We hypothesize that a combination of indexing, industry and broader market forces create common effects in order flow and returns. We test the relative contribution of each to common effects in large samples of both index and non-index stocks. Common effects are strong in index constituent...

In this paper, we use index addition to gain insights into the trading behavior of informed traders. When a stock is added to the Samp;P 500 index, it attracts permanent interest from index funds, which are, by definition, liquidity traders. Consequently, this event is associated with an...

We study large discrete decreases in CEO pay and compare them to CEO forced turnover. The determinants are similar, as are the performance improvements after the action. After the pay cut, the CEO pay-for-performance sensitivity is abnormally high, such that the CEO can restore his pay level by...

Theory predicts that in concentrated industries with high product similarity, horizontal acquisitions can effectively increase incumbent firms’ market power. Using a novel measure for industry product similarity, we show that in such industries firms’ propensity to make horizontal...

Existing studies identify analyst skills by ex post evaluation of their outputs (forecasts and recommendations), which are contaminated by luck and noise. Using the premises that questions reveal interest and that interest and practice lead to skill, we construct an ex ante analyst...

Studies of institutional monitoring focus on the fraction of the firm held by institutions. We focus on the fraction of the institution's portfolio represented by the firm. In the context of acquisitions, we hypothesize that institutional monitoring will be greatest when the target firm...

We compare CEO turnover in public and large private firms. Public firms have higher turnover rates and exhibit greater turnover-performance sensitivities than private firms. Controlling for pre-turnover performance, performance improvements are greater for private firms than for public firms. We...

We investigate the repercussions of credit market mistakes for a firm's borrowing and investment decisions. When credit ratings are relatively optimistic, we find evidence that firms take advantage of inaccuracies by issuing more debt, increasing leverage, rolling over more debt and lengthening...

Building on two sources of exogenous shocks to analyst coverage – broker closures and mergers, we explore the causal effects of analyst coverage on mitigating managerial expropriation of outside shareholders. We find that as a firm experiences an exogenous decrease in analyst coverage,...

This paper introduces the impact of debt misvaluation on merger and acquisition activity. Debt misvaluation helps explain the shifting dominance of financial acquirers (private equity firms) relative to strategic acquirers (operating companies). The effects of overvalued debt might seem limited...