Research
RESEARCH INTERESTS
My research interests are at the confluence of labor and finance, corporate governance, and entrepreneurship. I am also interested in organizational economics and contract theory.
Keywords: Human capital, Financial literacy, Statistical literacy, Allocation of talent, CEOs, Entrepreneurship, Innovation, Incentives
WORKING PAPERS
"The Impact of Financial Education of Executives on Financial Practices of Medium and Large Enterprises" (with Cláudia Custódio and Diogo Mendes), March 2024 (revise and resubmit at the Journal of Finance)
Article on VoxDev
We study the impact of an MBA-style executive education course in finance on corporate policies and firm performance. The course targeted top managers of medium and large enterprises in Mozambique. Using a randomized controlled trial (RCT), we find that executives change firm financial policies in response to the educational treatment. A reduction in working capital generates an increase in cash that is used to finance long-term investments. Those changes improve the performance of the treated firms. Our experimental evidence shows that targeted educational interventions can help building relevant managerial capital.
"The Sustainability Wage Gap", Appendix (with Philipp Krueger and Jiaxin Wu), January 2024 (revise and resubmit at the Journal of Financial Economics)
Article on GenevaSolutions; on ProMarket
Using administrative employer-employee matched data, we provide evidence that workers earn substantially lower wages in more sustainable firms. We hypothesize that this Sustainability Wage Gap arises because workers with preferences for sustainability accept lower wages to work in more environmentally sustainable firms. Examining both cross-sectional and time-series heterogeneity, we find that the wage gap is larger for high-skilled workers and increasing over time. Using a battery of additional tests, we argue that our results are difficult to reconcile with many alternative interpretations suggested in prior research.
"Which Workers suffer (or benefit) from firm-level Uncertainty Shocks?" (with Andrea Caggese and Vicente Cunat), March 2024
We propose novel evidence on the heterogeneous effects of uncertainty shocks on employment decisions. Using shrinkage methods on commodity prices, we construct a firm-specific profit uncertainty index and profit shocks for the population of Swedish firms (1997-2017) and their employees. We then measure the causal effect of exogenous changes in uncertainty on the employment decisions of firms. When uncertainty increases, firms are less likely to fire younger and short-tenured workers, are more likely to hire workers with previous experience in the same sector, and are more likely to both hire and fire more skilled workers, relative to normal times. The results are consistent with the prediction of a model in which heterogeneous workers differ in terms of specialization and flexibility, and in which uncertainty affects differently the option value of firing and relocating these workers. Additional robustness checks confirm this interpretation and highlight the role of disruptive high uncertainty episodes as periods of creative destruction and experimentation for the labour force.
"Boards of Banks" (with Daniel Ferreira, Tom Kirchmaier, and Shiwei Ye), February 2024
We show that country characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics have little explanatory power for the fraction of outside bank directors with experience in the banking industry. Exploiting the time-series dimension of the sample, we show that changes in bank characteristics are not robustly associated with changes in board independence, while changes in board experience are positively related to changes in bank size and negatively related to changes in performance. The evidence suggests that country-specific laws and regulations affect the composition of boards of banks mainly through requirements for director independence.
"The Role of Statistical Literacy in Risk Perceptions and Behavior During the COVID-19 Pandemic" (with Mikael Paaso and Vesa Pursiainen), April 2022
Blog post on RSM discovery
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We study the role of statistical literacy in people's assessment of risk by analyzing risk expectations and behavior in the context of the COVID-19 pandemic. Using a large-scale panel survey of about 4,000 Dutch households, we find that more statistically literate people adjust their risk estimates more strongly to the actual infection risk, measured by the current number of confirmed COVID-19 cases in their home province. Consistently, they are more likely to socially distance, especially when local cases are high. We also show that statistically more literate people evaluate the risks and benefits of a vaccination against COVID-19 differently and are more likely to get vaccinated against COVID-19.
PUBLICATIONS
"Since you’re so rich, you must be really smart: Talent, Rent Sharing and the Finance Wage Premium" (with Michael Böhm and Per Strömberg), Appendix, December 2022, Review of Economic Studies
Blog post on ProMarket.org
Financial sector wages have increased extraordinarily over the last decades. We address two potential explanations for this increase: (1) rising demand for talent and (2) firms sharing rents with their employees. We match administrative data on the population of Swedish workers, which include unique measures of individual talent, with financial information on their employers. We find no evidence that talent in finance improved, neither on average nor at the top, and the relative increase in finance wages is present across talent levels. In contrast, rising financial sector profits which are shared with employees can account for a large fraction of the increase in relative wages. We argue that the lack of a labor supply response can be partly explained by the importance of delayed compensation and social connections in finance. Our findings alleviate concerns about a “brain drain” but indicate
"How Close are Close Shareholder Votes?" (with Laurent Bach), 2019, Review of Financial Studies, Volume 32, Issue 8, Pages 3183–3214.
