Outsourcing Shareholder Voting to Proxy Advisory Firms (May 2013)
David F. Larcker, Allan L. McCall and Gaizka Ormazabal

This paper examines the economic consequences of institutional investors outsourcing research and voting decisions on matters submitted to a vote of public company shareholders to proxy advisory firms.

Corporate Governance, Incentives, and Tax Avoidance  (April 2013)
Chris A. Armstrong, Jennifer L. Blouin, Alan D. Jagolinzer, and David F. Larcker

This paper examines the link between corporate governance, managerial incentives, and tax avoidance.

Does Working from Home Work? Evidence from a Chinese Experiment  (March 2013)
Nicholas Bloom, James Liang, Donald John Roberts and Zhichun Ying

Study highlights the benefits of allowing employees to work from home.

Linguistic Diversity and Stock Trading Volume  (March 2013)
Yen-Cheng Chang, Harrison G. Hong, Larissa Tiedens and Bin Zhao

2013 Abstract: We test the hypothesis that the linguistic diversity of a stock’s investor base leads to more trading. Trading might be due to beliefs differing across languages or investor exposure to multiple languages leading to more trading ideas

Does Debt Discipline Bankers? An Academic Myth About Bank Indebtedness  (February 2013)
Anat Admati, and Martin Hellwig

Paper examines the plausibility and relevance of claims in banking theory that fragility of bank funding is useful because it imposes discipline on bank managers.

Effects on Comparability and Capital Market Benefits of Voluntary Adoption of IFRS by US Firms: Insights from Voluntary Adoption of IFRS by Non-US Firms (January 2013)
Mary Barth, Wayne R. Landsman, Mark H. Lang, and Christopher D. Williams

This study determines whether voluntary adoption of IFRS is associated with increased comparability of accounting amounts and attendant capital market benefits.

Identifying Peer Firms: Evidence from EDGAR Search Traffic (November 2012)
Charles M.C. Lee, Paul Ma, Charles C. Y. Wang

Using Internet traffic patterns from the Securities and Exchange Commission Electronic Data-Gathering, Analysis, and Retrieval (EDGAR) website, researchers show that firms appearing in chronologically adjacent searches by the same individual are fundamentally similar on multiple dimensions. Results highlight the usefulness of EDGAR data, as well as the latent intelligence in search traffic patterns.

Does Going Public Affect Innovation? (October 2012)
Shai Bernstein

This paper investigates the effects of going public on innovation. Using a data set consisting of innovative …firms that …filed for an initial public offering (IPO), The researcher compares the long-run innovation of …firms that completed their filing and went public with that of …firms that withdrew their filing and remained private.

The Brouhaha Over Intra-Corporate Forum Selection Provisions: A Legal, Economic, and Political Analysis (October 2012)
Joseph Grundfest and Kristen Amy Savelle

The prevailing view among many economists is that derivatives markets simply enable financial markets to incorporate information better and faster. Under this view, increasing the size of derivatives markets only increases the efficiency of financial markets. Study presents formal economic analysis that contradicts this view. 

Which U.S. Market Interactions Affect CEO Pay? Evidence from U.K. Companies (August 2012). 
Joseph J. Gerakos, Joseph D. Piotroski, and Suraj Srinivasan, Management Science, Forthcoming

Paper examines how different types of interactions with U.S. markets by non-U.S. firms are associated with higher level of CEO pay, greater emphasis on incentive-based compensation, and smaller pay gap with U.S. firms.

On Derivatives Markets and Social Welfare: A Theory of Empty Voting and Hidden Ownership (August 2012)
Jordan M. Barry, John William Hatfield and Scott Duke Kominers

The prevailing view among many economists is that derivatives markets simply enable financial markets to incorporate information better and faster. Under this view, increasing the size of derivatives markets only increases the efficiency of financial markets. Study presents formal economic analysis that contradicts this view.

Cash Holdings and Credit Risk (August 2012)
Viral V. Acharya, Sergei A. Davydenko, and Ilya A. Strebulaev

Intuition suggests that firms with higher cash holdings should be 'safer' and have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive. This puzzling finding can be explained by the precautionary motive for saving cash, which in our model causes riskier firms to accumulate higher cash reserves. In contrast, spreads are negatively related to the part of cash holdings that is not determined by credit risk factors.

Conservatism and Aggregation: The Effect on Cost of Equity Capital and the Efficiency of Debt Contracts (April 2012)
Anne Beyer

This paper studies the joint effect of conservatism and aggregation in two settings. The paper shows the maximum capital that can be raised by a debt contract which implements efficient post-contractual decisions is higher in the conservative than in the fair value regime. 

The Efficacy of Shareholder Voting: Evidence from Equity Compensation Plans (March 2012) 
Chris Armstrong, Ian D. Gow, and David F. Larcker

This study finds little evidence that either lower shareholder voting support for, or outright rejection of, proposed equity compensation plans leads to decreases in the level or composition of future CEO incentive-compensation. Thus, recent regulatory efforts aimed at strengthening shareholder voting rights, particularly in the context of executive compensation, may have limited effect on firms’ compensation policies.

Debt Overhang and Capital Regulation (March 2012)
Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig and Paul C. Pfleiderer

We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer. This resistance is present even without any government subsidies of debt, but it is exacerbated by such subsidies. 

Women in the Boardroom: Symbols or Substance? (March 2012)
Charles A. O'Reilly III and Brian G.M. Main

The central argument for increasing the number of women on corporate boards of directors has been the so-called “business case for diversity” which proposes that women and minorities add valuable new perspectives that result in enhanced corporate performance. Unfortunately, the empirical evidence for this claim is mixed, leading some researchers to suggest that women outsiders are appointed for symbolic rather than substantive reasons.

