ABSTRACT This study examines boardroom connections that form when corporate executives sit on mutual fund boards. These connections have the potential to facilitate information flow that informs fund investment decisions. I find that fund trades in the executive's firm anticipate future earnings news and stock returns during the period that the fund and firm are connected. The evidence is consistent with a broad scope of information being transferred through the connections, implying the potential for these connections to have an economically significant impact. For example, trades in the executive's firm predict returns both inside and outside of the earnings announcement period, and trades in stocks in the same sector as the executive's firm also predict returns. This study highlights the potential for the role of fund directors to extend beyond their formal monitoring responsibilities and act as conduits of information.

Abstract We study the determinants of firms’ LGBTQ+ policies and their relation to general CSR policies. Common factors explain LGBTQ+ policies related to firms’ primary stakeholders and those aimed at public LGBTQ+ efforts: younger firms, those with more financial resources, more educated workforces, catering to retail customers, and located in liberal areas have more LGBTQ+-friendly policies. LGBTQ+ initiatives encounter less societal agreement than CSR initiatives. Illustrating the distinctiveness of LGBTQ+ issues in the CSR space, we find that firms’ LGBTQ+ friendliness only weakly correlates with overall CSR performance. Lastly, we show that firms’ LGBTQ+ policies respond to pressure from shareholder proposals. (JEL G32, G34, G38)

Why is poor governance pervasive in the mutual fund industry? Researchers, practitioners and regulators have attributed this failing to a lack of director independence from fund management. This paper proposes an alternate explanation: fund governance is contagious. Fund directors act as vectors, transmitting governance attributes from their primary place of employment to the fund. Using hand-collected director employment data, the paper finds that boards dominated by directors tied to the finance industry, to shareholder unfriendly firms, and to shareholder unfriendly funds, have worse governance. Examining employment shocks, litigations and firm bankruptcies, within a quasi-experimental framework, provides causal evidence that these connections cause fund governance spillover. Overall, the results suggest that contagious governance plays a role in propagating business malpractice in the mutual fund industry.

We study fund-firm connections that arise when firm executives and directors serve as fund directors. We find that connected funds are significantly more likely to vote with management in proposals with negative Institutional Shareholder Services (ISS) recommendations or low shareholder support. As our data show that management support does not exist either before connection formation or after its termination, this result is unlikely to be caused by omitted factors. Rather, the connected fund's voting patterns show independence from ISS recommendations and successful connected voting is associated with positive announcement returns, suggesting that connected fund support for management reflects information advantages. Lastly, we find that a fund family and firm are more likely to connect when the fund family holds a large stake in the firm and is geographically proximate as well as when it has a record of voting independently from ISS.

We examine whether firms exploit enforcement heterogeneity in response to a heightened risk of investigation by regional Securities and Exchange Commission (SEC) enforcement offices. We find that firms facing high SEC scrutiny risks are more likely to relocate outside the jurisdiction of the SEC regional office. The likelihood of out-of-SEC relocation becomes at least two times higher after exogenous shocks to local SEC enforcement. High scrutiny-risk firms tend to migrate to regions with weaker SEC enforcement history and regions with more peers engaging in misbehavior. Scrutiny shopping is more salient for firms with lower costs of relocation.

Six years after the collapse of Lehman Brothers, the question of whether the U.S. financial system has become less risky remains unanswered. On the one side, new regulations including Dodd-Frank and Basel III have made improvements by requiring higher bank capital, and financial institutions themselves have reduced risk-taking activities. On the other side, it has been argued that “the fundamental risks remained and the efforts of regulators and politicians were simply rearranging the deckchairs on the Titanic.” (Baily and Elliott, 2013) This paper highlights the changing nature of financial institution risk from 2005 to 2011. It finds that while these institutions have become less risky individually after the crisis, the financial market has become more vulnerable to systemic contagion. The causal inference that the crisis and the post-crisis legislation have gradually changed the nature of financial institution risk is drawn from a quasi-experimental design. This finding suggests that the ever more integrated financial system might experience more synchronized contractions in future crises, providing empirical support for the proposals of the inter-bank collective regulation of banks by Acharya (2009) in addition to the intra-bank collective regulations as in Froot and Stein (1998) and BIS (1996, 1999).