Working Papers

Forthcoming in the Journal of Law and Economics.

This paper examines changes in executive compensation programs made by firms in response to proxy advisory firm say-on-pay voting policies. Using proprietary models, proxy advisory…

Organization theory highlights the spread of norms of rationality in contemporary life. Yet rationality does not always spread without friction; individuals often act based on other beliefs and norms. We explore this problem in the context of…

This paper investigates whether the U.S. repatriation tax for U.S. multinational corporations (MNCs) affects foreign investment. Prior research shows that repatriation tax costs are positively associated with cash overseas, but the use of such…

Using bottom-up information gleaned from corporate financial statements, we examine the relation between aggregate investment, future equity returns, and investor sentiment. Consistent with the business cycle literature, corporate investments…

This paper studies the role of ex-ante information asymmetries in second price, common value auctions. Motivated by information structures that arise commonly in applications such as online advertising, we seek to understand what types of…

We investigate the role of networks of military alliances in preventing or encouraging wars between groups of countries. A country is vulnerable to attack if some allied group of countries can defeat the defending country and its (remaining)…

This paper considers dynamic moral hazard settings, in which the agent’s actions have consequences in the future. To maintain incentives, the optimal contract ties deferred compensation and termination to future performance. Some of the…

Performance appraisal is one of the cornerstones of management control systems. Although this topic has been the subject of considerable prior research, most of this work is based on a single observation per firm or performance appraisal…

This paper examines the optimal degree of centralization that can be achieved with respect to bailout policies when a central authority cannot supervise the entire banking system of the economy. Part of the banking system is supervised by a local…

Systematic risk is an important determinant of corporate capital structure. A one standard deviation increase in asset beta corresponds to a decrease in leverage of 13%, controlling for total asset volatility. This evidence is consistent with…

We examine a firm’s price-to-earnings (P/E) and price-to-book (P/B) ratios in a model of sequential capacity investments. Our analysis focuses on several key variables, including past and anticipated future investment growth, economic…

We develop a model of the joint capital structure decisions of banks and their borrowers. Strikingly high bank leverage emerges naturally from the interplay between two sets of forces. First, seniority and diversification reduce bank asset…

I study public liquidity provision in a liquidity-constrained economy in which government policy is decided by politicians subject to rent-seeking and electoral constraints. Public interventions are modeled as a choice between direct fiscal…

We evaluate the performance of private equity (PE) funds, using a variance decomposition model to separate skill from luck. We find a large amount of long-term persistence, and skilled PE firms outperform by 7% to 8% annually. But this…

This article discusses the role of GAAP accounting from an investor’s perspective.  For all its flaws, a historical-based system of accounting is vital to the investment community, and I believe moves toward fair value accounting should…

We examine the financial health and performance of reverse mergers (RMs) that became active on U.S. stock markets between 2001 and 2010, particularly those from China (around 85% of all foreign RMs). As a group, RMs are small, early-stage…