This study analyzes how promotion-based tournament incentives for non-CEO senior executives affect corporate innovation. We measure tournament incentives using the pay gap between a CEO and the next layer of senior executives. We find that tournament incentives are positively related to...

Using the compensation gap between a CEO and the second-highest-paid CEO in the same Metropolitan Statistical Area (MSA) as a proxy for local tournament incentives, I document a positive relation between local tournament incentives and firm risk. Specifically, CEOs who face higher local...

Using a news-based index of aggregate policy uncertainty in the US economy, we document a strong negative relation between policy uncertainty and corporate risk-taking. We show that high levels of policy uncertainty are associated with significantly lower future stock return volatility at the...

This paper analyzes how ownership concentration and managerial incentives influences bank risk for a large sample of US banks over the period 1997-2007. Using 2SLS simultaneous equations models, we show that ownership concentration has a positive total effect on bank risk. This is the result of...

Using CEO severance contracts during 1992-2010, we find that CEOs with a severance contract tend to reduce corporate investments, impede innovation, and decrease firm risk across several dimensions, leading to shareholder value destruction. This negative value effect is stronger during the...

We empirically evaluate 20 prominent contributions to a broad range of areas in the empirical corporate finance literature. We assemble the necessary data and apply a single, simple econometric method, the connected-groups approach of Abowd, Karmarz, and Margolis (1999), to appraise the extent...

This Article reports results of an empirical study that suggests that the current economic crisis has changed managerial behavior in the US in a way that may impede economic recovery. The study finds a strong, statistically significant and economically meaningful, positive correlation between...

Financial strategy is about how companies raise funds and manage them within their organizations. Corporate governance is relevant to both of these aspects, and an understanding of corporate governance is vital for an appreciation of corporate finance. This chapter from Corporate Financial...

Using a comprehensive sample of US banks for years 2001 to 2016, we split the pay gap between the CEO and rank-and-file employees into two: CEO pay gap and VP pay gap. We examine the effect on bank performance of the tournament incentives arising from these different pay gaps. We find that CEO...

IPO firms with high-powered CEO incentive contracts have lower failure rates in the aftermarket. Economically, an interquartile change in the distribution of CEO pay translates in a reduction of the failure risk probability by approximately 21%. The Pay Gap between the CEO and its subordinate...