Research

Working papers

• Human Capital, Competition and Mobility in the Managerial Labor Market
  with Noah Lyman and Lin Zhao
  May 2025
  ssrn
  
  Abstract

  We pose and estimate a model of the managerial labor market to quantify the relative importance of general and firm-specific human capital, managerial bargaining power, and labor market competition in shaping compensation and mobility. We decompose compensation growth over both tenure at the firm and labor market experience, finding firm-specific human capital to be an important driver in both cases. Firm-specific skill restricts mobility and can help explain the low rate of external CEO hiring. We decouple the effects of managerial bargaining power and labor market competition on managers' realized share of rents and show that neglecting the role of competition biases estimates of managers' bargaining power. Furthermore, we find that firm-specific human capital enhances managers' ability to extract rents from incumbents as it raises the match-specific quality between the manager and firm.
• Shareholder Voice and Executive Compensation
  December 2024
  ssrn
  
  Abstract

  I estimate a model of CEO compensation with non-binding shareholder approval votes (Say-on-Pay). The Board sets compensation and (relative to shareholders) may prefer high total pay; shareholders can fail the vote and punish the Board for high pay. Failed votes are perceived as costly by the Board and shareholders: Say-on-Pay resembles a costly punishment mechanism, raising firm value by 2.4% on average, despite only 7% of votes failing. I analyze a counterfactual binding vote: failure binds pay to prior levels, which may not reflect current information about CEO ability. The failure rate falls, pay levels increase and firm value decreases.
• Sacred Hurdle Rates and Bargaining Power
  with Bruce Carlin, Alan D. Crane and John R. Graham
  December 2024
  ssrn
  previously circulated as Project Development with Delegated Bargaining: The Role of Elevated Hurdle Rates
  
  Abstract

  CFOs report using buffered hurdle rates averaging 6.6 percentage points above the cost of capital. These are taken as given by managers (considered sacred) and are central to company activity: realized returns in our data cluster just above elevated hurdle rates. Buffers convey a bargaining advantage over counterparties in project development and M&A. Our model shows this benefit can exceed the opportunity cost of forgone projects, preserving firm value. Consistent with the model, bidders' elevated hurdle rates in M&A deals associate with higher surplus capture ex post; and in CFO survey data, buffers negatively relate to ex ante bargaining power.

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.