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Randall A.  Heron - Indiana University, Kelley School of Business. Indianapolis, IN, US

Randall A. Heron Randall A.  Heron

Professor of Finance | Indiana University, Kelley School of Business

Indianapolis, IN, UNITED STATES

Randall Heron's research interests include corporate governance, mergers and acquisitions, corporate restructurings, and takeover defenses.

Secondary Titles (2)

  • OneAmerica Foundation Endowed Chair
  • Professor of Finance


Randall Heron is a professor of finance and holds a OneAmerica Foundation Chair at the IU Kelley School of Business in Indianapolis.

He was recognized as an academic influencer by Business Finance Magazine and as a top five newsmaker by Workforce Management for his research on option grant backdating. Heron’s research appears in leading finance and management journals such as the Journal of Business, Management Science, Journal of Financial and Quantitative Analysis, the Strategic Management Journal, and the Journal of Financial Economics, where he won the Jensen Prize for the best paper in 2007. Heron has received a Research Excellence Award and 25 Teaching Excellence Awards during his career at the Kelley School.

Professor Heron conducts research in corporate finance and specializes in corporate governance and mergers and acquisitions. He has served as a consultant or expert witness for hedge funds, the Department of Justice, the Securities and Exchange Commission, in corporate fraud cases, and in valuation and rate setting engagements.

Professor Heron received a BS in accounting (1990) and an MBA (1991) from Western Illinois University. He received his Ph.D. from Purdue University in 1995. Heron served as a visiting assistant professor at the University of Notre Dame before joining the Kelley School in 1997.

Areas of Expertise (3)

Mergers and Acquisitions

Corporate Finance

Corporate Governance

Education (3)

Purdue University: Ph.D. 1995

Western Illinois University: MBA 1991

Western Illinois University: B.S. 1990

Articles (7)

Do stock options overcome managerial risk aversion? Evidence from exercises of executive stock options

Management Science

Randall A. Heron, Erik Lie

2017 We report that the probability that executives exercise options early decreases with the volatility of the underlying stock return. We interpret this to mean that executives’ subjective option value increases with volatility and that option grants increase executives’ risk appetite. Further decomposition reveals that the results are most pronounced for idiosyncratic volatility, consistent with our conjecture that executives believe they can better predict or influence the resolution of idiosyncratic uncertainty than systematic uncertainty and, thus, favor the former.

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The effect of poison pill adoptions and court rulings on firm entrenchment

Journal of Corporate Finance

Randall A Heron, Erik Lie

2015 Researchers challenge a common presumption that poison pills and two Delaware case rulings in 1995 validating such pills materially entrench firms. Based on unsolicited takeover attempts from 1985 to 2009, scholars find that poison pills enhance takeover premiums, but do not reduce completion rates. Furthermore, the 1995 Delaware rulings affected neither the use of poison pills among the targets, the effectiveness of the pills that were used, the completion rate of the takeover attempts, nor the takeover premiums.

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What fraction of stock option grants to top executives have been backdated or manipulated?

Management Science

Randall A. Heron, Erik Lie

2009 We estimate that 13.6% of all option grants to top executives during the period 1996–2005 were backdated or otherwise manipulated. Our study primarily focuses on grants that were unscheduled and at-the-money, of which we estimate that 18.9% were manipulated.

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On the use (and abuse) of stock option grants

Financial Analysts Journal

Randall A. Heron, Erik Lie, and Tod Perry

2007 Executive compensation has long been a topic of significant debate. In recent years, the component of executive compensation packages generating the most controversy has been stock options. Companies use stock options to attract and retain executive talent while strengthening the relationship between executive compensation and performance of the company’s stock price. In addition to providing incentives for grant recipients to increase shareholder value, stock options have also been used to reduce corporate taxes and to provide employees with compensation that does not require the company to make an immediate cash outflow.

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Does backdating explain the stock price pattern around executive stock option grants?

Journal of Financial Economics

Randall A. Heron, Erik Lie

2007 Extant studies show that stock returns are abnormally negative before executive option grants and abnormally positive afterward. We find that this return pattern is much weaker since August 29, 2002, when the Securities and Exchange Commission requirement that option grants must be reported within two business days took effect. Furthermore, in those cases in which grants are reported within one day of the grant date, the pattern has completely vanished, but it continues to exist for grants reported with longer lags, and its magnitude tends to increase with the reporting delay. We interpret these findings as evidence that most of the abnormal return pattern around option grants is attributable to backdating of option grant dates.

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On the use of poison pills and defensive payouts by takeover targets

Journal of Business

Randall A. Heron, Erik Lie

2006 Using a large sample of unsolicited takeover attempts, researchers examine the determinants and effects of targets’ choice to adopt poison pills either before or after unsolicited offers and to initiate defensive payouts. The probability of poison pill adoptions decreases with insider ownership, whereas the probability of defensive repurchases increases at a decreasing rate with insider ownership. Poison pills contribute to bid increases and higher bids, yet do not alter the likelihood of takeover. Defensive share repurchases slightly reduce the takeover likelihood but do not appear to harm shareholders, perhaps because they tend to fend off low-ball bids or increase the firm’s leverage.

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Do early birds get the returns? An empirical investigation of early-mover advantages in acquisitions

Strategic Management Journal

Kenneth Carow, Randall Heron, and Todd Saxton

2004 We explore whether pioneering advantages exist for early-mover acquirers in industry acquisition waves by examining both combined (target and acquirer) and acquirer stock returns.

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