Journal of Financial Economics

We examine how executive compensation can be designed to facilitate product market collusion. We look at the 2013 decision to close several regional offices of the U.S. Department of Justice, which lowered antitrust enforcement for firms located near these closed offices. We argue this made collusion more appealing to shareholders, and find that these firms increased the sensitivity of executive pay to local rivals’ performance, consistent with rewarding the managers for colluding with them. The affected CEOs were also granted longer vesting periods, which provides long-term incentives that could foster collusive arrangements.

We examine whether foreign institutional capital promotes green growth in emerging-market firms, using firm level and China A-shares’ market-level inclusions in the MSCI Index as shocks to foreign capital. While foreign capital boosts output in emerging-market firms, emissions rise disproportionately, leading to substantial increases in emissions intensity. In contrast, emissions intensities of developed-market firms tend not to increase with foreign capital. These increases in emissions intensity are concentrated in emerging markets with weaker environmental regulations and firms receiving more capital from high-sustainability-score investors. Overall, results suggest that environmental considerations are assigned lower priority when emerging-market firms utilize foreign capital for growth.

I study if firms deliberately sacrifice workplace safety for profits by using contract workers, for whom they are not legally liable. I exploit a regression discontinuity design around the amendment to the Occupational Health and Safety Act in Korea, 2017, which expanded the legal accountability of firms to cover contract workers. The number of contract workers decreased by 18.1% in affected establishments compared to unaffected establishments. This change was not compensated by direct hiring, causing overall employment to fall by 1.3%. Working hours and wage costs paid to directly hired employees increased to make up for the resulting losses in work hours from the contract workers. Workplace safety improved at affected establishments at the cost of higher safety investment. Profitability dropped in affected firms, and those firms reacted by shrinking investments. The results are consistent with firms strategically outsourcing risky jobs to contract workers to offload their duties on workplace safety. 

I study if investment decisions within corporate foundations hurts the value of corporate philanthropic activities. Exploiting a regulation change that banned circular shareholdings in large business groups in Korea, I study if corporate foundations invest so as to benefit controlling shareholders while deteriorating the value of minority investors in affiliated firms. In affected business groups, corporate foundations purchased 5% more shares in affiliated firms where the controlling shareholders had high cash flow rights to retain the ownership concentration. Affiliated firms in affected business groups made 2% less in cash donations overall. On the other hand, the affiliated firms whose controlling shareholders had low cash flow rights donated more which was value decreasing.