In the wake of the recent financial crisis, US executive compensation has, once again, come under fire from regulators, politicians, the financial press, the general public, and some academics. Although the critiques are varied, many identify the level of pay and performance-based incentives as...

Corporate governance is a multidimensional construct, with many interactive mechanisms that must be simultaneously managed for efficiency. We develop a model where multiple governance mechanisms (board independence, board expertise, and CEO equity incentives) are endogenously selected to...

Accounting for employee stock options (ESOs) is controversial, with many arguing that it has substantial economic consequences. Such arguments rely on the assumption that one or more interested parties fixate on accounting numbers and fail to understand the real costs and benefits of ESOs. We...

Previous research offers little large-sample evidence on the magnitude of non-financial firms' risk exposure hedged by financial derivatives. Among 234 large non-financial derivatives users, if the median firm simultaneously experiences a three standard deviation change in interest rates,...

The costs associated with compiling data on employee stock option portfolios is a substantial obstacle in investigating the impact of stock options on managerial incentives, accounting choice, financing decisions, and the valuation of equity. We present an accurate method of estimating option...

The authors review recent literature on the role of corporate financial reporting and transparency in reducing governance-related agency conflicts between managers, directors, shareholders, and other stakeholders—most notably financial regulators—and suggest some avenues for future research....

We analyze a model of voluntary disclosure where investors impose a discount for uncertainty about firm value. We find a commitment to conservative reporting, defined as a requirement that firms disclose bad realizations of economic events, results in firm prices being higher on average....

We predict and find that firms use annual grants of options and restricted stock to CEOs to manage the optimal level of equity incentives. We model optimal equity incentive levels for CEOs, and use the residuals from this model to measure deviations between CEOs' holdings of equity incentives...