Paper Abstracts:

 

“Bridging the Gap: Evidence from externally hired CEOs”
Journal of Accounting Research (2018) (SSRN, JAR)
(with Yonca Ertimur, Jonathan Rogers, and Sarah Zechman)
“We investigate executive employment gaps (hereafter, gaps) between the appointment of an external CEO at a public firm and the individual’s prior executive position at a public company. These gaps cannot be reliably obtained from common databases. We hand‐collect data for externally hired CEOs at public companies from 1992 to 2014. These CEOs represent approximately 40% of the 5,095 CEO successions and have a mean gap of 1.9 years. The gap increases to 3.2 years for the subset of new hires with a gap. We hypothesize that labor market frictions and executive skill sets contribute to the existence and length of these gaps. Using theories from labor economics, we predict (equilibrium) associations between two measures of “fit” (executive compensation and long‐term match quality) and gaps (both existence and length). Finally, we provide descriptive evidence on what executives do (e.g., sit on boards, work for private consulting companies, or consume leisure) during their gaps. This project was subject to and published through a registered report process. Any tests that were not included in the accepted proposal are marked as unplanned analyses.”

 

“Overconfidence and Proprietary Investment Disclosure”
R&R at Contemporary Accounting Research (2019) (SSRN)
“This paper investigates the role of idiosyncratic CEO traits in proprietary disclosure decisions. I analyze narrative R&D disclosures in the 10-K and find evidence that they have notable proprietary costs associated with their disclosure. Specifically, managers provide fewer R&D disclosures when firms face more significant competition and, consistent with information spillovers, firms’ underlying return on R&D is significantly lower in the presence of high R&D disclosure. Next, I examine CEO overconfidence and find that firms with overconfident CEOs have significantly more narrative R&D disclosures. Using a novel approach examining verb tenses, I identify R&D disclosures that are more likely to contain propriety information (i.e., disclosures about current and future R&D activities) and find that the association between overconfidence and R&D disclosure is stronger for more proprietary disclosures. Further, the association between R&D disclosure and the return on R&D remains consistent after controlling for overconfidence. Finally, I find no evidence that CEO overconfidence is associated with nonproprietary disclosure. These results suggest that CEO overconfidence is associated with lower perceived costs of proprietary disclosure, leading to more voluntary disclosure of proprietary information.”

 

“Disengaged Owners and Financial Reporting: Evidence from Index Funds
SSRN Working Paper (2019) (SSRN)
(with Stephen Rowe)
“The amount of equity held by index funds is an increasingly important share of the U.S. stock market. This rise in ownership by passive investors that are, by construction, restricted from making trading decisions has the potential to dramatically impact firm decisions. We expect that compared to other owners, index funds have lower levels of engagement with portfolio firms, leading firm managers to make systematically different decisions as the percent of firm owners who are “disengaged” increases. Using fund-level stock holdings, we directly measure index fund ownership for each firm and examine its association with financial reporting. Consistent with lower engagement with financial reporting, we find that greater ownership by index funds is associated with fewer accruals, greater frequency of missing earnings expectations, and a greater likelihood of misstatements. Our findings are consistent with index funds engaging with firms less, leading to decreased managerial incentives to both bias earnings information and invest in financial reporting quality.”