This paper uses earnings announcements to analyze the trading behavior and associated price impacts of institutions that have a lending or underwriting relationship with client firms and also hold client firms' shares. Buying support from relationship institutions mitigates the negative impact of earnings surprises on client firms' stock prices, predicts subsequent negative earnings surprises, and is also associated with less selling by independent institutions holding the same firms' shares. Price reactions for firms without relationship institutions are significantly larger. Price support from relationship institutions appears to help resolve uncertainty accompanying clients' temporary earnings shocks, thus reducing noise in the capital markets.

This paper examines the relation between managerial power and compensation for Chief Executive Officers of S&P 500 companies from 1993 through 2012. We find that more-powerful CEOs earn more than less-powerful CEOs. We refer to this additional compensation as a “power premium” and investigate this power premium based on two competing views. The managerial ability view argues that the power premium compensates CEOs for their better managerial talent while the managerial power view argues that the power premium reflects the CEO's ability to extract excessive compensation. Overall, our results are more consistent with the managerial ability view. Empirically, we find that the power premium and the fraction of equity-based compensation are invariant to whether the CEO is newly hired or not. We also find that the likelihood of having an explicit employment contract is similar between new and incumbent CEOs.

We examine how firms' dividend policy affects the initial compensation of their newly appointed CEOs. We focus on newly appointed CEOs to isolate the effect of dividends on compensation and to provide new insights into an aspect largely neglected by compensation research. We show that the dividend payout is positively related to new CEO compensation. Further, the positive effect of dividends is stronger for firms with no dividend cuts over the past two, three and four years, firms with relatively high institutional ownership, and those with strong boards, consistent with new CEOs receiving higher pay as compensation for greater dividend pressure.

Using the staggered enactment of constituency statutes across US states, we find that banks with directors whose legal duties are expanded to consider stakeholder and long-term interests significantly reduce risk-taking by increasing capital and shifting to safer borrowers. Additionally, we find that the effect of statute enactment on bank performance is insignificant on average but significantly positive for banks that take excessive risk. Furthermore, we find that banks that previously received a statute enactment fared significantly better during the crises. Our findings support the increasing calls for greater emphasis on stakeholder interests amidst the current bank regulatory and governance reforms.

We find that fund managers who began their careers during recessions produce superior returns. This superior performance is not unconditional, as they exhibit better market timing than their non-recession counterparts in recessions, but do not demonstrate better stock picking in booms. Exploring managers' portfolio choices across years, we find that recession managers tilt their investments towards defensive, rather than cyclical, industries during and before recession periods. Overall, our findings support the argument that the economic conditions under which an individual initially entered the labour market exert a long-term impact on her career outcomes and decision-making.

We study whether borrowers' opaque practices, such as tax aggressiveness, are affected by their lenders' engagement in mergers and acquisitions (M&As). Our findings suggest that borrowers' tax aggressiveness is negatively associated with bank mergers as banks increasingly rely on hard information in monitoring and lending practices following mergers. This relationship is more pronounced for borrowers that are more opaque in their information environments and have a greater need for credit, and when banks that have a greater intention to monitor borrowers and rely more on soft-information-based monitoring prior to the mergers. Our study contributes to the growing literature on whether and how bank consolidations affect borrowers' decision making.