Blog post on Harvard Law School Forum on Corporate Governance
We show that close votes on shareholder proposals are disproportionately more likely to be won by management than by shareholder activists. Using a sample of shareholder proposals from 2003 to 2016, we uncover a large and discontinuous drop in the density of voting results at the 50% threshold. We document similar patterns for say-on-pay votes and director elections. Our findings imply that shareholder influence through voting is more limited than is suggested by the high frequency of close shareholder votes. It also follows that one cannot routinely use an RDD to identify the causal effects of changes in corporate governance generated by shareholder votes.
"Firing the Wrong Workers: Financing Constraints and Labor Misallocation" (with Andrea Caggese and Vicente Cunat), October 2019, Journal of Financial Economics, Volume 133, Issue 3, Pages 589-607.
Firms consider wages, current and expected productivity as well as firing and hiring costs when firing a worker. Financing constraints distort this inter-temporal trade-off leading firms to sub-optimally fire short-tenured workers with high future expected productivity. We provide empirical evidence of this distortion using matched employer-employee data from the Swedish population between 2000 and 2010. We propose a new empirical strategy that uses credit ratings to identify financing constraints and exchange rates and trade data to identity demand shocks. Our empirical results identify an important new misallocation effect of financial frictions that operates within firms across different types of workers.
"Financial Expert CEOs: CEO’s Work Experience and Firm’s Financial Policies" (with Claudia Custodio), Journal of Financial Economics, Volume 114, Issue 1, October 2014, Pages 125-154.
This research studies the role of CEOs with a career background in finance. Firms that appoint financial expert CEOs hold less cash, more debt, and engage in more share repurchases. Financial expert CEOs are more financially sophisticated: they are less likely to use one companywide discount rate instead of a project-specific one, they manage financial policies more actively, and their firm investments are less sensitive to firm cash flows. We use exogenous changes to business conditions and find financial expert CEOs are able to raise external funds even when credit conditions are tight. They were also more responsive to the dividend and capital gains tax cuts in 2003 and paid out more to shareholders. Newly appointed financial expert CEOs also seem more likely to replace incumbent CFOs. Finally, we analyze CEO-firm matching based on financial experience and find that financial expert CEOs tend to be hired by more mature firms. Our results are consistent with the notion that employment histories of CEOs matter for corporate policies. However, we cannot formally rule out that our findings are partly explained by endogenous CEO-firm matching.
"Stealth Trading and Trade Reporting by Corporate Insiders", (with Andre Betzer, Jasmin Gider, and Erik Theissen), Review of Finance, Volume 19, Issue 2, 2015, Pages 865-905.
Regulations in the pre-Sarbanes–Oxley era allowed corporate insiders considerable flexibility in strategically timing their trades and SEC filings, e.g., by executing several trades and reporting them jointly after the last trade. We document that even these lax reporting requirements were frequently violated and that the strategic timing of trades and reports was common. Event study abnormal returns are larger after reports of strategic trades than after reports of otherwise similar nonstrategic trades. Our results imply that delayed reporting obviates the adjustment of prices to the information revealed by the insider trades. They lend strong support to the more stringent reporting requirements established by the Sarbanes–Oxley Act.
"How Do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns." (with Claudia Custodio), Review of Financial Studies, Volume 26, Issue 8, 2013, Pages 2008-2047.
This paper shows how CEO characteristics affect the performance of acquirers in diversifying takeovers. When the acquirer's CEO has previous experience in the target's industry, acquirer's abnormal announcement returns are between 1.2 and 2.0 percentage points larger than those generated by a CEO who is new to the target's industry. This is driven by the industry-expert CEO's ability to capture a larger fraction of the merger surplus. Industry-expert CEOs negotiate better deals and pay a lower premium for the target. This effect is stronger when information asymmetry is high and in bilateral negotiations compared to auctions. We also find that industry-expert CEOs on average select lower surplus deals. This evidence is consistent with industry-experts having superior negotiation ability.
LONG-TERM WORKING PAPERS
"How Do Shareholders Votes create Value?" (with Laurent Bach), March 2017
Shareholder votes may create value because they force boards to implement proposals’ content or because they signal shareholders’ discontent. In order to distinguish these hypotheses, we collect data on the implementation of shareholder proposals. We show that the decision to implement proposals and the launch of vote-no campaigns are triggered by separate majority thresholds. Using a regression discontinuity design, we find that there is a positive stock market reaction to majority votes when the result triggers further vote-no campaigns. In contrast, we do not detect any effect of a majority vote when it only pushes managers to implement a proposal.
OTHER PUBLICATIONS
"Square Inc.", Case Study, 2017
"Cadbury-Kraft", Case Study (with Bo Becker), 2014
Corporate Governance Systems (with Christian Andres, Andre Betzer, and Marc Goergen), March 2010
Appeared in H. Kent Baker and Ronald Anderson (ed.), Corporate Governance, Companions to Finance Series, Kolb Series in Finance, New York: John Wiley, chapter 3.