Search results: 50.
Good Timing: CEO Stock Option Awards and Company News Announcements
Published: 6/1997, Volume: 52, Issue: 2 | DOI: 10.1111/j.1540-6261.1997.tb04809.x | Cited by: 621
DAVID YERMACK
This article analyzes the timing of CEO stock option awards, as a method of investigating corporate managers' influence over the terms of their own compensation. In a sample of 620 stock option awards to CEOs of Fortune 500 companies between 1992 and 1994, I find that the timing of awards coincides with favorable movements in company stock prices. Patterns of companies' quarterly earnings announcements are consistent with an interpretation that CEOs receive stock option awards shortly before favorable corporate news. I evaluate and reject several alternative explanations of the results, including insider trading and the manipulation of news announcement dates.
Remuneration, Retention, and Reputation Incentives for Outside Directors
Published: 10/2004, Volume: 59, Issue: 5 | DOI: 10.1111/j.1540-6261.2004.00699.x | Cited by: 624
DAVID YERMACK
I study incentives received by outside directors in Fortune 500 firms from compensation, replacement, and the opportunity to obtain other directorships. Previous research has only shown these relations to apply under limited circumstances such as financial distress. Together these incentive mechanisms provide directors with wealth increases of approximately 11 cents per $1,000 rise in firm value. Although smaller than the performance sensitivities of CEOs, outside directors' incentives imply a change in wealth of about $285,000 for a 1 standard deviation (SD) change in typical firm performance. Cross‐sectional patterns of director equity awards conform to agency and financial theories.
Taking Stock: Equity‐Based Compensation and the Evolution of Managerial Ownership
Published: 6/2000, Volume: 55, Issue: 3 | DOI: 10.1111/0022-1082.00250 | Cited by: 451
Eli Ofek, David Yermack
We investigate the impact of stock‐based compensation on managerial ownership. We find that equity compensation succeeds in increasing incentives of lower‐ownership managers, but higher‐ownership managers negate much of its impact by selling previously owned shares. When executives exercise options to acquire stock, nearly all of the shares are sold. Our results illuminate dynamic aspects of managerial ownership arising from divergent goals of boards of directors, who use equity compensation for incentives, and managers, who respond by selling shares for diversification. The findings cast doubt on the frequent and important theoretical assumption that managers cannot hedge the risks of these awards.
CEO Involvement in the Selection of New Board Members: An Empirical Analysis
Published: 10/1999, Volume: 54, Issue: 5 | DOI: 10.1111/0022-1082.00168 | Cited by: 980
Anil Shivdasani, David Yermack
We study whether CEO involvement in the selection of new directors influences the nature of appointments to the board. When the CEO serves on the nominating committee or no nominating committee exists, firms appoint fewer independent outside directors and more gray outsiders with conflicts of interest. Stock price reactions to independent director appointments are significantly lower when the CEO is involved in director selection. Our evidence may illuminate a mechanism used by CEOs to reduce pressure from active monitoring, and we find a recent trend of companies removing CEOs from involvement in director selection.
Pay Me Later: Inside Debt and Its Role in Managerial Compensation
Published: 8/2007, Volume: 62, Issue: 4 | DOI: 10.1111/j.1540-6261.2007.01251.x | Cited by: 484
RANGARAJAN K. SUNDARAM, DAVID L. YERMACK
Though widely used in executive compensation, inside debt has been almost entirely overlooked by prior work. We initiate this research by studying CEO pension arrangements in 237 large capitalization firms. Among our findings are that CEO compensation exhibits a balance between debt and equity incentives; the balance shifts systematically away from equity and toward debt as CEOs grow older; annual increases in pension entitlements represent about 10% of overall CEO compensation, and about 13% for CEOs aged 61–65; CEOs with high debt incentives manage their firms conservatively; and pension compensation influences patterns of CEO turnover and cash compensation.
Managerial Entrenchment and Capital Structure Decisions
Published: 9/1997, Volume: 52, Issue: 4 | DOI: 10.1111/j.1540-6261.1997.tb01115.x | Cited by: 1167
PHILIP G. BERGER, ELI OFEK, DAVID L. YERMACK
We study associations between managerial entrenchment and firms' capital structures, with results generally suggesting that entrenched CEOs seek to avoid debt. In a cross‐sectional analysis, we find that leverage levels are lower when CEOs do not face pressure from either ownership and compensation incentives or active monitoring. In an analysis of leverage changes, we find that leverage increases in the aftermath of entrenchment‐reducing shocks to managerial security, including unsuccessful tender offers, involuntary CEO replacements, and the addition to the board of major stockholders.
