LTW (2008) examine firms withdrawing from the SEC reporting system but continuing to trade on Pink Sheets. The paper finds that Sarbanes-Oxley increased the propensity of firms to go dark but, counter to conventional wisdom, had no significant effect on the rate of going-private transactions. Agency costs, as well as poor growth opportunities, proximity to financial distress, and increased compliance costs arising from SOX increase the propensity to go dark. Suggestions to improve the empirical implementation and interpretation involve including additional control and more suitable explanatory variables, and more attention to causation issues and to the quantification of economic significance.

The classic case of nonconvexity in consumer opportunities is that of labor supply. While most studies of labor supply concentrate on the individual agent in partial equilibrium, this study considers general equilibrium. I show that even with nonconvex consumer opportunites, such as those involved in the labor supply decision, the standard theorems of general equilibrium models still hold.

This paper examines real wage measures that include leisure and nonlabor income in consumption decisions with respect to the advantages and disadvantages of partial versus complete welfare orderings and of utility-based versus utility-free wage indices. In addition, we argue that the usefulness of a real wage measure beyond welfare comparison has been ignored. To test the robustness of utility-based indices, these real wage measures are calculated for two different utility-function specifications, the indirect addilog system and the linear expenditure system. Further comparisons are made against index bounds that are independent of the functional form for preferences.

We examine the relative importance of observed and unobserved firm- and manager-specific heterogeneities in determining executive compensation incentives and firm policy, risk, and performance. First, we decompose executive incentives into time-variant and time-invariant firm and manager components. Manager fixed effects supply 73% (60%) of explained variation in delta (vega). Second, controlling for manager fixed effects alters parameter estimates and corresponding inference on observed firm and manager characteristics. Third, larger CEO delta (vega) fixed effects predict better firm performance (riskier corporate policies and higher firm risk). These results suggest that the delta (vega) fixed effect captures managerial ability (risk aversion). (JEL G3, G32, G34, J24, J31, J33) Received September 7, 2018; editorial decision February 21, 2020 by Editor Andrew Ellul.

We analyze the effect of parameter uncertainty on equilibrium asset prices. For the symmetric case, when the amount of estimation risk is the same for all securities, the existing literature argues that parameter uncertainty is largely irrelevant for equilibrium. Our results differ. We find that symmetric estimation risk affects equilibrium values of relative asset prices, expected returns, market weights, and betas.

Prior theoretical work on estimation risk generally has been restricted to single-period, returns-based models in which the investor must estimate the vector of expected returns but the covariance matrix is known. This paper extends the literature on parameter uncertainty in several ways. First, we analyze asymmetric parameter uncertainty in a model based on payoffs. Second, we explore the effects of both symmetric and asymmetric estimation risk on equilibrium asset prices when the covariance matrix for payoffs must also be estimated. Finally, we investigate the effects on equilibrium of asymmetric parameter uncertainty in a simple multiperiod model.

We find that the average stock-market reaction to announcements of poison pills is positive when the board has a majority of outside directors and negative when it does not. The probability that a subsequent control contest is associated with an auction is also positively related to the fraction of outsiders on the board. These results are largely driven by directors who are retired executives from other companies. The evidence suggests that outside directors serve the interests of shareholders.

This paper examines the relation between the premium on closed‐end funds and organizational features of the funds and advisors, including the compensation scheme of the investment advisor. We find that the fund premium is larger when: (a) the advisor's compensation is more sensitive to fund performance; (b) the assets managed by the advisor are concentrated in the fund in question; (c) the advisor manages other funds with low compensation sensitivity to performance and with low concentration of assets managed by the advisor; and (d) the advisor's compensation contract evaluates performance relative to a benchmark.

This study provides the first large-sample analysis of the stock-market reactions to interfirm litigation. When a suit is filed, the common stock of the typical defendant declines by about 1%, while the plaintiff experiences no significant gains. For the average pair of firms, the combined drop in value upon filing is $21 million. Much of the loss is regained if the suit is settled. The findings suggest that bargaining among firm claimants sometimes leads to very inefficient outcomes. Part of the leakage is explained by the costs of increased financial distress imposed on the defendant.