Executive Compensation, Individual-Level Tax Rates, and Insider Trading Profits

Changes in individual-level tax rates represent exogenous shocks to executives’ net compensation. While these shocks may increase or decrease compensation, there is little evidence that firms respond by changing executives’ explicit compensation. One explanation is that executives bear the brunt of any tax rate change by directly reflecting these changes to their own compensation. Alternatively, […]

The Impact of Private Equity Buyouts On Productivity and Jobs

Over the past two decades, the role of private equity in the real economy has dramatically increased. For example, private equity-backed U.S. companies numbered approximately 4,000 in 2006, but by 2018, that figure had doubled to around 8,000. Meanwhile, the number of publicly traded firms in the United States fell by 14 percent, from 5,113 […]

Bias, Identity and M&A

Corporate executives play a central role, perhaps even the central role, in a firm’s decision to undertake a merger or acquisition (M&A). M&A deals are often done at the behest of executives, who also largely run the deal-making process. Senior executives, especially CEOs, play a pivotal role in crafting, negotiating, and closing deals. They are […]

The Denials of Dick Kovacevich: Wells Fargo’s Godfather of Salesmanship Says Everyone Else is to Blame

It was four years ago that Wells Fargo admitted creating fake customer accounts to hit sky-high sales goals and almost everyone tied to the bank has paid a price since then. Millions of customers were likely saddled with bogus accounts while investors coughed up billions in would-be profits to pay for the bank’s sins. Thousands […]

CEO-Power and Luck: Impact of Stock Markets on Building Powerful CEOs

The amount of power to grant a CEO is one of the most important decisions corporate boards must make. CEO power has crucial implications for firm behavior. Yet, we still do not fully understand how CEOs become powerful over time. Under the optimal view, corporate boards reward CEOs with power for good firm performance. However, […]

Risk-Taking Incentives and Earnings Management: New Evidence

Earnings management is the use of accounting methods by managers to manipulate financial statements in order to inaccurately convey the financial performance of their company. Earnings management is costly to stakeholders and society because it decreases the informativeness of earnings thereby distorting the economic efficiency of the stock market. Moreover, earnings management can also potentially […]

Short Sellers and Politically Motivated Bad News Hoarding

Short selling has been viewed as a market mechanism that can potentially disincentivize firms’ opportunistic behaviors such as negative information suppression, as short sellers take actions when they detect the hidden bad news. Extant studies have provided evidence that short selling can help deter management from suppressing negative information in developed economies. However, in emerging […]

How Important Is Moral Hazard For Distressed Banks?

The bank safety net inherently introduces moral hazard. For example, deposit insurance effectively serves as a put option whose value increases as risk-taking increases, potentially encouraging a bank to increase its value by taking on more risk. Also, due to banks’ systemic importance, they typically receive state support during periods of crisis and even outside […]

ERISA and ESG Investing

The Department of Labor (“DOL”), through its administration of the Employee Retirement Income Security Act of 1974 (ERISA), has a critical role to play in the regulation of employee pension benefit plans. Most importantly, the DOL is tasked with enforcing the fiduciary duties of ERISA plan managers (trustees who retain investment and voting authority or […]

Stranger than Fiction? Business Drives a New System of Climate Governance

This post is the latest in our special issue: “Climate Change and Financial Markets – Risk, Regulation, and Innovation.” To learn more about the special issue and the work of the Global Financial Markets Center around climate change and financial markets, please read the special issue’s introduction here. And to review all The FinReg Blog […]