Individual Investors and Volatility
Published: 7/19/2011, Volume: 66, Issue: 4 | DOI: 10.1111/j.1540-6261.2011.01668.x | Cited by: 316
THIERRY FOUCAULT, DAVID SRAER, DAVID J. THESMAR
We show that retail trading activity has a positive effect on the volatility of stock returns, which suggests that retail investors behave as noise traders. To identify this effect, we use a reform of the French stock market that raises the relative cost of speculative trading for retail investors. The daily return volatility of the stocks affected by the reform falls by 20 basis points (a quarter of the sample standard deviation of the return volatility) relative to other stocks. For affected stocks, we also find a significant decrease in the magnitude of return reversals and the price impact of trades.
DISCUSSION
Published: 7/1986, Volume: 41, Issue: 3 | DOI: 10.1111/j.1540-6261.1986.tb04539.x | Cited by: 0
DAVID FELDMAN
STATE OF THE FINANCE FIELD: FURTHER COMMENT
Published: 12/1968, Volume: 23, Issue: 5 | DOI: 10.1111/j.1540-6261.1968.tb00322.x | Cited by: 10
David Durand
Political Connections and Allocative Distortions
Published: 1/7/2019, Volume: 74, Issue: 2 | DOI: 10.1111/jofi.12751 | Cited by: 294
DAVID SCHOENHERR
Exploiting a unique institutional setting in Korea, this paper documents that politicians can increase the amount of government resources allocated through their social networks to the benefit of private firms connected to these networks. After winning the election, the new president appoints members of his networks as CEOs of state‐owned firms that act as intermediaries in allocating government contracts to private firms. In turn, these state firms allocate significantly more procurement contracts to private firms with a CEO from the same network. Contracts allocated to connected private firms are executed systematically worse and exhibit more frequent cost increases through renegotiations.
MERGERS, DIVERSIFICATION AND THE THEORIES OF THE FIRM
Published: 3/1973, Volume: 28, Issue: 1 | DOI: 10.1111/j.1540-6261.1973.tb01368.x | Cited by: 0
David Gilbert
A QUARTERLY SERIES OF CORPORATE BASIC YIELDS, 1952–57, AND SOME ATTENDANT RESERVATIONS*
Published: 9/1958, Volume: 13, Issue: 3 | DOI: 10.1111/j.1540-6261.1958.tb04200.x | Cited by: 3
David Durand
Testing the Efficiency of the Canadian‐U.S. Exchange Market under the Assumption of no Risk Premium
Published: 3/1981, Volume: 36, Issue: 1 | DOI: 10.1111/j.1540-6261.1981.tb03533.x | Cited by: 45
DAVID LONGWORTH
The efficiency of the Canadian‐U.S. exchange market for the current float is examined more extensively than previously. Semi‐strong‐form tests which admit the lagged spot rate as a predictor are considered in addition to the standard weak‐form test. These stronger tests reject the joint null hypothesis of an efficient exchange market and no risk premium for the period ending in October 1976, although not for the entire period. For almost every year the current spot rate provided a better forecast of the future spot rate than did the current forward rate.
GROWTH STOCKS AND THE PETERSBURG PARADOX*
Published: 9/1957, Volume: 12, Issue: 3 | DOI: 10.1111/j.1540-6261.1957.tb04143.x | Cited by: 13
David Durand
DISCUSSION
Published: 7/1984, Volume: 39, Issue: 3 | DOI: 10.1111/j.1540-6261.1984.tb03648.x | Cited by: 0
DAVID EMANUEL
The Term Structure of Interest Rates in a Partially Observable Economy
Published: 7/1989, Volume: 44, Issue: 3 | DOI: 10.1111/j.1540-6261.1989.tb04391.x | Cited by: 29
DAVID FELDMAN
This paper investigates the term structure of interest rates in a multiperiod production and exchange economy with incomplete information. Unable to observe their stochastic investment opportunities, investors engage in dynamic Bayesian inference. This results in the endogenous identification of a more complex production function which generates a richer term structure, resembling the one that actual market prices imply. In addition, this paper introduces a characteristic function of the term structure and demonstrates that, in contrast with a fully observable economy, the widely investigated expectations hypothesis holds true only if interest rates are nonstochastic.
