- The Option to Quit: The Effect of Employee Stock Options on Turnover (with Paige Ouimet and Ed Van Wesep), Journal of Financial Economics 127, 136 - 151, 2018.
- Featured in Harvard Law School Forum on Corporate Governance and Financial Regulation
We show that in the years following a large broad-based employee stock option (BBSO) grant, employee turnover falls at the granting firm. We find evidence consistent with a causal relation by exploiting unexpected changes in the value of unvested options. A large fraction of the reduction in turnover appears to be temporary with turnover increasing in the 3rd year following the year of the adoption of the BBSO plan. The increase three years post-grant is equal in magnitude to the cumulative decrease in turnover over the three prior years, suggesting that long-vesting BBSO plans delay, rather than prevent, turnover.
- Persistence of Innovation around Initial Public Offerings: Evidence from NonVC-Backed IPOs (with Ugur Celikyurt)
- Revise and Resubmit at the Journal of Financial Services Research
We study the innovation activity of firms going public and find that post-IPO innovation activity is highly associated with pre-IPO innovation activity at both venture-capital- and non-venture-capital-backed companies. Our results about non-venture-capital-backed companies that go public, which mostly have been ignored in similar studies, suggest that venture-capital-backing is not an important determinant of post-IPO innovation activity for firms with prior innovation experience. Our findings indicate that venture-capital-backing only helps companies with low pre-IPO innovation activity while companies with high pre-IPO innovation activity continue to innovate after going public whether backed by venture capital or not. We address potential endogeneity issues in a matching framework.
- Private Equity in the Global Economy: Evidence on Industry Spillovers (with Greg W. Brown)
- Revise and Resubmit at the Journal of Corporate Finance
Using a novel dataset on global private equity investments in 19 industries across 48 countries, I find that following private equity investments employment, profitability, and labor productivity increase for publicly listed companies in the same country and industry. This suggests that positive externalities created by private equity firms are absorbed by other companies within the same industry. These effects are more pronounced in country-industries with higher levels of competition indicating that the competitive pressure from private equity-backed targets forces industry peers to improve. I further find that capital expenditures of public firms also grow faster subsequent to private equity investments. On the financial side, I provide evidence that industry stock market returns increase after the industry receives venture capital, while buyout investments lead to higher debt levels within the industry. Overall, my findings suggest that private equity investments have broad implications for industry growth and the real economy.
- Boosting Employees or Earnings? BBSO plans before and after FAS123(R), November 2012
I provide evidence that manipulating earnings is one of the motivations for managers to grant stock options to rank and file employees. Exploring the variation in the value of broadbased stock options before and after FAS 123(R), which makes the fair-value method for employee stock option expensing mandatory for US firms, I find that firms significantly reduce their employee stock option grants following the elimination of the favorable accounting treatment these option plans used to have under FAS 123. The reduction in stock option plans is more pronounced at firms where the CEO has incentives to boost earnings, while this impact is not present at firms with strong governance mechanisms.
- Lead Directors and Board Dynamics (with Ugur Celikyurt), November 2018
- Intra-Industry Spillovers from PE (with Ugur Celikyurt), July 2018
- Determinants of International PE Capital Flows (with Asli Demirguc-Kunt), July 2016
- Pre-IPO Valuation Disclosure and Underpricing (with Derek Horstmeyer), September 2015
- Is U.S. Regulation Pushing Medical Innovation Abroad? (with Greg Brown and David Robinson), November 2014
- Does Private Equity Hurt or Help the Economy? (with Greg Brown), March 2014