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Published Papers

Collective Action and Governance Activism
with Craig Doidge, Alexander Dyck, and Hamed Mahmudi​
Review of Finance, 2019, Volume 23, Issue 5, Pages 893–933.
(PaperPublished Version)
Coverage: The Wall Street JournalThe Globe and Mail; Financial Post; Harvard Law School Forum on Corporate Governance

We examine how an investor collective action organization (ICAO) enhances activism by institutional investors. The ICAO initiates private meetings with independent directors to discuss governance proposals and has incentives to engage in activism that are about six times larger than a single investor acting alone. Firms engaged by the ICAO are 58% more likely than non-engaged firms to adopt the ICAO’s governance proposals that include majority voting, say-on-pay and performance-sensitive executive pay. The ICAO’s formation elicited a positive market reaction for firms that the ICAO was likely to target. We conclude that institutional investors improve governance through collective action. 

Why are Bidder Termination Provisions Included in Takeovers?
with Zhiyao Chen, Hamed Mahmudi and Xiaofei Zhao​
Journal of Financial and Quantitative Analysis, Volume 57, Issue 7, November 2022 , pp. 2860 - 2896
(Paper; Internet Appendix; Published Version

We examine bidder termination provisions, which enhance a bidder's ability to withdraw from a takeover, also known as reverse break-up fees. We liken a bidder termination provision to a real option on the target's assets, and show that the provisions create value in some takeovers and not others. We find that inclusion of the provisions and size of termination fees payable by bidders are related to the optionality of a takeover and that pricing fees appropriately may increase the value created in M&A.

Quasi-Insider Shareholder Activism:
Corporate Governance at the Periphery of Control
with Jonathan Cohn and Mitch Towner
Review of Corporate Finance Studies, forthcoming
(Paper; Internet Appendix)
Coverage: Columbia Law School Blue Sky Blog

We document the role of investors at the periphery of control in corporate governance.  These investors, whom we term "quasi-insiders", include founders, former CEOs, and other former officers. Quasi-insiders launch activist campaigns in smaller and worse-performing firms than traditional activists, and use aggressive tactics to seek greater control.  Their campaigns are associated with positive market reactions comparable to those in other activist campaigns, and subsequent improvements in operating performance.  The presence of a quasi-insider blockholder is associated with a significant increase in the sensitivity of CEO turnover to performance.  We conclude that quasi-insiders play a meaningful role in governance for firms that other investors might ignore.

Working Papers

The Impact of a Principles-Based Approach
to Director Gender Diversity Policy
with Tor-Erik Bakke, Laura Field and Hamed Mahmudi
Revise and Resubmit at the Journal of Accounting and Economics
Coverage: Harvard Law School Forum on Corporate Governance

We study the impact of a principles-based (i.e., comply or explain) regulatory approach to mandating female representation on corporate boards. We find that firms most likely to be affected by principles-based regulation exhibit positive abnormal returns around its announcement and exhibit a 30% increase in the fraction of female directors over the longer term. Compliance with the gender diversity policy increases over time and non-compliance appears to be related to the supply of female directors.

The Value Implications of Mandatory Clawback Provisions
with Tor-Erik Bakke and Hamed Mahmudi
Revise and Resubmit at the Journal of Law and Economics
Coverage/Policy: The Wall Street Journal; SEC Final Clawback Rule; SEC DERA Memo

We examine firm policies requiring the recoupment of erroneously awarded performance-based compensation from executives, known as clawback provisions. We study the value implications of clawback provisions by examining the stock market’s reaction to the SEC’s announcement of a proposed rule mandating their adoption. We find that clawback provisions are value-enhancing, particularly for firms with captured boards, which are more likely to resist their adoption.

Does Corporate Political Spending Advance Shareholder Interests? 
Evidence from Clawback Regulation
with Tor-Erik Bakke and Hamed Mahmudi
(Paper; Internet Appendix)

Firms whose shareholders would benefit more from the introduction of Dodd-Frank mandatory clawback provisions contribute more to politicians who are likely to weaken the mandate. We measure the extent to which firms would benefit from mandatory clawback provisions using the stock market reaction to the SEC’s announcement of a proposed rule that would mandate clawbacks. Firms with more positive reactions to the announcement exhibit a greater increase in political contributions between the pre- and post-announcement periods to politicians who worked to weaken the clawback rules. Our findings indicate that corporate political spending may go against shareholder interests.

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Politicization of the Supreme Court and Firm Value:
Evidence from Ruth Bader Ginsburg’s Death
with Tor-Erik Bakke, Hamed Mahmudi and Song Zhang

We exploit the sudden passing of justice Ruth Bader Ginsburg (RBG) – an event that signaled a more conservative Supreme Court of the US (SCOTUS) – to examine the impact of a change in the partisan composition of the SCOTUS on firm value.  Consistent with a more conservative SCOTUS, we find that Republican-leaning firms exhibit more positive abnormal announcement returns around RBG's passing. This result is driven by industry-level political preferences. Republican-leaning firms located in Republican-controlled states exhibit more positive returns. Firms facing more political risk exhibit lower announcement returns, consistent with an increase in economic policy uncertainty following RBG’s passing.

Growth-promoting bonuses and Mergers and Acquisitions
with Tor-Erik Bakke, Mathias Kronlund and Hamed Mahmudi

We study how growth-promoting bonuses — bonuses that are explicitly tied to size measures such as sales — impact firms' acquisition activity. Firms' whose executives are granted growth-promoting bonuses are more likely to do acquisitions. Acquisitions by such firms tend to destroy value for acquirers, as indicated by lower acquirer announcement returns. Lower acquirer returns appear to be a result of selecting targets with lower synergies and to a lesser extent, higher value transfers to targets. Among firms that grant growth-promoting bonuses, many would have missed their bonus goals without doing an acquisition.

Do Personal Taxes Drive Unrelated Mergers and Acquisitions?
with Jeff Coles, Jason Sandvik and Nathan Seegert

We propose a new rationale for unrelated acquisitions based on personal taxes. Unrelated acquisitions can potentially benefit shareholders by providing them with portfolio diversification, while avoiding the personal taxes they would incur if firms made dividend payouts instead. We find that dividend-paying firms decreased unrelated acquisitions following the 2003 reduction in dividend tax rates. We observe none of these effects for related acquisitions, or for non-dividend paying firms. Although unrelated acquisitions are commonly attributed to managers pursuing their own interests, our findings highlight a potential upside to unrelated acquisitions for shareholders.

Case Studies

Buying into the 407:
The Syndication Protocol as a New Model for Infrastructure Investing
with Alexander Dyck
International Centre for Pension Management Case Study, 2012
(Case Study​)
We examine a collaborative initiative to invest in an infrastructure asset led by a large pension fund. We discuss the merits of investing in the infrastructure for pension funds, and illustrate how pension funds may engage in collaborative direct investment and the significant advantages to this approach.
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