This paper investigates the role of information precision in IPO pricing. The model shows that more precise information will exert more influence on the offer price. In strong support of the model, I find that the proportion of the industry return during the waiting period that is incorporated into the offer price increases with a proxy for the precision of the industry return as a measure of the change in the IPO firm's value during the waiting period. The model and the empirical findings enhance our understanding of the partial adjustment phenomenon: noisy information will be partially incorporated into the offer price.

Corporate managers frequently announce corporate distributions, including stock splits, stock dividends, special dividends, and increases in regular dividends, on the anniversary of a like announcement at the same firm. The market appears to not fully appreciate the implications of current distributions for future distributions and stock returns, as a simple strategy that involves purchasing firms with high predicted probabilities of distribution announcements earns significant abnormal monthly returns. These results are distinct from previously documented return regularities related to regular earnings and dividend announcements and return seasonality.

This paper compares the productivity and efficiency of large banks and community banks in the United States over the period 1997–2006. This comparison is performed by estimating a true random effects stochastic distance frontier model—a model that is capable of disentangling unobserved heterogeneity from inefficiency—within a Bayesian framework. We find that failure to consider unobserved heterogeneity results in a misleading ranking of banks and mismeasured technical efficiency, productivity growth, and returns to scale. Our results show that, compared with community banks, large banks have experienced much higher productivity growth and higher levels of returns to scale. Our estimates of total factor productivity growth show a clear downward trend for both large and community banks, and our decomposition of the output-distance-function-based Divisia productivity index indicates that technical change is the driving force behind this trend.

Does director gender influence CEO empire building? Does it affect the bid premium paid for target firms? Less overconfident female directors less overestimate merger gains. As a result, firms with female directors are less likely to make acquisitions and if they do, pay lower bid premia. Using acquisition bids by S&P 1500 companies during 1997–2009 we find that each additional female director is associated with 7.6% fewer bids, and each additional female director on a bidder board reduces the bid premium paid by 15.4%. Our findings support the notion that female directors help create shareholder value through their influence on acquisition decisions. We also discuss other possible interpretations of our findings.

The well-documented abnormal long-run buy-and-hold returns to firms issuing equity in initial public offerings and seasoned equity offerings, firms bidding in mergers, and firms initiating dividends can be attributed to imperfect control-firm matching. In addition to firm size and market-to-book ratio, event firms on average differ from control firms in terms of idiosyncratic volatility, liquidity, return momentum, and capital investment, each of which also explains returns. We propose a simple regression-based approach to control for differences in firm characteristics across event and control firms, and we show that long-run abnormal returns do not differ significantly from zero for event firms in the 1980 to 2005 period. The returns to event firms are, therefore, consistent with patterns known to exist for the broad stock market and do not require event-specific explanations.

Corporate managers frequently announce corporate distributions, including stock splits, stock dividends, special dividends, and increases in regular dividends, on the anniversary of a like announcement at the same firm. The market appears to not fully appreciate the implications of current distributions for future distributions and stock returns, as a simple strategy that involves purchasing firms with high predicted probabilities of distribution announcements earns significant abnormal monthly returns. These results are distinct from previously documented return regularities related to regular earnings and dividend announcements and return seasonality.

We examine the impact of managerial entrenchment on firm value using a dynamic model with firm fixed effects. To estimate the model, we employ the long-difference technique, which is shown by our simulation to deliver the least biased estimates. Based on a large sample of U.S. companies, we document a significantly negative and causal effect of managerial entrenchment on firm value after taking into account omitted variables, reverse causality, and highly persistent endogenous variables. Additional analysis suggests that the causality running from managerial entrenchment to firm value is more pronounced than that for reverse causality.

This paper investigates the returns to scale of large banks in the US over the period 1997–2010. This investigation is performed by estimating a random coefficient stochastic distance frontier model in the spirit of Tsionas (2002) and Greene (2005, 2008). The primary advantage of this model is that its coefficients can vary across banks, thereby allowing for unobserved technology heterogeneity among large banks in the US We find that failure to consider unobserved technology heterogeneity results in a misleading ranking of banks and mismeasured returns to scale. Our results show that the majority of large banks in the US exhibit constant returns to scale. In addition, our results suggest that banks of the same size can have different levels of returns to scale and there is no clear pattern among large banks in the US concerning the relationship between asset size and returns to scale, due to the presence of technology heterogeneity.

Capital gains taxation creates a lock-in effect, increasing investors' incentives to monitor and decreasing portfolio firms' incentives to cater to short-term investors. We show a negative relation between lock-in and portfolio firms' earnings management, and this relation is stronger for capital gains held by tax-sensitive investors. Further, the relation between lock-in and earnings management is stronger when the capital gains tax rate is higher. We show that locked-in funds vote against management and against audit committee members' reappointment following earnings management. Locked-in funds are less likely to exit a position following disappointing earnings announcements, reducing firms' incentive to manage earnings.

Using random H-1B visa lotteries as a natural experiment, we find that firms respond to shortages of high-skilled workers by acquiring firms that employ such workers. The effect is stronger among firms with high human capital and more senior workforces, firms facing tight labor markets and legal barriers to poaching workers, and firms lacking foreign affiliates. The acquired workers are highly educated, sharing skills and occupations similar to those of the acquirer’s existing workers. Our findings suggest skilled labor is an important driver of acquisitions and acquiring is an effective means of obtaining skilled labor.