzs Award for Best Student Paper)
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– is becoming more similar since 2006. In particular, 25% of the variation across firms disappeared in the last ten 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. The convergence has negative economic consequences. The more similar a firm’s compensation structure becomes to the others, the higher the pay and the lower its sensitivity to the firm performance and the risk taken. Additionally, the firm innovates less –invests less in R&D and is less likely to patent– and reduces its market value.
The Effect of Mandatory Information Disclosure on Financial Constraints
(Revise and Resubmit at Journal of Accounting and Economics; presented at AFA 2019)
This paper studies the effects of the mandatory implementation of a more informative disclosure regime on firms' financial constraints and investment policies. I run a difference-in-difference analysis and find that firms moving from a voluntary use of the regime to a mandatory use increase debt issuance and investment in tangible assets, and reduce the level of discussion about difficulties in obtaining debt financing. At the same time, they report higher difficulties obtaining external finance through equity. These findings support the hypothesis that mandatory disclosure provides a commitment device to future disclosure but shuts down the signaling value of voluntary disclosure.