Secondary Titles (1)
- Rifkin Family Faculty Fellow
Industry Expertise (5)
Areas of Expertise (5)
Best Referee - Review of Financial Studies (professional)
University of Pennsylvania, Wharton Business School: Ph.D., Business 2000
The Hebrew University: B.Sc., Math and Physics 1992
Research Grants (3)
Contractual Versus Actual Separation Pay following CEO TurnoverManagement Science
2014 Using hand-collected data, we document the details of the ex-ante severance contracts and the ex-post separation pay given to S&P500 CEOs upon departing from their companies. We analyze what determines whether or not a departing CEO receives separation pay in excess of her severance contract. We find that discretionary separation pay is, on average, $8 million, which amounts to close to 242% of a CEO’s annual compensation. We investigate several potential explanations for this phenomenon and find evidence that in voluntary CEO departures, discretionary separation pay represents a governance problem. In contrast, we find evidence that in forced departures, discretionary separation pay is used to facilitate an amicable and smooth transition from the failed ex-CEO to a new CEO. These results help to shed light on the dual role played by severance compensation and on the bargaining game played between the board and the departing executive.
Large Shareholder Trading and the Complexity of Corporate InvestmentsJournal of Financial intermediation
2013 This paper investigates how the presence of a large institutional shareholder affects the complexity of corporate investments. Our analysis is based on the observation that the blockholder’s planning horizon does not necessarily coincide with the time it takes for the market to correctly evaluate these investments. It demonstrates that this horizon mismatch creates an incentive for the large shareholder to manipulate the firm’s stock price. In equilibrium, corporate managers respond to these manipulation attempts by increasing the complexity of their investments. This in turn lowers the large shareholder’s incentive to collect costly information, which reduces price informativeness and exacerbates managerial myopia. Thus, our analysis identifies a new cost of block ownership resulting from an increased complexity of corporate investments.
Political Connections and the Allocation of Procurement ContractsReview of Finance
2013 This article analyzes whether political connections of the board of directors of publicly traded companies in the USA affect the allocation of government procurement contracts. It focuses on the change in control of both House and Senate following the 1994 election and finds that companies with boards connected to the winning (losing) party experience a significant and large increase (decrease) in procurement contracts after the election. The results remain significant after controlling for industry classifications as well as for several other company characteristics. The findings highlight one of the main avenues through which corporate political connections add value to US companies.
Do Politically Connected Boards Affect Firm Value?Review of Financial Studies
2009 This article explores whether political connections are important in the United States. The article uses an original hand-collected data set on the political connections of board members of S&P 500 companies to sort companies into those connected to the Republican Party and those connected to the Democratic Party. The analysis shows a positive abnormal stock return following the announcement of the nomination of a politically connected individual to the board. This article also analyzes the stock-price response to the Republican win of the 2000 presidential election and finds that companies connected to the Republican Party increase in value, and companies connected to the Democratic Party decrease in value.
An Equilibrium Model of Incentive Contracts in the Presence of Information ManipulationJournal of Financial Economies
2006 This paper develops an agency model in which stock-based compensation is a double-edged sword, inducing managers to exert productive effort but also to divert valuable firm resources to misrepresent performance. We examine how the potential for manipulation affects the equilibrium level of pay-for-performance sensitivity and derive several new cross-sectional implications that are consistent with recent empirical studies. In addition, we analyze the impact of recent regulatory changes contained in the Sarbanes-Oxley Act of 2002 and show how policies intended to increase firm value by reducing misrepresentation can actually reduce firm value or increase the upward bias in manipulated disclosures.