Presidential Address: Social Transmission Bias in Economics and Finance
Published: 5/27/2020, Volume: 75, Issue: 4 | DOI: 10.1111/jofi.12906 | Cited by: 266
DAVID HIRSHLEIFER
I discuss a new intellectual paradigm, social economics and finance—the study of the social processes that shape economic thinking and behavior. This emerging field recognizes that people observe and talk to each other. A key, underexploited building block of social economics and finance is social transmission bias: systematic directional shift in signals or ideas induced by social transactions. I use five “fables” (models) to illustrate the novelty and scope of the transmission bias approach, and offer several emergent themes. For example, social transmission bias compounds recursively, which can help explain booms, bubbles, return anomalies, and swings in economic sentiment.
Transactions Costs and the Theory of Portfolio Selection
Published: 9/1976, Volume: 31, Issue: 4 | DOI: 10.1111/j.1540-6261.1976.tb01964.x | Cited by: 26
David Goldsmith
Heterogeneous Beliefs, Speculation, and the Equity Premium
Published: 1/10/2008, Volume: 63, Issue: 1 | DOI: 10.1111/j.1540-6261.2008.01310.x | Cited by: 210
ALEXANDER DAVID
Agents with heterogeneous beliefs about fundamental growth do not share risks perfectly but instead speculate with each other on the relative accuracy of their models' predictions. They face the risk that market prices move more in line with the trading models of competing agents than with their own. Less risk‐averse agents speculate more aggressively and demand higher risk premiums. My calibrated model generates countercyclical consumption volatility, earnings forecast dispersion, and cross‐sectional consumption dispersion. With a risk aversion coefficient less than one, agents' speculation causes half the observed equity premium and lowers the riskless rate by about 1%.
A Theoretical Model for Valuing Preferred Stock
Published: 9/1983, Volume: 38, Issue: 4 | DOI: 10.1111/j.1540-6261.1983.tb02288.x | Cited by: 19
DAVID EMANUEL
This paper develops a model of preferred stock value which includes the possibility of dividends on the preferred stock being omitted. The analytical framework used is based on the option‐hedging methodology of Black and Scholes. Precise valuation formulae are obtained for cumulative and noncumulative preferred stock in a variety of contexts. The values obtained are quite different from those for either riskless or risky perpetual bonds, which have previously been proposed as being similar to preferred stock.
Can Unemployment Insurance Spur Entrepreneurial Activity? Evidence from France
Published: 2/5/2020, Volume: 75, Issue: 3 | DOI: 10.1111/jofi.12880 | Cited by: 123
JOHAN HOMBERT, ANTOINETTE SCHOAR, DAVID SRAER, DAVID THESMAR
We evaluate the effect of downside insurance on self‐employment. We exploit a large‐scale reform of French unemployment benefits that insured unemployed workers starting businesses. The reform significantly increased firm creation without decreasing the quality of new entrants. Firms started postreform were initially smaller, but their employment growth, productivity, and survival rates are similar to those prereform. New entrepreneurs' characteristics and expectations are also similar. Finally, jobs created by new entrants crowd out employment in incumbent firms almost one‐for‐one, but have a higher productivity than incumbents. These results highlight the benefits of encouraging experimentation by lowering barriers to entry.
Housing Collateral and Entrepreneurship
Published: 1/12/2017, Volume: 72, Issue: 1 | DOI: 10.1111/jofi.12468 | Cited by: 343
MARTIN C. SCHMALZ, DAVID A. SRAER, DAVID THESMAR
We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross‐sectional variation in local house‐price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France) cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.
Report of the Executive Secretary and Treasurer for the Year Ending September 30, 2008
Published: 7/16/2009, Volume: 64, Issue: 4 | DOI: 10.1111/j.1540-6261.2009.01487.x | Cited by: 0
David H. Pyle
Report of the Executive Secretary and Treasurer
for the Year Ending September 30, 2006
Published: 8/2007, Volume: 62, Issue: 4 | DOI: 10.1111/j.1540-6261.2007.01266.x | Cited by: 0
David H. Pyle
Approximating the Asset Pricing Kernel
Published: 9/1997, Volume: 52, Issue: 4 | DOI: 10.1111/j.1540-6261.1997.tb01114.x | Cited by: 56
DAVID A. CHAPMAN
This article tests a simple consumption‐based asset pricing model by approximating the true asset pricing kernel using low‐order orthonormal polynomials based on the model's state variables. Approximated kernels based solely on next period's consumption growth are not rejected by overall measures of model fit, but they produce statistically and economically large pricing errors. Approximated kernels based on two quarters of future consumption growth and technology shocks have substantially improved overall fit. In particular, the best of these kernels are capable of eliminating the small firm effect.
