WORKING PAPERS

• Underrepresentation of Women CEOs (with Toni M. Whited)

Abstract: Why do so few women become CEOs? We answer the question by estimating a dynamic model of the CEO gender decision that contains three sources of gender-based differences: unobserved productivity, search frictions that reflect limited female labor supply, and employer disutility arising from discrimination against women. We find that the most crucial factor in explaining the apparent glass ceiling is the shortage of suitable candidates. Net of the availability of suitable candidates, boards are in favor of hiring women CEOs.

Conferences: EFA 2023, ESSFM Gerzensee 2023

• Why Are CEOs Rarely Succeeded by External Candidates? (with Enrique Schroth)

Abstract: We claim that Compustat firms are run by outsider CEOs only 8.4% of the time largely because boards have a subjective preference for promoting insiders. We estimate a dynamic model of a board’s CEO hiring choices to confront the subjective preference channel to other forces against external appointments. Search costs, transition costs, and lower productivity are reasons for infrequent external hiring, but their combined effects are smaller than the board’s preferences alone. Without such bias, we predict a 49% frequency of outsider control. Younger boards are the most biased towards internal promotions, suggesting that career concerns shape directors’ hiring preferences.

Conferences: FIRS 2024, Aarhus Workshop on Strategic Interaction in Corporate Finance 2024

• Relative Performance Evaluation and Strategic Competition (with Toni M. Whited and Ran Guo)

R&R at Review of Financial Studies

Abstract: We examine how relative performance evaluation (RPE) affects industry competition—a question relevant for corporate boards interested in incentivizing executives. Using U.S. airline data, we estimate a dynamic game of competition with heterogenous firms in an oligopolistic market with RPE contracts. RPE naturally makes CEO compensation less sensitive to market demand. However, because RPE amplifies a firm’s cost efficiency relative to its peers, RPE does not always induce aggressive product market competition, often weakening competition from inefficient firms. While RPE induces endogenous selection of efficient firms into large, high entry-cost markets, and vice versa, RPE has little effect in uncompetitive markets.

Conferences: EFA 2019, CICF 2022

• Payroll and Financial Leverage

Abstract: Payroll rigidity incentivizes firms to use financial leverage to absorb shocks. I quantify the relative magnitudes of the underlying economic forces by estimating a dynamic model in which investment, employment, and financing decisions are determined endogenously as a result of exogenous labor market frictions. In the model, firms reduce leverage after negative productivity shocks because they cannot cut payroll. After positive productivity shocks, firms avoid hiring in anticipation of payroll rigidity, allowing them to increase leverage. I validate the model with a difference-in-differences analysis that exploits state changes in Social Security legislation as an exogenous shock to payroll rigidity.

• Dividend Covenants and Investment Policy (with Engelbert Docker)

Abstract: We quantify the effects of dividend covenants in mitigating underinvestment problems by using a dynamic model of investment and finance. In the model, a trade-off between future flexibility of distributions and deterrent of underinvestment problem determines whether a firm issues debt with dividend covenants. The model predicts that small firms with low cash holdings and large firms with high cash holdings are unlikely to issue debt with dividend covenants.

Conferences: EFA 2015 Doctoral Tutorial