Research

 1.  Voting and Trading: The Shareholder's Dilemma, with Adam Meirowtiz [Link]

Journal of Financial Economics, 2022

• Abstract: We study governance when shareholders vote and can also buy or sell shares. We find that voting for the policy that one believes is better for the firm maximizes portfolio value only when pivotal; otherwise, it is better to vote against one’s information, distort the market, and then trade at the distorted price. Equilibrium voting informativeness balances these forces and is demonstrably low. As the number of shareholders grows, the probability of making the correct decision becomes lower than the informational quality of just one shareholder’s private signal. Despite this, shareholders extract information rents from trading and thus obtain additional value from their private information. These effects are related to the level of direct information leakage in the market. The predicted patterns of trading and market volatility help reconcile several debates.

1.  Speaking with One Voice: Shareholder Collaboration on Activism [Link]

Revise and Resubmit, the Review of Corporate Finance Studies

• Selected Presentations:  Northern Finance Association Annual Conference (NFA), Midwest Finance Association (MFA) Annual Conference, FMA European Conference, Financial Management Association Conference (FMA), Southern Finance Association Conference (SFA)

• Abstract:  I study how an activist shareholder (e.g., hedge fund) with non-decisive ownership orches- trates shareholder collaboration to influence a firm through intervention. The premise is that the activist must collaborate with fellow active shareholders and win over passive shareholders simultaneously. I find that collaborating with fellow active shareholders spreads activism costs but, perhaps surprisingly, jeopardizes passive shareholders’ support. This trade-off determines the activist coalition size and may explain the outsized influence of small coalitions. Passive shareholders’ pro-management preferences can ex-ante shape active shareholders’ strategies and governance outcomes. Shareholder collaboration also increases the likelihood of boards settling with activists before proxy fights.

2.  Information Acquisition and Shareholder Voting, with Adam Meirowitz [Link]

• Selected Presentations:  2023 Cambridge Corporate Finance Theory Symposium (University of Cambridge), 2023 Voting and Governance Conference (Yale University), 2023 Northern Finance Association Annual Conference (NFA), 2023 European Finance Association Annual Conference (EFA), 2023, IBEO 2023 - Alghero workshop, Silicon Prairie Finance Conference 2023 (University of Iowa), University of Illinois Urbana-Champaign Seminar

• Abstract:  In extant work on information acquisition and voting, the value of information is pinned to the probability of being pivotal. In the corporate governance setting, this approach is incomplete, as shareholders can also use their information to trade. We model information acquisition, voting, and trading and find distortions to voting behavior and information aggregation from the incentive to extract informational rents when trading. In contrast to extant work, the incentives to acquire information do not vanish as the population gets large. Because the equilibrium quality of governance is not increasing in the fraction of shareholders who choose to acquire information, governance can be better with a proxy advisor whose low-quality information crowds out the acquisition of better-quality private information. Moreover, reductions in transparency can alleviate these distortions. For example, concealing all but the final policy choice from shareholder meetings might actually improve governance compared to a setting where the vote margins are revealed to the market.

3. [Empirical Paper] Betting on My Enemy: Insider Trading Ahead of Hedge Fund 13D Filings, with Truong Duong and Travis Sapp

Revise and Resubmit, the Journal of Corporate Finance

• Abstract: Corporate insiders often become aware of hedge fund attention prior to a 13D filing. We find abnormal buying activity by insiders in the months leading up to hedge fund 13D filings. Whereas 13D announcement abnormal returns are 7.72%, we find that profits to insiders who buy average 12.09%. Insider buying is not linked to common firm characteristics that predict activist targeting. Our findings indicate that insiders are benefiting from private knowledge that their firm has become the focus of hedge fund activism. We link insider trading to indicators of poor corporate culture.

4.  Public Information as a Source of Disagreement Among Shareholders, with Laurent Bouton, Aniol Llorente-Saguer, Antonin Mace, Adam Meirowitz, and Dimitrios Xefteris [Link]

NBER Working Paper, CEPR Discussion Paper

• Selected Presentations: Accounting Research Workshop, University of Zurich, 2023

• Abstract:  We study how investors’ beliefs about firm value respond to the release of public information. We consider a rational expectations model with homogeneous investors (common preferences, priors, and opinions) with the novelty that information, both public and private, pertains to the path-forward of the firm—i.e., both to economic fundamentals and to decisions of the firm, which jointly determine the performance of the firm—instead of being directly about firm value. Our analysis shows that, counter to the received wisdom, the well-documented pattern of increased disagreement after public announcements does not require heterogeneity in preferences or opinions; it can emerge even in settings with homogeneous agents as long as the available information is allowed to shape payoff-relevant firm decisions.

5.  Voting for Socially Responsible Corporate Policies, with Adam Meirowitz, Matthew Ringgenberg [Link]

• Selected Presentations:  University of Zurich 2022, Financial Management Association Conference (FMA) 2023, Journal of Corporate Finance Special Issue Conference 2023

• Abstract:  We examine voting for corporate policies when voters face a trade-off between maximizing firm value and implementing social objectives (like minimizing pollution). We show voting can aggregate preferences and lead to stable policies when there is one social objective in addition to firm value. But when voters care about two or more social objectives, it can lead to governance indeterminacy or volatility in policies. We show an agenda setter can influence policy choice, but this power is not absolute. We also show that blockholders make it easier to achieve stable policies. Our findings have important implications for the design of proxy voting rules.

6. Voting with Index Investing, with Adam Meirowitz

1. Causes and Consequences of the High Selectivity of Academia, with Jiacui Li (University of Utah)

2. Activism & Information Acquisition, with Daniel Bernhardt (UIUC) and Adam Meirowitz (Yale)