This paper connects executive compensation with hedging and analyzes a crucial shareholders and managers agency source that evolves from the pricing of the hedging device. The shareholders are risk-neutral, while the risk-averse manager hedges the price risk of the manufactured quantity, and his...

U.S. firms currently hold a $2trillion cash stockpile. We examine if cash stockpiles fuel cash acquisitions by studying the method of payment decision for cash-rich firms. Surprisingly, cash-rich firms are 23% less likely to make cash bids than stock bids, relative to firms that are not cash...

We examine whether disagreement between managers and investors, in the context of mergers and acquisitions, affects the information contained in bidder returns. We test the disagreement hypothesis, which posits that disagreement causes investors to be less certain about their revaluation of...

Corporate managers often invest in activities that are deemed to be socially responsible. In some instances, these investments enhance shareholder value. However, in other cases, altruistic managers or managers who privately benefit from the positive attention arising from these activities may...

We test the hypothesis that efficient internal capital markets mitigate the negative announcement returns surrounding seasoned equity offerings (SEOs). Our predictions are based on the argument that efficiency reduces uncertainty regarding the value of assets-in-place. Having established the...

Prior theoretical work generates conflicting predictions with respect to how CEO age impacts risk-taking behavior. Consistent with the prediction that risk-taking behavior decreases as CEOs become older, I document a negative relation between CEO age and stock return volatility. Further analyses...

Internal capital markets (ICMs) provide firms an alternative to costly external financing; however, they also provide an avenue to avoid the monitoring associated with issuing external capital. We argue that firms operating inefficient internal capital markets will avoid outside financing....

We examine managerial compensation and wealth sensitivities around CEO changes. The average new CEO is incentivized to increase the risk of the firm primarily because he holds significantly less stock than his predecessor, and in fact riskier policy choices are subsequently implemented. Similar...

This paper provides empirical evidence that lumpy investment projects provide firms with the opportunity to adjust leverage at low marginal cost. Consistent with a theoretical model, I find that 1) firms sequence equity before debt during the financing period of their investment projects, and 2)...

This paper explores pyramidal firms and their motivations for the use of debt financing. We find that pyramids have significantly higher leverage than non-pyramids and that the use of debt in pyramids is associated with the risk of expropriation. We do not find evidence for the...