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Publications

Executive compensation: the trend toward one-size-fits-all     
Journal of Accounting and Economics (forthcoming)

  • WFA 2021 Best PhD Student Paper

  • Presentations: WFA (2021), SFS Cavalcade (2021), MFA (2021), FOM (2020)

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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)
 

  • 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.

Racial diversity and inclusion without equity? Evidence from executive compensation
(with Eliezer Fich and Lubomir Litov) 

The structure of managerial compensation, excluding CEOs, varies by ethnicity and race. Black, Hispanic, and Asian C-suite executives receive less equity-based pay than their White counterparts. As minority executives’ tenure increases or they move to firms with minority CEOs or firms near recent Black Lives Matter events, pay structure similarity improves. When this similarity increases, the pay gap between White and minority executives tightens, firm performance improves, financial fraud declines, and the CEO-to-median-worker pay ratio narrows. Race-based pay disparities are influenced by both minority executives’ preferences and corporate cultures where the idiosyncratic backgrounds of different executives take time to coalesce.

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.

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.

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