Research

Job market paper

• Shareholder Voice and Executive Compensation
  November 2024
  Revision in progress, updated draft available upon request
  ssrn
  Abstract

  I estimate a model of CEO compensation with non-binding shareholder approval votes (Say-on-Pay). The Board sets pay and may be biased toward high pay; shareholders can fail the vote and punish the Board for overpayment. I estimate that failed votes are costly to both parties. Say-on-Pay resembles a costly punishment mechanism: its disciplining effect raises firm value by 2.4% on average, despite only 7% of votes failing. I analyze a counterfactual binding Say-on-Pay: vote failure fixes CEO pay to its previous level, which may not reflect current information about CEO skill. The vote failure rate falls, pay levels increase and firm value decreases.

Working papers

• Human Capital, Competition and Mobility in the Managerial Labor Market
  with Noah Lyman and Lin Zhao
  November 2024
  Draft available upon request
  Abstract

  We estimate a search model of managerial careers to quantify the relative importance of human capital accumulation (both general and firm-specific), managerial bargaining power, and imperfect labor market competition in shaping compensation and mobility in the market for US corporate executives. The composition of human capital is career-dependent and varies widely across managers: over tenure, firm-specific capital is the greatest driver of wage growth, whereas over experience in the labor market, job search and competition dominate. Firm-specific capital can help explain the high rate of internal CEO hires and low observed cross-firm CEO mobility. We further show that labor market competition (relative to pure bargaining power) makes up the majority of realized CEO surplus capture, and that firm-specific human capital positively interacts with competition in determining CEOs' shares of rents as it raises the match-specific quality between the firm and manager.
• Project Development with Delegated Bargaining: The Role of Elevated Hurdle Rates
  with Bruce Carlin, Alan D. Crane and John R. Graham
  March 2024
  ssrn
  Abstract

  During project development, investment costs are endogenously determined through delegated bargaining with counterparties. In surveys, nearly 80% of CFOs report using an elevated hurdle rate, the implications of which we build a model to explore. We show that elevated hurdle rates can convey a bargaining advantage that exceeds the opportunity cost of forgone projects, whether these hurdle rate buffers arise for strategic or non-strategic reasons. Using CFO survey data, we find buffer use is negatively related to the cost of capital and to bargaining power, consistent with our model's predictions, and that realized returns are associated with "beat the hurdle rate benchmark" behavior.

Publications

• Corporate Flexibility in a Time of Crisis
  with Murillo Campello, John R. Graham and Yueran Ma
  Journal of Financial Economics, June 2022
  internet appendix; published version; ssrn; github repo
  
  Abstract

  We use the COVID shock to study the direct and interactive effects of several forms of corporate flexibility on short- and long-term real business plans. We find that i) workplace flexibility, namely the ability for employees to work remotely, plays a central role in determining firms’ employment plans during the health crisis; ii) investment flexibility allows firms to increase or decrease capital spending based on their business prospects in the crisis, with effects shaped by workplace flexibility; and iii) financial flexibility contributes to stronger employment and investment, in particular when fixed costs are high. While the role of workplace flexibility is new to the COVID crisis, CFOs expect lasting effects for years to come: high workplace flexibility firms foresee continuation of remote work, stronger employment recovery, and shifting away from traditional capital investment, whereas low workplace flexibility firms rely more on automation to replace labor.