We examine the relation between institutional holdings and payout policy in U.S. public firms. We find that payout policy affects institutional holdings. Institutions avoid firms that do not pay dividends. However, among dividend-paying firms they prefer firms that pay fewer dividends. Our...

The 2001 to 2002 corporate scandals led to the Sarbanes-Oxley Act and to various amendments to the U.S. stock exchanges' regulations. We find that the announcement of these rules has a significant effect on firm value. Firms that are less compliant with the provisions of the rules earn positive...

We study the relation between opportunistic timing of option grants and corporate governance failures, focusing on "lucky" grants awarded at the lowest price of the grant month. Option grant practices were designed to provide lucky grants not only to executives but also to independent directors....

In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking...

Empirical evidence suggests that banking panics are related to the business cycle and are not simply the result of "sunspots." Panics occur when depositors perceive that the returns on bank assets are going to be unusually low. We develop a simple model of this. In this setting, bank runs can be...

This paper explains why some firms prefer to pay dividends rather than repurchase shares. When institutional investors are relatively less taxed than individual investors, dividends induce "ownership clientele" effects. Firms paying dividends attract relatively more institutions, which have a...

In standard asset pricing theory, investors are assumed to invest directly in financial markets. The role of financial institutions is ignored. The focus in corporate finance is on agency problems. How do you ensure that managers act in shareholders' interests? There is an inconsistency in...