We examine career outcomes of CEOs subsequent to turnover. CEOs often resurface after turnover, but they secure positions that are inferior to their prior posts. Success in the retread market is unrelated to prior employer performance and board composition. CEOs who were particularly attached to their prior employer tend to have the poorest subsequent job prospects. These results suggest a generally efficient CEO turnover process in which firms dismiss CEOs of low ability. As CEOs acquire specific human capital over time, their outside options and bargaining power appear to diminish, offering a potential explanation for the specialist CEO compensation discount.

Previous studies have linked personal characteristics of business leaders to corporate decisions and outcomes. We analyze if the traumatic experience of the Chinese Famine has an impact on managerial decisions. By exploiting the exogenous variation in local severity of the famine, we find that having lived through the famine during one's younger years is associated with more conservative financial, investment, and cash holding policies, a lower likelihood of unethical behavior, and better firm performance during economic downturns.

Using novel earnings calendar data, we show that firms’ advanced scheduling of earnings announcement dates foreshadows their earnings news. Firms that schedule later-than-expected announcement dates subsequently announce worse news than those scheduling earlier-than-expected announcement dates. Despite scheduling disclosures being observable weeks ahead of earnings announcements, we show that equity markets fail to reflect the information in these disclosures until the announcement itself. By also showing that option markets respond efficiently to volatility-timing information embedded in the same scheduling disclosures, we provide novel evidence that markets fail to react to information about future earnings despite investors immediately trading on the underlying signal.

Tighter bank lending standards could increase firms' post-hedging currency exposure by reducing firms' ability to fund hedging (funding channel) and/or by constraining counterparties' capacity to facilitate hedging (capacity channel). We find that tighter lending standards materially increase firms' exposure. In addition, we find no support for a funding-channel effect as firms' internal liquidity does not mitigate the impact of lending standards on exposure, indicating that the impact is through the capacity channel. Finally, we find a negative association between lending standards and aggregate transactions in currency derivatives, bolstering support for a capacity-channel effect. Our results have implications for firms' hedging policy and the bank lending channel of monetary policy transmission.

We use stock market data to test cross-sectional implications of theories of sovereign default and provide a market-based estimate of sovereign default costs. We find that the stock prices of firms vulnerable to financial intermediation disruption, or firms more exposed to the government, are particularly sensitive to changes in sovereign credit spreads. This is consistent with theories in which default is costly because it disrupts financial intermediation and damages government reputation. Estimation of a structural valuation model indicates that the market prices stocks as if sovereign default has large effects on vulnerable stocks, translating to a 12% destruction of the value of their productive assets. Received July 9, 2011; editorial decision August 16, 2017 by Editor Geert Bekaert.

Work schedules play an important role in utilizing labor in organizations. In this study of emergency department physicians in shift work, schedules induce two distortions: First, physicians “slack off†by accepting fewer patients near end of shift (EOS). Second, physicians distort patient care, incurring higher costs as they spend less time on patients assigned near EOS. Examining how these effects change with shift overlap reveals a tradeoff between the two. Within an hour after the normal time of work completion, physicians are willing to spend hospital resources more than six times their market wage to preserve their leisure. Accounting for overall costs, I find that physicians slack off at approximately second†best optimal levels.

We show that firm demand-side factors are strong drivers of procyclical refinancing behavior over the credit cycle using novel data from the Shared National Credit program. Firms are more likely to refinance early when credit conditions are good to keep the effective maturity of their loans long and hedge against having to refinance in tight credit conditions. High credit quality firms are better able to hedge, making their refinancing propensity more sensitive to credit cycles than less creditworthy firms. There is a strong relationship between refinancing a loan, and subsequent growth in capital expenditure, especially when a loan is refinanced early.

We examine the influence of outside directors’ industry experience on segment investment, segment operating performance, and firm valuation for conglomerates. Given board composition is endogenous, we instrument for the presence of industry expert directors using the supply of experienced executives near conglomerate firms’ headquarters. We find that industry expert representation on the board causes increased segment investment. Consistent with experienced directors playing favorites rather than acting as dispassionate advisors, segment profitability (firm value) is lower for segments (firms) with industry expert outside directors. We do not find analogous negative profitability or valuation effects of director experience for single-segment firms.

We use newly available GAAP forecasts to document that traditionally-identified GAAP forecast errors contain 37% measurement error. Correcting for this measurement error, we settle a long-standing debate regarding investor preference for GAAP versus non-GAAP earnings and provide strong evidence of a preference for non-GAAP earnings. We also revisit the use of non-GAAP exclusions to meet analysts’ forecasts when GAAP earnings fall short. Results indicate that 34% of these traditionally-identified meet-or-beat firms are misidentified due to measurement error, and this error masks evidence that firms more frequently exclude transitory rather than recurring expenses for meet-or-beat purposes.

ABSTRACT We use experimental markets to examine whether providing consulting services to a non‐audit client impacts audit quality. Our paper directly addresses concerns raised by the Public Company Accounting Oversight Board that the largest public accounting firms’ growth in their consulting practices threatens audit quality. We conduct an experiment proposed using a registration‐based editorial process. We compare a baseline where the auditor does not provide consulting services to conditions where auditors provide consulting to audit clients or where auditors only provide consulting services to non‐audit clients. Our unique design provides evidence on whether providing consulting to non‐audit clients strengthens the salience of a client‐cooperative social norm that reduces audit quality. We do not find differences in audit quality by condition in our planned analysis, however we find greater variation in audit quality in the conditions where auditors provide consulting services compared to the baseline. In unplanned analyses, our results suggest providing consulting services increases auditor cooperation with managers, increasing audit quality when managers prefer high audit quality and decreasing audit quality when managers prefer low audit quality.