Research

Working Papers

Beyond Monitoring: The Advisory Role of Activist Directors 

Revise and Resubmit, Review of Finance

Abstract: This paper examines the effects of activist directors on firm outcomes, focusing on their advisory role. Using a hand-collected dataset of activist directors' committee appointments, I show that activists create long-term shareholder value by advising management. When they are on advisory committees, they improve profitability, optimize capital allocation, and foster growth through innovation and strategic transactions. In contrast, their presence on monitoring committees leads to short-term value changes by mitigating agency problems. Using close-call director election results in a regression discontinuity design, I provide causal evidence that activists' impact extends beyond monitoring, highlighting their distinct contributions as advisors.

Control Rights or Wrongs? Active versus Index Governance (with David K. Musto and Anne M. Tucker)

Abstract: Control rights arising from the big indexers' big stakes give them unique and broad access to corporate leadership. Big indexers can leverage this access to learn and spread best governance practices. We assess the governance consequences with a survey of U.S. public company executives that compares active and index engagement. Indexers' engagement is perceived more often as perfunctory, but gets results on board diversity. Active investors play to their own strengths, but they also engage more intensely and more successfully than indexers, even on most E&S issues. More than half of the companies respond to investor engagement by consulting proxy advisors, particularly on indexers' governance and E&S priorities. New SEC guidance reclassifies governance engagement efforts like the ones documented in this survey as "control" potentially making indexers' engagement unaffordable and halting the spread of governance practices through their control rights.

The Aftermath of Settlements: Hedge Fund Activism and Corporate Risk-Taking 

Abstract: Does an increase in activist settlements lead to an increase in corporate risk-taking? In this paper, I investigate the effects of activist directors on managerial discipline using board settlements and hand-collected golden leash agreements data. I find causal evidence against the claim that board settlements tilt the direction of management toward short-termism, leading to excessive risk-taking. I identify two mechanisms that explain the decrease in corporate risk-taking: increased board monitoring and change in ownership structure. Taken together, my findings show that activists decrease corporate risk-taking, causing improvements in long-term firm value.

Corporate Governance and Corporate Social Responsibility 

Abstract: In this paper, I examine the effect of corporate governance on corporate social responsibility (CSR). Using exogenous variation in board independence, I provide causal evidence that improved corporate governance decreases CSR. My findings support the view that CSR is driven by agency problems. Managers overinvest in CSR since they want to build a good social citizen image at the expense of shareholders. Effective corporate governance decreases CSR since it reduces agency conflict.