We examine, for various educational characteristics of hedge fund managers, the performance profile of hedge fund portfolios along their managers' professional experience path. We find that during the initial years following their graduation, hedge fund managers who majored in business or...

We examine the relation between pay-performance sensitivity (PPS), the convexity of managerial compensation (Vega), and future stock risk and returns for a large sample of firms between 1992 and 2004. On average, both higher PPS and higher Vega are associated with lower future stock returns....

This study examines the determinants and consequences of price clustering. Real estate list and transaction prices exhibit two price-ending characteristics: even (000-ending) and just-below-even (900-ending). The use of even-ending prices is negatively related to the precision of the price...

This paper evaluates the common practice of setting the strike prices of executive option plans at-the-money. Hall and Murphy, 2000, claim this practice to be optimal since it maximizes the sensitivity of compensation to firm performance. However, they do not incorporate effort and the...

We examine the determinants and consequences of price clustering. Real estate list and transaction prices exhibit two price-ending characteristics: even (000-ending) and just-below-even (900-ending). The use of even-ending prices is negatively related to the precision of the price estimates and...

We use our numerical technique to explore the optimality of risk-taking under financial distress. In our model, cash reserves are represented by a Brownian processes that includes an innovation parameter. When this innovation parameter goes to zero, our results show that risk-taking is optimal...

We model CEO and director compensation using firm characteristics, CEO characteristics, and governance variables. We find that director compensation is related to variables that proxy for the level of monitoring and effort required by directors. After controlling for monitoring proxies, we find...

The volatility smile that is generated by the Black-Scholes model has been traditionally attributed to an inappropriately assumed return distribution. Previous studies use alternative specifications such as stochastic volatility and jump diffusion models. However, these specifications do not...

This paper explores the impacts of managerial overconfidence on the structure of executive compensation, managerial effort, and the welfare of stockholders and managers. Our findings help explain two puzzling corporate finance phenomena. The viability of managerial overconfidence is perplexing...