Publications

  1. Friends or Foes? Target Selection Decisions of Sovereign Wealth Funds and Their Consequences (with Ugur Lel), 2011, Journal of Financial Economics 101, 360–381.
    This paper examines investment strategies of Sovereign Wealth Funds (SWFs), their effect on target firm valuation, and how both of these are related to SWF transparency. We find that SWFs prefer large and poorly performing firms facing financial difficulties. Their investments have a positive effect on target firms' stock prices around the announcement date but no substantial effect on firm performance and governance in the long-run. We also find that transparent SWFs are more likely to invest in financially constrained firms and have a greater impact on target firm value than opaque SWFs. Overall, SWFs are similar to passive institutional investors in their preference for target characteristics and in their effect on target performance, and SWF transparency influences SWFs' investment activities and their impact on target firm value.

    This paper was previously circulated under the title, Friends Or Foes?: The Stock Price Impact of Sovereign Wealth Fund Investments and the Price of Keeping Secrets.

  2. Revenge of the Steamroller: ABCP as a Window on Risk Choices (with Carlos Arteta, Mark Carey, and Ricardo Correa), forthcoming, Review of Finance.
    We use credit-arbitrage asset-backed commercial paper vehicles as a laboratory to empirically examine financial institutions' motivations to take bad-tail systematic risk. By comparing the characteristics of global banks that sponsored credit-arbitrage vehicles prior to the global financial crisis to those that didn't, we show that owner-manager agency problems, government safety nets, and government ownership of banks are associated with bad-tail systematic risk-taking. Although good governance is associated with less risk-taking on average, well-governed banks that also have a high ex ante expectation of being bailed out by the government take more risk. Lastly, we find mixed evidence that tougher bank capital regulation deters bad-tail risk-taking.

Working Papers

  1. Technological Change, Job Tasks, and CEO Pay, November 2015.
    This paper examines how changes in the composition of the human capital of the workforce impact the CEO. Over the last fifty years, technological change has caused the tasks workers perform to shift from routine to nonroutine work. I estimate that these changes in the workforce caused CEO pay to double over the last thirty years, explaining roughly one third of the aggregate increase in CEO pay. Consistent with this effect being caused by the existence of synergies between CEOs and nonroutine workers, I use text analysis of 10-K statements to show that managers of nonroutine workforces focus relatively more on employees and that this focus leads to large increases in firm value and profitability. Together, this suggests that a substantial portion of the increase in CEO pay over the past three decades represents an optimal response to skill-biased technological change.
  2. Do Bank Capital Regulations Concentrate Systematic Risk?, September 2015.
    As a result of the Enron scandal, new regulations were enacted that increased the capital charge for holding assets in off balance sheet vehicles. I utilize a triple difference specification to identify the effect of this exogenous regulatory shock on bank systematic risk exposure. I find that after the regulation, banks' exposure to off-balance sheet assets at vehicles with high systematic risk increases relative to vehicles with low systematic risk and relative to non U.S. banks which are not affected by the regulation. These results suggest that capital regulation might have the perverse effect of increasing the systemic risk of the U.S. financial system.
  3. Climbing the Corporate Ladder: Whom Do Highly Skilled CEOs Work For? (with Yelena Larkin), November 2018.
    In this paper we examine whether boards that are more aligned with shareholders’ interests end up hiring more talented managers. Using a novel measure of managerial talent, we find that talented CEOs work for firms with less independent boards. We explore whether supply or demand-side labor market frictions can explain this result, and find that talented CEOs receive a higher percentage of their pay in cash, are more likely to serve as chair of the board, and are less likely to join a firm with a former CEO on board, consistent with supply-side bargaining power frictions. Our evidence suggests that the preferences of highly-skilled managers impact the supply of managerial talent available to firms with independent boards.
  4. Minimum Wage and Corporate Policy (with Matt Gustafson), November 2018.
    We provide evidence that minimum wage changes lead labor intensive firms to adopt more conservative investment and financing policies. Our identification strategy exploits cross-state and intertemporal variation in whether a state’s minimum wage is bound by the federal minimum wage. We find that labor intensive firms in bound states quickly and significantly reduce both investment and debt use relative to non-labor intensive firms and labor intensive firms in unbound states. The magnitude of the investment decline is concentrated in firms with high levels of investment opportunities and is largest when defining labor intensive firms as those in the restaurant, retail, and entertainment industries.
  5. Public Ownership and the Local Economy (with Jess Cornaggia, Matt Gustafson, and Kevin Pisciotta), August 2018.
    We find that a firm’s transition from private to public ownership stunts local economic growth, especially in poorer areas. After accounting for the endogenous decision to go public, areas hosting companies that go public experience muted growth in employment, establishments, population, and wages, relative to areas where firms file to go public and remain private. Establishment level analyses reveal that transitioning to public ownership causes firms to geographically diversify their establishments and employee base. These findings are consistent with public ownership reducing a firm’s reliance on local agglomeration economies, to the detriment of the local community.