AI in the Boardroom: A Revolutionary Construct?

The importance of good corporate governance has received a renewed vigor over the last decade, culminating recently with the impact of the COVID-19 pandemic. Companies now, more than ever before, need to be more resilient and sustainable. Our recent paper explores the shortcomings of corporate governance and how AI may provide tools to address some of these […]

Relative Performance Evaluation and the Peer Group Opportunity Set

The use of incentive-compensation practices based on relative performance has grown dramatically in recent years (see Figure 1). As of 2019, more than 50% of large U.S. firms base executive compensation in part on their firms’ performance relative to peer firms, compared to just 20% in 2006. Further, relative total shareholder return (“TSR”) is now […]

Trust Culture and the Effectiveness of Consumer Protection

In our recent paper, we study consumer complaints filed with the Consumer Financial Protection Bureau (CFPB), the watchdog agency charged with protecting consumers from financial abuses, and their disciplinary effect on bank behavior. Since its establishment, the role and effectiveness of the agency has been subject to debate—the previous administration tried to dismantle it, while the […]

Does CSR Engender Trust? Evidence From Investor Reactions to Corporate Disclosures

Growth in corporate social responsibility (CSR) practices is an undeniable fact of modern business. 90% of S&P 500 firms published a corporate sustainability report in 2020, up from merely 20% in 2011. As more and more firms adopt CSR practices, a key question emerges: how do such activities impact investor perceptions of firms? Proponents of […]

Corporate Governance at Play: Between Law and Its Perception

When firms go through an Initial Public Offering (IPO), their corporate governance changes by becoming more complex to reflect the requirements of a public firm. At the same time, there are many mechanisms at play due to the presence of different categories of owners: insiders vs. outsiders, founders vs. venture capital investors, etc. Therefore, the […]

Cruel and Unusual Circumstances: The Fed’s Use and Misuse of Penalty Rates

After a political and legislative showdown at the end of 2020, Congress closed the Fed’s most novel Section 13(3) emergency lending facilities—the ones aimed most directly at Main Street. These facilities—supported by Treasury funds allocated by the Coronavirus Aid, Relief, and Economic Security (CARES) Act—lent only a fraction of their stated maximum lending limits, leaving many criticizing the programs’ overly punitive […]

The Role of Academic Research in SEC Rulemaking: Evidence from Business Roundtable v. SEC

In our paper, “The Role of Academic Research in SEC Rulemaking: Evidence from Business Roundtable v. SEC,” we examine the Securities and Exchange Commission’s (SEC) use of academic research in its rulemaking. We focus on the DC District Court’s decision in Business Roundtable v. SEC (2011) to strike down the proxy-access rule, which was promulgated by the SEC […]

What Kind of Asset is Our Digital Personal Data?

“It was the ‘Wizard of Oz’ in digital format as the four titans of Big Tech testified via video before the House Antitrust Subcommittee. Just like in the movie, what the subcommittee saw was controlled by a force hidden from view. The wizard in this case – the reason these four companies are so powerful […]

How Policymakers Can Defuse a Major ESG Threat to Shareholder Rights

Since 2004, when the term “ESG” was first used in a report published by the United Nations Global Compact, there has been an explosion of interest in the concept, including in corporate boardrooms. The Global Compact, in a follow-up report the next year, described the emergence of ESG corporate policies as a “powerful and historic convergence … between the objectives […]

The Role of the Board’s Financial Expertise in the IPO Process

Since the 1970s, the underpricing of IPOs has been a well-observed phenomenon and many issuers see their stock price rising sharply on the first day of trading, which means that the IPO firm could have realized higher proceeds from the offering (“money left on the table”). As a result, venture capitalists and Silicon Valley companies recently expressed their […]