Does the Political Power of Non-Financial Stakeholders Affect Firm Values? Evidence from Labor Unions

with Jared Stanfield

Journal of Financial and Quantitative Analysis, Forthcoming


While corporate political connections are known to enhance firm values, we demonstrate that union political activity can have the opposite effect. We examine the consequences of a recent state law in Australia that restricts union political activity, but does not change collective bargaining rights. In the wake of this law, the values of affected unionized firms significantly increase and, consistent with this market reaction, these firms are able to negotiate more favorable labor contracts than their unionized peers in other states. The evidence strongly suggests that unions use political activism to extract rents from corporations and benefit their members.

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Stocking Up: Executive Optimism, Option Exercise, and Share Retention

with Rik Sen

Journal of Financial Economics, 2015, Vol. 118, 399-430


We show that an executive is optimistic about her company's prospects if and only if she retains some of the shares received whenever she exercises company stock options. Empirically, an indicator of optimism based on this idea matches the expected relations between optimism and corporate decision-making better than commonly used indicators based on the timing of option exercise. This makes sense, as our model of an executive's optimal option exercise and portfolio choice demonstrates that the timing of option exercise depends just as much on stock and other executive characteristics as it does on optimism.

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News or Noise? Internet Postings and Stock Prices

with Robert Whitelaw

Financial Analysts Journal, 2001, Vol. 57, 41-51


The anecdotal evidence is growing that postings in Internet financial forums affect stock prices, either because the postings contain new information or because they represent successful attempts to manipulate stock prices. From an investment perspective, knowing whether this phenomenon is pervasive is important. We examined the relationship between Internet message board activity and abnormal stock returns and trading volume in the period from mid-April 1999 to mid-February 2000. Our study focused on the discussion forum, an extremely popular site whose format permits the construction of an objective measure of investor opinions. For stocks in the Internet service sector, we found that on days with abnormally high message activity, changes in investor opinion correlated with abnormal industry-adjusted returns. These event days also coincided with abnormally high trading volume, which persisted for a second day. However, we found that message board activity did not predict industry-adjusted returns or abnormal trading volume, which is consistent with market efficiency.

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Working Papers

Death by Committee: An Analysis of Delegation in Corporate Boards

with Renee Adams and Vanitha Ragunathan

Winner: Best Paper in Corporate Finance Award 2016 FMA Annual Meeting, 2017 AFA Paper

Did the corporate governance reforms of the early 2000s have unintended consequences? While readily observable board characteristics have not changed much over time, boards have increasingly delegated responsibilities to sub-committees staffed entirely by independent directors. Consistent with theoretical models on small group decision-making, we find evidence that delegation may have erected barriers to communication between inside and independent directors. Reform-induced delegation does not appear to be value-enhancing; average Tobin’s q decreases by 4.1% after the reforms. Sub-committees are relatively understudied, but our results suggest that ignoring them leads to an incomplete picture of corporate boards.