External Networking and Internal Firm Governance
Published: 1/17/2012, Volume: 67, Issue: 1 | DOI: 10.1111/j.1540-6261.2011.01706.x | Cited by: 887
CESARE FRACASSI, GEOFFREY TATE
We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.
Adverse Selection in Corporate Loan Markets
Published: 12/9/2025, Volume: 81, Issue: 1 | DOI: 10.1111/jofi.70011 | Cited by: 6
MEHDI BEYHAGHI, CESARE FRACASSI, GREGORY WEITZNER
Theories of competition typically predict a positive relationship between market concentration and prices. However, in loan markets, adverse selection can reverse this relationship as riskier borrowers become more likely to receive funding. Using supervisory data, we show that interest rates, borrower risk, and lending volume are higher in markets with more banks. We also create a novel measure of markup that is orthogonal to borrower risk, and find that, consistent with adverse selection, markups are higher after repeated borrowing relationships. Finally, we use a shock to large banks' lending costs to provide further support for the adverse selection channel.
Barbarians at the Store? Private Equity, Products, and Consumers
Published: 4/25/2022, Volume: 77, Issue: 3 | DOI: 10.1111/jofi.13134 | Cited by: 93
CESARE FRACASSI, ALESSANDRO PREVITERO, ALBERT SHEEN
We investigate the effects of private equity firms on product markets using price and sales data for an extensive number of consumer products. Following a private equity deal, target firms increase retail sales of their products 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth; the launch of new products and geographic expansion do. Competitors reduce their product offerings and marginally raise prices. Cross‐sectional results on target firms, private equity firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise.
Pricing Model Performance and the Two‐Pass Cross‐Sectional Regression Methodology
Published: 11/12/2013, Volume: 68, Issue: 6 | DOI: 10.1111/jofi.12035 | Cited by: 236
RAYMOND KAN, CESARE ROBOTTI, JAY SHANKEN
Over the years, many asset pricing studies have employed the sample cross‐sectional regression (CSR)
R
2
as a measure of model performance. We derive the asymptotic distribution of this statistic and develop associated model comparison tests, taking into account the impact of model misspecification on the variability of the CSR estimates. We encounter several examples of large
R
2
differences that are not statistically significant. A version of the intertemporal capital asset pricing model (CAPM) exhibits the best overall performance, followed by the Fama–French three‐factor model. Interestingly, the performance of prominent consumption CAPMs is sensitive to variations in experimental design.