There is a debate on whether executive pay reflects rent extraction due to quot;managerial powerquot; or is the result of arms-length bargaining in a principal-agent framework. In this paper we offer a test of the managerial power hypothesis by empirically examining the CEO compensation of U.S....

We document that credit rating changes significantly affect chief executive officer's (CEO's) incentives. Modeling both credit rating changes and CEO incentive changes as two jointly endogenous processes, we present strong evidence that CEO incentives increase subsequent to credit downgrades...

We study whether a risk-based pricing source can generate momentum profits. We show both analytically and empirically that the Fama-French factor-adjusted return, or alphas, contains a missing risk-based component. A momentum strategy based on a proxy for this missing-factor component generates...

We examine the quality of brokerage firm analyst coverage when they have venture capital investments in IPO issuers. We explore whether combining these activities compromises the objectivity of analyst reports given brokerage firm incentives to support IPO issues where they are shareholders....

We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a...

We model the conditional mean and volatility of stock returns as a latent vector autoregressive (VAR) process to study the contemporaneous and intertemporal relationship between expected returns and risk in a flexible statistical framework and without relying on exogenous predictors. We find a...

Private information imposes a severe trading disadvantage on uninformed traders while at the same time providing firms with valuable signals for investment adjustment. The two forces have opposite impacts on the cost of capital, and the net effect depends on which force dominates. We show that...

We assess the impact of the Sarbanes-Oxley Act of 2002 on corporate investment in an investment Euler equation framework, where a dummy for the passage of the Act is allowed to affect the rate at which managers discount future investment payoffs. Using generalized method of moments estimators,...