A Market-Based Study of the Cost of Default (March 2012)
Sergei A. Davydenko, Ilya A. Strebulaev and Xiaofei Zhao

Although the cost of financial distress is a central issue in capital structure and credit risk studies, reliable estimates of its size are difficult to come by. This paper proposes a novel method of extracting the cost of default from the change in the market value of a firm's assets upon default. 

Failure is an Option: Failure Barriers and New Firm Performance (February 7, 2012) 
Robert Eberhart, Charles E. Eesley, and Kathleen M. Eisenhardt

Do bankruptcy changes in the institutional environment affect the rate of founding by particular types of founders and the performance of their ventures? Researchers argue that lowered costs of exit may have attracted individuals with greater human capital and social networks thus positively affecting new firm performance among other findings.

Market Making Under the Proposed Volcker Rule (January 16, 2012)  
Darrell Duffie

This paper discusses implications for the quality and safety of financial markets of proposed rules implementing the market-making provisions of section 13 of the Bank Holding Company Act, commonly known as the “Volcker Rule. 

CEO Preferences and Acquisitions (December 2011)
Dirk Jenter and Katharina Lewellen 

Mergers frequently force target CEOs to retire early, and CEOs’ private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs’ private merger costs, we find strong evidence that target CEO preferences affect merger patterns. The likelihood of receiving a takeover bid increases sharply when target CEOs reach age 65.  

Proxy Advisory Firms and Stock Option Exchanges (Revision: August 2011) 
David F. Larcker, Allan L. McCall and Gaizka Ormazabal 

Using a comprehensive sample of stock option exchanges announced between 2004 and 2009, researchers find that firms that adopt exchanges that follow the restrictive proxy advisory firm policies (e.g., ISS) exhibit statistically lower market reaction at the announcement of this transaction, lower future operating performance, and higher executive turnover. Results are consistent with the conclusion that the recommendations of proxy advisory firms on stock option exchanges are not value increasing for shareholders.

Policy Issues in the Design of Tri-Party Repo Markets (Revision: July 2011) 
Darrell Duffie, Adam Copeland, Antoine Martin, and Susan McLaughlin

This paper provides an overview of the nature and impetus of reforms to the U.S. tri-party repo market, one of the most critical components of the financial system. Authors review some key systemic weaknesses of this market that were revealed during the financial crisis of 2007-2009. 

Systemic Risk Exposures: A 10-by-10-by-10 Approach (July 2011) 
Darrell Duffie; National Bureau of Economic Research, Systemic Risk Measurement Initiative 

Presents and discusses a “10-by-10-by-10” network-based approach to monitoring systemic financial risk. Under this approach, a regulator would analyze the exposures of a core group of systemically important financial firms to a list of stressful scenarios, say 10 in number. 

Does a Central Clearing Counterparty Reduce Counterparty Risk?
Darrell Duffie and Haoxiang Zhu 
A plan by global financial regulators to fix the mess created by the misuse of credit default swaps is flawed, says Darrell Duffie, professor of finance at the Stanford Graduate School of Business.

Related: A Central Clearing House Doesn't Reduce CDS Risk, Stanford GSB News, April 2009

Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is not Expensive (Draft March 23, 2011)
Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig and Paul C. Pfleiderer 

Setting equity requirements significantly higher than the levels currently proposed would entail large social benefits and minimal, if any, social costs. To achieve better capitalization quickly and efficiently and prevent disruption to lending, regulators must actively control equity payouts and issuance. If remaining challenges are addressed, capital regulation can be a powerful tool for enhancing the role of banks in the economy. 

Consequences of Shareholder Rejection of Equity Compensation Plans (November 2010)
Chris Armstrong, Ian D. Gow, and David F. Larcker

This study examines the effects of shareholder support for equity compensation plans on
the level and composition of future CEO compensation and on equity grants. Researchers find little 
evidence that lower shareholder support for proposed equity compensation plans leads to decreases in future CEO compensation or in future grants of stock options.

Performance-induced CEO Turnover (February 2010) 
Dirk Jenter and Katharina Lewellen 

Finds that boards aggressively fire CEOs for poor performance, and that the turnover-performance sensitivity increases substantially with board quality. The turnover-performance spreads remain high for seasoned CEOs in tenure years six to ten, but diminish considerably for the most seasoned CEOs. Our results, based on a new empirical approach, are significantly stronger than in prior research, and show that the threat of performance-induced dismissal is an important source of incentives for most CEOs. 

Performance-Based Incentives for Internal Monitors (February 2010)
Chris Armstrong, Alan D. Jagolinzer and David F. Larcker 

This study examines the use of performance-based incentives for internal monitors (general counsel and chief internal auditor) and whether these incentives impair monitors’ independence by aligning their interests with the interests of those being monitored. 

Managerial Incentives and Value Creation: Evidence from Private Equity (November 2009) 
Paul Oyer and Phillip Leslie

Paper analyzes the differences between companies owned by private equity (PE) investors and similar public companies. Researchers document that PE-owned companies provide higher managerial incentives to their top management: CEOs have almost twice as much equity, 10% lower salary, and more cash compensation than their counterparts at comparable public corporations. 

Managerial Contracting and Corporate Social Responsibility  (September 1, 2006)
David P. Baron 

This paper presents a positive theory of corporate social responsibility set in a managerial capitalism context in which managers instead of markets allocate resources, including social expenditures.