THE IMPACT OF CORPORATE GROWTH ON THE RISK OF COMMON STOCKS
Published: 5/1975, Volume: 30, Issue: 2 | DOI: 10.1111/j.1540-6261.1975.tb01827.x | Cited by: 18
David R. Fewings
Minutes of the Annual Membership Meeting
Published: 8/1999, Volume: 54, Issue: 4 | DOI: 10.1111/0022-1082.00155 | Cited by: 0
David H. Pyle
FIRM VALUATION, CORPORATE TAXES, AND DEFAULT RISK
Published: 12/1975, Volume: 30, Issue: 5 | DOI: 10.1111/j.1540-6261.1975.tb01053.x | Cited by: 11
David P. Baron
Risk‐Based Premiums for Insurance Guaranty Funds
Published: 9/1988, Volume: 43, Issue: 4 | DOI: 10.1111/j.1540-6261.1988.tb02607.x | Cited by: 148
J. DAVID CUMMINS
Insurance guaranty funds have been adopted in all states to compensate policyholders for losses resulting from insurance company insolvencies. The guaranty funds charge flat premium rates, usually a percentage of premiums. Flat premiums can induce insurers to adopt high‐risk strategies, a problem that can be avoided through the use of risk‐based premiums. This article develops risk‐based premium formulas for three cases: a) an ongoing insurer with stochastic assets and liabilities, b) an ongoing insurer also subject to jumps in liabilities (catastrophes), and c) a policy cohort, where claims eventually run off to zero. Premium estimates are provided and compared with actual guaranty fund assessment rates.
A MONETARIST MODEL OF THE MONETARY PROCESS*
Published: 5/1970, Volume: 25, Issue: 2 | DOI: 10.1111/j.1540-6261.1970.tb00506.x | Cited by: 0
David I. Fand
GOVERNMENT DEBT, INTERGENERATION WELFARE, AND ECONOMIC ACTIVITY*
Published: 6/1968, Volume: 23, Issue: 3 | DOI: 10.1111/j.1540-6261.1968.tb00836.x | Cited by: 0
David H. Kopf
DISCUSSION
Published: 5/1973, Volume: 28, Issue: 2 | DOI: 10.1111/j.1540-6261.1973.tb01795.x | Cited by: 0
David J. Ott
MONEY SUPPLY CONTROL: RESERVES AS THE INSTRUMENT UNDER LAGGED ACCOUNTING
Published: 6/1976, Volume: 31, Issue: 3 | DOI: 10.1111/j.1540-6261.1976.tb01927.x | Cited by: 0
David A. Pierce
Fed Policy, Financial Market Efficiency, and Capital Flows
Published: 8/1999, Volume: 54, Issue: 4 | DOI: 10.1111/0022-1082.00153 | Cited by: 0
David M. Jones
THE EFFECT OF A CHANGE IN THE CEILING RATE ON DEPOSITS AT COMMERCIAL BANKS*
Published: 9/1967, Volume: 22, Issue: 3 | DOI: 10.1111/j.1540-6261.1967.tb02985.x | Cited by: 0
David E. Bond
The Equilibrium Valuation of Risky Discrete Cash Flows in Continuous Time
Published: 12/1989, Volume: 44, Issue: 5 | DOI: 10.1111/j.1540-6261.1989.tb02659.x | Cited by: 9
DAVID C. SHIMKO
This paper values a contingent claim to discrete stochastic cash flows generated by a Poisson arrival process with a randomly varying intensity parameter. In the most general case, both the size and the arrival intensity of cash flows may correlate wih state variables in a continuous time economy. Assuming the conditions of an intertemporal capital aset pricing model, solutions for the value of the contingent claim can be found using various techniques. The paper suggests immediate applications to the valuation of insurance contracts, the decision to build a firm with unknown future investment opportunities, and the pricing of mortgage‐backed securities.
Presidential Address: Pension Policy and the Financial System
Published: 8/2018, Volume: 73, Issue: 4 | DOI: 10.1111/jofi.12710 | Cited by: 63
DAVID S. SCHARFSTEIN
In this paper, I examine the effect of pension policy on the structure of financial systems around the world. In particular, I explore the hypothesis that policies that promote pension savings also promote the development of capital markets. I present a model that endogenizes the extent to which savings are intermediated through banks or capital markets, and derive implications for corporate finance, household finance, banking, and the size of the financial sector. I then present a number of facts that are broadly consistent with the theory and examine a variety of alternative explanations of my findings.
