Assistant Professor of Finance, Purdue University
Journal of Financial Economics 106(2), November 2012, pages 427-446.
Previously titled “Product market competition and capital structure: Evidence from import penetration”
Abstract: I find that firms experiencing increases in import competition significantly reduce their leverage ratios by issuing equity and selling assets to repay debt. Using import tariffs and foreign exchange rates as instrumental variables for import penetration, I show that these results are not manifestations of endogenous relations between import competition and leverage. The results are consistent with traditional tradeoff models of capital structure that predict a positive relation between book leverage and future expected profitability. Further evidence suggests that import competition affects leverage through changes in the tradeoff between the tax benefits of debt and the costs of financial distress.
Journal of Accounting Research 51(3), June 2013, pages 631-671.
Previously titled “Paying for risk or shareholder rip-off? An analysis of ex-ante severance pay contracts”
Abstract: We analyze a sample of over 3,600 ex ante explicit severance pay agreements in place at 808 firms and show that firms set ex ante explicit severance pay agreements as one component in managing the optimal level of equity incentives. Younger executives are more likely to receive explicit contracts and better terms. Firms with high distress risk, high takeover probability and high return volatility are significantly more likely to enter into new or revised severance contracts. Finally, ex post payouts to managers are largely determined by the ex ante contract terms.
Journal of Accounting and Economics, forthcoming
Abstract: The use of equity incentives is significantly greater in countries with stronger insider trading restrictions, and these higher incentives are associated with higher total pay. These findings are robust to alternative definitions of insider trading restrictions and enforcement, and to panel regressions with country fixed effects. We also find significant increases in top executive pay and the marginal use of equity-based incentives in the period immediately following the initial enforcement of insider trading laws. We conclude that insider trading laws are one channel through which cross-country differences in pay practices can be explained.