We examine how venture capitalists (VCs) adapt their financing strategies when investing in startups that compete against deep-pocketed incumbents. Employing textual analysis to identify a startup’s potential competitors, we show that when competitors are cash-rich, VCs deploy a financing strategy characterized by less conditionality, as observed through larger, less frequent funding rounds that are less contingent on short-term performance. This strategy requires VCs to rely more on continuous monitoring and liquidation protection, and is restricted to larger funds with specialized experience. Our results highlight that product market competition plays an important role in explaining VC financial contracting choices.

[We study a widespread yet under-explored corporate governance phenomenon: the pledging of company stock by insiders as collateral for personal bank loans. Utilizing a regulatory change that exogenously decreases pledging, we document a negative causal impact of pledging on shareholder wealth. We study two channels that could explain this effect. First, we find that margin calls triggered by severe price falls exacerbate the crash risk of pledging firms. Second, since margin calls may cause insiders to suffer personal liquidity shocks or to forgo private benefits of control, we hypothesize and find that pledging is associated with reduced firm risk-taking.]

[Using a dataset of 28,635 firms in 45 countries, this study investigates the motivations for family-controlled business groups. We provide new evidence consistent with the argument that particular group structures emerge not only to perpetuate control, but also to alleviate financing constraints at the country and firm levels. At the country level, family groups, especially those structured as pyramids, are more prevalent in markets with limited availability of capital. At the firm level, investment intensity is greater for firms held in pyramidal rather than in horizontal structures, reflecting the financing advantages of the former. Within a pyramid, internal equity funding, investment intensity, and firm value all increase down the ownership chain. However, group firm performance declines when dual-class shares and cross shareholdings are employed as additional control-enhancing mechanisms.]

An unprecedented number of firms announced CEO salary reductions at the onset of the coronavirus pandemic. We document that the total compensation for these CEOs did not actually decrease but was instead restructured, leading to a marked increase in opaque components of compensation. These adjustments align with the managerial power view of executive pay setting, whereby heightened stakeholder outrage prompts greater camouflaging of compensation to avoid scrutiny. We further show that this pattern of compensation adjustments predominantly occurred in firms with powerful CEOs, weak institutional investor monitoring, and poorer governance quality.

One in five U.S. high-technology firms are led by CEOs with hands-on innovation experience as inventors. Firms led by “Inventor CEOs” are associated with higher quality innovation, especially when the CEO is a high-impact inventor. During an Inventor CEO's tenure, firms file a greater number of patents and more valuable patents in technology classes where the CEO's hands-on experience lies. Utilizing plausibly exogenous CEO turnovers to address the matching of CEOs to firms suggests these effects are causal. The results can be explained by an Inventor CEO's superior ability to evaluate, select, and execute innovative investment projects related to their own hands-on experience.

Common ownership has raised growing antitrust concerns. We compile a comprehensive dataset of U.S. antitrust litigation cases from the Federal Trade Commission, the Department of Justice, and consumer-initiated lawsuits to shed light on these concerns. We find no robust relationship between common ownership of firm-pairs and the likelihood of these firms being jointly sued. Furthermore, common ownership is negatively associated with potential channels of collusion, such as interlocking directors and competitor-benchmarked executive pay. Evidence from institutional mergers and S&P 500 additions of rival firms supports our main conclusions. Overall, our results offer little support for the view that common ownership promotes explicit collusion.

We study a widespread yet under-explored corporate governance phenomenon: the pledging of company stock by insiders as collateral for personal bank loans. Utilizing a regulatory change that exogenously decreases pledging, we document a negative causal impact of pledging on shareholder wealth. We study two channels that could explain this effect. First, we find that margin calls triggered by severe price falls exacerbate the crash risk of pledging firms. Second, since margin calls may cause insiders to suffer personal liquidity shocks or to forgo private benefits of control, we hypothesize and find that pledging is associated with reduced firm risk-taking. Received March 2, 2017; editorial decision January 24, 2019 by Editor David Denis.

Using a dataset of 28,635 firms in 45 countries, this study investigates the motivations for family-controlled business groups. We provide new evidence consistent with the argument that particular group structures emerge not only to perpetuate control, but also to alleviate financing constraints at the country and firm levels. At the country level, family groups, especially those structured as pyramids, are more prevalent in markets with limited availability of capital. At the firm level, investment intensity is greater for firms held in pyramidal rather than in horizontal structures, reflecting the financing advantages of the former. Within a pyramid, internal equity funding, investment intensity, and firm value all increase down the ownership chain. However, group firm performance declines when dual-class shares and cross shareholdings are employed as additional control-enhancing mechanisms.

Theory suggests that controlling shareholders can influence firm value through both shared benefits creation and private benefits consumption. Using negotiated control-block transfers from 31 countries, we look beyond ownership concentration and investigate how controlling shareholder heterogeneity influences the relative importance of these two effects. We document that a control transfer precipitates positive firm outcomes particularly when the vendor has maintained control over an extended period and the acquirer displays a strong incentive to engage in restructuring. In such cases, we observe a sustained positive price reaction, more focused corporate investments, lower leverage, higher operating efficiency, and superior long-term performance.

We investigate whether external industry tournament incentives influence the design of executive-compensation contracts. Using staggered negative mobility shocks as exogenous disruptions to tournament incentives, we show that firms treated by these shocks act to restore their executives’ diminished implicit risk-taking incentives by increasing compensation vega. On average, post-shock compensation vegas increase by approximately 10%. These effects are considerably larger for treated executives with strong tournament incentives and high ex ante mobility. Mobility shocks have no impact on compensation delta or total pay. Our results shed light on how explicit risk-taking incentives are optimized with respect to executive career concerns.