Minutes of the Annual Membership Meeting, January 7, 2012
Published: 7/19/2012, Volume: 67, Issue: 4 | DOI: 10.1111/j.1540-6261.2012.01756.x | Cited by: 0
DAVID H. PYLE
AN ECONOMIC ANALYSIS OF CREDIT UNIONS IN MICHIGAN*
Published: 12/1966, Volume: 21, Issue: 4 | DOI: 10.1111/j.1540-6261.1966.tb00285.x | Cited by: 1
David L. McKee
REAL ESTATE CREDIT CONTROLS AS A SELECTIVE INSTRUMENT OF FEDERAL RESERVE POLICY*
Published: 12/1958, Volume: 13, Issue: 4 | DOI: 10.1111/j.1540-6261.1958.tb04227.x | Cited by: 0
David P. Eastburn
Defensive Changes in Corporate Payout Policy: Share Repurchases and Special Dividends
Published: 12/1990, Volume: 45, Issue: 5 | DOI: 10.1111/j.1540-6261.1990.tb03722.x | Cited by: 98
DAVID J. DENIS
This paper examines defensive payouts announced in response to hostile corporate control activity. The evidence indicates that the announcement of defensive share repurchases is associated with an average negative impact on the share price of the target firm. In contrast, special dividend payments generally increase the wealth of target firm shareholders. Regardless of payout type, those firms remaining independent after the outcome of the corporate control contest experience an abnormal share price increase over the duration of the contest. Among these firms there are substantial post‐contest changes in capital, asset, and ownership structure and abnormally high rates of top management turnover.
Inflation and Asset Returns in a Monetary Economy
Published: 9/1992, Volume: 47, Issue: 4 | DOI: 10.1111/j.1540-6261.1992.tb04660.x | Cited by: 170
DAVID A. MARSHALL
Postwar U.S. data are characterized by negative correlations between real equity returns and inflation and by positive correlations between real equity returns and money growth. These patterns are closely matched quantitatively by an equilibrium monetary asset pricing model. The model also implies negative correlations between expected asset returns and expected inflation, and it predicts that the inflation‐asset return correlation will be more strongly negative when inflation is generated by fluctuations in real economic activity than when it is generated by monetary fluctuations.
SUPER PREMIUM SECURITY PRICES AND OPTIMAL CORPORATE FINANCING DECISIONS
Published: 5/1976, Volume: 31, Issue: 2 | DOI: 10.1111/j.1540-6261.1976.tb01903.x | Cited by: 6
David W. Glenn
DISCUSSION
Published: 5/1981, Volume: 36, Issue: 2 | DOI: 10.1111/j.1540-6261.1981.tb00464.x | Cited by: 7
DAVID P. SEIDERS
The Implications of Nonmarketable Income for Consumption‐Based Models of Asset Pricing
Published: 9/1988, Volume: 43, Issue: 4 | DOI: 10.1111/j.1540-6261.1988.tb02609.x | Cited by: 4
DAVID P. BROWN
A new representation of nonmarketable (NM) income is introduced in this essay. Using this representation and continuous trading, there exists a set of individuals who do not participate in the asset market and who consume at the rate of nonmarketable income derived from human capital. Because these individuals remain nonparticipants for a range of stochastic processes governing the NM income, consumption betas are not generally unique in value and the consumption‐based CAPM (CCAPM) does not obtain. However, the intertemporal CAPM (ICAPM) of Merton remains valid.
THE FINANCING OF INDUSTRIAL DEVELOPMENT IN COLORADO*
Published: 12/1954, Volume: 9, Issue: 4 | DOI: 10.1111/j.1540-6261.1954.tb01247.x | Cited by: 0
David L. Mosconi
SENIOR SECURITIES IN THE CAPITAL STRUCTURES OF COMMERCIAL BANKS*
Published: 3/1966, Volume: 21, Issue: 1 | DOI: 10.1111/j.1540-6261.1966.tb02964.x | Cited by: 0
David W. Cole
DISCUSSION
Published: 5/1976, Volume: 31, Issue: 2 | DOI: 10.1111/j.1540-6261.1976.tb01913.x | Cited by: 0
David H. Downes
The Crash of ʼ87: Was It Expected? The Evidence from Options Markets
Published: 7/1991, Volume: 46, Issue: 3 | DOI: 10.1111/j.1540-6261.1991.tb03775.x | Cited by: 505
DAVID S. BATES
Transactions prices of S&P 500 futures options over 1985‐1987 are examined for evidence of expectations prior to October 1987 of an impending stock market crash. First, it is shown that out‐of‐the‐money puts became unusually expensive during the year preceding the crash. Second, a model is derived for pricing American options on jump‐diffusion processes with systematic jump risk. The jump‐diffusion parameters implicit in options prices indicate that a crash was expected and that implicit distributions were negatively skewed during October 1986 to August 1987. Both approaches indicate no strong crash fears during the 2 months immediately preceding the crash.