Many directors are not simply insiders or outsiders. For example, an officer of a supplier is neither independent nor captive of management. We use a spatial model of board decision-making to analyze bargaining among multiple types of directors. Board decisions are modeled using a new solution...

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early...

Disclosure by firms would seem to reduce investment inefficiency by reducing informational asymmetry. However, the impact of disclosure is endogenous and depends on incentives within the firm. Given optimal renegotiation-proof contracts, disclosing only accepted contracts does not solve the...

This paper investigates whether beta can predict the expected return after controlling for the beta instability resulting from shift in the covariance structure. Such a shift is primarily due to noise investors chasing stocks with high idiosyncratic volatility. Consequently, these stocks tend to...

We document that a stock's price around a recommendation or forecast covaries with prices of other stocks the issuing analyst covers. The effect of shared analyst coverage on stock price comovement extends beyond analyst activity days. A stock's daily returns covary with the returns of other...

The standard test for the pricing role of aggregate idiosyncratic risk in the conventional predictive regression considers aggregate total idiosyncratic risk a reasonable proxy for its undiversified component, which should be priced as theory suggests. However, when the priced component is...

This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly correlations among individual stocks and...

Despite the debate on the pricing of idiosyncratic risk, it is generally believed that the pricing effect is likely to exist among small stocks due to lack of diversification and information asymmetry predicted by Merton (1987). However, given the size of Asset Under Management, most...

It is well known that 70% of individual stocks' returns are classified as idiosyncratic returns under a conventional asset pricing model. In this study, we raise an important question as to whether majority return variations are truly influenced by idiosyncratic risks that at most affect several...

This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility. Accordingly, correlations among individual stocks and...