Mutual funds vary greatly in their reliance on proxy advisory recommendations. Over 25% of funds rely almost entirely on Institutional Shareholder Services (ISS) recommendations, while other funds place little weight on them. Funds with higher benefits and lower costs of researching the items up for vote are less likely to rely on ISS. These actively voting funds are less likely to vote in a "one-size-fits-all" manner, and they earn higher alphas, consistent with benefits from this allocation of resources. For the underlying firms, the presence of actively voting funds mitigates the influence of ISS and helps sway shareholder votes toward value-maximizing outcomes.

[We examine the conflicts of interest and the flow of information between divisions of financial institutions. Using data on analyst recommendations and stockholdings of investment banks advising acquirers in mergers, we find evidence that information from investment banking flows to other divisions of the bank. Specifically, following a merger announcement, changes in a bank's stockholdings of the acquirer are positively associated with changes in recommendations by its analyst. This relationship, however, does not exist before the merger announcement. Additional tests show that the relationship between stockholdings and recommendations following a merger announcement is strongest when conflicts of interest for analysts are likely the smallest.]

IPO volume fluctuates substantially over time. This paper compares the extent to which the aggregate capital demands of private firms, the adverse-selection costs of issuing equity, and the level of investor optimism can explain these fluctuations. Empirical tests include both aggregate and industry-level time-series regressions using proxies for the above factors and an analysis of the relation between post-IPO stock returns and IPO volume. Results indicate that firms’ demands for capital and investor sentiment are important determinants of IPO volume, in both statistical and economic terms. Adverse-selection costs are also statistically significant, but their economic effect appears small.

Abstract Motivated by evidence that the largest gender differences in career outcomes arise within occupations, we examine a single occupation. With the support of the American Finance Association (AFA), we surveyed AFA members on the professional culture within finance. Individual experiences vary substantially, especially across men and women. Contrary to conventional narratives, differences in preferences play little role in explaining why women experience worse outcomes. Bias and discrimination have the largest effect. The consequences of noninclusiveness extend beyond the personal to the entire field. Our findings suggest that institutions potentially could do more than they recognize to improve both diversity and science. (JEL I23, J16, J24, J44, J71)

A growing number of studies suggest that common ownership caused cooperation among firms to increase and competition to decrease. We take a closer look at four approaches used to identify these effects. We find that the effects that some studies have attributed to common ownership are caused by other factors, such as differential responses of firms (or industries) to the 2008 financial crisis. We propose a modification to one of the previously used empirical approaches that is less sensitive to these issues. Using this to re-evaluate the link between common ownership and firm outcomes, we find little robust evidence that common ownership affects firm behavior.

We examine the conflicts of interest and the flow of information between divisions of financial institutions. Using data on analyst recommendations and stockholdings of investment banks advising acquirers in mergers, we find evidence that information from investment banking flows to other divisions of the bank. Specifically, following a merger announcement, changes in a bank's stockholdings of the acquirer are positively associated with changes in recommendations by its analyst. This relationship, however, does not exist before the merger announcement. Additional tests show that the relationship between stockholdings and recommendations following a merger announcement is strongest when conflicts of interest for analysts are likely the smallest.

Abstract Consistent with institutions having an advantage over individuals, we find that newly public firms with the highest levels of institutional investment significantly outperform those with the lowest levels. While prior literature has attributed much of institutions’ higher returns around various corporate events to private information, we find that much of the difference simply reflects better interpretation of readily available public information. Individuals disproportionately invest in the types of firms that earn significantly lower abnormal returns over the long run. Individuals either disregard or misinterpret the relevance of readily available public information, and as a result, they bear the brunt of IPO underperformance.

While the percentage of mature firms with classified boards or dual class shares has declined by more than 40% since 1990, the percentage of IPO firms with these structures has doubled over this period. We test whether IPO firms implement these structures optimally or whether they are utilized to allow managers to protect their private benefits of control. Both shareholder voting patterns and changes in firm types going public suggest that the Agency Hypothesis best explains IPO firm's use of dual class, particularly when there is a large voting-cash flow wedge. In contrast, among firms with high information asymmetry, classified board structures are better explained by the Optimal Governance hypothesis.

This paper investigates underwriters’ treatment of public information throughout the IPO pricing process. Two key findings emerge. First, public information is not fully incorporated into the initial price range. While the economic magnitude of the bias is small, it is puzzling because it is not clear who benefits from it. Further, it indicates that the filing range midpoint is not an unbiased predictor of the offer price, as prior literature has assumed. Second, while public information is similarly not fully incorporated into the final offer price, the small economic significance of this relation indicates that the IPO pricing process is almost efficient.

Historically, a key advantage of being a public firm was broader access to capital, from a disperse group of shareholders. In recent years, such capital has increasingly become available to private firms as well. We document a dramatic increase over the past twenty years in the number of mutual funds participating in private markets and in the dollar value of these private firm investments. We evaluate several factors that potentially contribute to this trend: firms seeking extra capital to postpone public listing, mutual funds seeking higher risk-adjusted returns and initial public offering (IPO) allocations, and venture capitalists (VCs) seeking new investors to substantiate higher valuations. Results indicate that the first two factors play a significant role.