Congress and activists recently proposed giving shareholders a say (vote) on executive pay. We find that when the House passed the Say-on-Pay Bill, the market reaction was significantly positive for firms with high abnormal chief executive officer (CEO) compensation, with low pay-for-performance sensitivity, and responsive to shareholder pressure. However, activist-sponsored say-on-pay proposals target large firms, not those with excessive CEO pay, poor governance, or poor performance. The market reacts negatively to labor-sponsored proposal announcements and positively when these proposals are defeated. Our findings suggest that say-on-pay creates value for companies with inefficient compensation but can destroy value for others.

We find direct evidence that institutions increase round-trip stock trades, increase average commissions per share, and pay unusually high commissions on some trades in order to send abnormally high commissions to the lead underwriters of profitable initial public offerings (IPOs). These excess commission payments are a particularly effective way for transient investors to receive lucrative IPO allocations. Our results suggest that the underwriter’s concern for their long-term client relationships limits the payment-for-IPO practice. We estimate that abnormal commission payments are large for the most profitable issues, and that an additional $1 excess commission payment to the lead underwriter results in $2.21 in investor profits from allocated shares.

This paper documents the existence of a slowly evolving trend in the log dividend-price ratio, DP t , determined by a demographic variable, MY t : the middle-aged to young ratio. Deviations of DP t from this long-run component explain transitory but persistent fluctuations in stock market returns. The relation between MY t and DP t is a prediction of an overlapping generation model. The joint significance of MY and DP t in long-horizon forecasting regressions for market returns explains the mixed evidence on the ability of DP t to predict stock returns and provide a model-based interpretation of statistical corrections for breaks in the mean of this financial ratio.