Prior research has examined the firm-level performance implications of “busy” boards. Firm-level analysis, however, masks important heterogeneity in the time constraints and expertise of individual busy directors. We develop and validate shareholder voting as a proxy for shareholders’ satisfaction. Our director-specific tests provide compelling evidence that the potential costs of busy directors outweigh their benefits. At the same time, we uncover new sources of heterogeneity among busy directors. For example, the downsides are more pronounced for directors who sit on boards where fiscal year ends cluster in the same month. Our analysis highlights the role of shareholder voting in board composition research.

We develop results for the use of LASSO and Post-LASSO methods to form firststage predictions and estimate optimal instruments in linear instrumental variables (IV) models with many instruments, p, that apply even when p is much larger than the sample size, n.We rigorously develop asymptotic distribution and inference theory for the resulting IV estimators and provide conditions under which these estimators are asymptotically oracle-efficient.In simulation experiments, the LASSO-based IV estimator with a data-driven penalty performs well compared to recently advocated many-instrument-robust procedures.In an empirical example dealing with the effect of judicial eminent domain decisions on economic outcomes, the LASSObased IV estimator substantially reduces estimated standard errors allowing one to draw much more precise conclusions about the economic effects of these decisions.Optimal instruments are conditional expectations; and in developing the IV results, we also establish a series of new results for LASSO and Post-LASSO estimators of non-parametric conditional expectation functions which are of independent theoretical and practical interest.Specifically, we develop the asymptotic theory for these estimators that allows for non-Gaussian, heteroscedastic disturbances, which is important for econometric applications.By innovatively using moderate deviation theory for self-normalized sums, we provide convergence rates for these estimators that are as sharp as in the homoscedastic Gaussian case under the weak condition that log p = o(n 1/3 ).Moreover, as a practical innovation, we provide a fully data-driven method for choosing the user-specified penalty that must be provided in obtaining LASSO and Post-LASSO estimates and establish its asymptotic validity under non-Gaussian, heteroscedastic disturbances.

I examine how mandatory position disclosure of claimholders’ economic interests affects Chapter 11 bankruptcy outcomes. Exploiting a regulation that increased disclosure by creditors and equityholders on certain committees, I find that position disclosure is associated with a decrease in the length of bankruptcy cases, especially the duration of negotiations between claimholders across classes. Further, I show that position disclosure is associated with lower post-bankruptcy recidivism. Contrary to the concerns expressed by critics, I find little evidence that position disclosure reduced claimholders’ participation in committees or decreased trading in the market for bankruptcy claims. My findings highlight the overall benefits of position disclosure in facilitating negotiations during bankruptcy. Data Availability: Data are available from the public sources cited in the text.

We investigate the relation between derivatives use and corporations’ cost of equity capital. Using a large sample of non-financial firms, we compute and analyze (i) the relative cost of equity of firms that use derivatives and those that do not; and (ii) the change in cost of equity experienced by firms initiating derivatives programs. We find that the cost of equity of derivatives users is lower than non-users by 24–78 basis points. Our results are robust to specifications that account for potential endogeneity related to a firm’s derivatives use and capital structure decisions. We further find that the reduction in the cost of equity is attributable to both lower market beta and SMB beta, suggesting that firms use derivatives to reduce their financial distress risk and that this distress risk has a systematic component that is priced in the market. Finally, the observed reductions in the cost of equity tend to be largest for smaller firms and for firms utilizing currency and interest rate derivatives.