Research
Job Market Paper
The Proxy Advice Industry and Common Owners' Coordination
High levels of common ownership may reduce firms’ incentives to compete. The empirical relevance of this concern is controversial, in part because there are no obvious mechanisms for common owners to coordinate their actions. I study a channel, proxy advisors, which may induce such coordination simply by satisfying their fiduciary duty. A single proxy advisor – Institutional Shareholder Services (ISS) – provides advice to 70% of all institutional investors on how to vote at shareholder meetings. I clarify in a theoretical framework how a proxy advisor maximizing client value will promote softer competition for commonly held firms. Combining data on ownership and shareholder meetings for all publicly listed U.S. firms (2003-2017), I find empirical support for the model’s mechanism. In particular, for a firm with higher common ownership, ISS is more likely to i) support mergers, ii) oppose managerial incentive contracts that enhances performance-sensitivity, and iii) support director interlocks.
Ola Bengtsson Award for Best PhD Paper 2023
Publications
Cartel Birth and Death Dynamics: Empirical Evidence, 2023, International Journal of Industrial Organization, with C. Le Coq and C. Marvão | SSRN
This paper examines how a gradual tightening of antitrust enforcement impacts cartels' births and deaths. To avoid the inherent sample selection bias in prosecuted cartel studies, we use a unique dataset of Swedish legal cartels registered between 1946 and 1993. We compare estimates from a count model (considering only registered cartels) and a Hidden Markov Model (allowing for potentially unregistered cartels) to identify observed and hidden cartel dynamics. The count model suggests that strengthening antitrust enforcement has a deterrent effect, but the Hidden Markov Model suggests otherwise. Despite stricter competition laws and a credible threat of cartel prohibition, cartels continue to form, but do so undercover. Additionally, our results suggest that the strengthening of competition law has little impact on destabilizing existing cartels.
Other working papers
Does the Production Approach to Markup Estimation Match a Stylized Fact? | SSRN
The production approach estimates firms' markups using sales, variable costs, and output elasticity. The approach has recently attracted the attention of scholars and policymakers for its straightforward implementation and limited data requirements. Criticism has also been directed at the approach and validation of the approach is called for. This paper provides a novel empirical assessment of the approach using rich panel data on the complete population of Swedish firms across four sectors (1998-2019). I first estimate the markup of each firm using the production approach. Using two sources of identification, I then test whether these estimates can match the stylized fact that markups are higher on more concentrated local markets. In static tests, I study geographically independent markets that vary in market structure and find that estimated markups corroborate to the stylized fact for three of the four sectors. In dynamic tests, focusing on changes in concentration, I find that markups fall with entry and rise with exits.
Work in progress
Proxy Advisors, Anti-Hedging Policies, and Executive Compensation Contracts, with J. Bae, T. Ellingsen, E. Gaard Kristiansen, and R. Zhang
Anti-hedging policies (AHPs) prevent company executives from hedging compensation packages in financial markets. We document the explosive spread of AHPs among S&P 1500 firms during the period 2006-2021. Leveraging a large policy change by an influential proxy advisor that strongly advocated for AHPs from December 2012 onwards, we then use variation in ownership shares of the advisor’s clients to assess the advisor’s impact on AHPs. Using this instrument, we finally investigate how AHPs cause changes in executive compensation contracts. Overall, we cannot reject the hypothesis that pay is competitive, but there is some evidence of skimming by powerful executives.
The Effect of Private Equity on Markups, with M. Hagman
This paper studies the effect of private equity on firms' markups using rich panel data on all PE buyouts in Sweden (1998-2019). We find that target firms' markups increase following a buyout, compared to matched control firms. We then study whether this effect is driven by enhanced efficiency, cost savings, or increased market power.