[Many directors are not simply insiders or outsiders. For example, an officer of a supplier is neither independent nor captive of management. We use a spatial model of board decisionmaking to analyze bargaining among multiple types of directors. Board decisions are modeled using a new solution concept called consensus. We use consensus to show that the information a new director brings is more important than the new director's impact on bargaining when the board is large and not too diverse. Our model suggests broadening the regulatory definition of independence and requiring a supermajority of outsiders. It also cautions that strong penalties, such as those imposed by Sarbanes-Oxley erode incentives when board performance is difficult to measure.]

[We study a competitive model in which managers differ in ability and choose unobservable effort. Each firm chooses its size, how able a manager is to hire, and managerial compensation. The model can be considered an amalgam of agency and Superstars, where optimizing incentives enhances the firm's ability to provide a talented manager with greater resources. The model delivers many testable implications. Preliminary results show that the model is useful for understanding interesting compensation trends, for example, why CEO pay has recently become more closely associated with firm size. Allowing for firm productivity differences generally strengthens our results.]

We model debt restructurings that could endogenously end in bankruptcy, and study spillovers to competitors’ operating decisions, profits, restructuring outcomes and security prices. We show that while bankruptcy could cause the firm’s share price to drop, bankruptcy always signals good news about the firm. We identify the conditions under which a bankruptcy also signals good news about competitors. We demonstrate that when a firm’s bankruptcy costs are relatively small, bankruptcy raises its share price while lowering the prices of competitors’ shares and debt as well as boosting the probability that they will enter bankruptcy. When there is little information asymmetry about the firm’s prospects, or the information asymmetry is about industry prospects, bankruptcy raises competitors’ share and debt prices and lowers their probability of bankruptcy.

Many directors are not simply insiders or outsiders. For example, an officer of a supplier is neither independent nor captive of management. We use a spatial model of board decision-making to analyze bargaining among multiple types of directors. Board decisions are modeled using a new solution concept called consensus. We use consensus to show that the information a new director brings is more important than the new director's impact on bargaining when the board is large and not too diverse. Our model suggests broadening the regulatory definition of independence and requiring a supermajority of outsiders. It also cautions that strong penalties, such as those imposed by Sarbanes-Oxley erode incentives when board performance is difficult to measure.

We study a competitive model in which managers differ in ability and choose unobservable effort. Each firm chooses its size, how able a manager is to hire, and managerial compensation. The model can be considered an amalgam of agency and Superstars, where optimizing incentives enhances the firm's ability to provide a talented manager with greater resources. The model delivers many testable implications. Preliminary results show that the model is useful for understanding interesting compensation trends, for example, why CEO pay has recently become more closely associated with firm size. Allowing for firm productivity differences generally strengthens our results.

Prior research suggests that executive option grants that do not quickly vest provide managers with better incentives to pursue long-term, instead of short-term, objectives. Previous research also suggests that the pursuit of long-term objectives could be undermined by the risk of early termination. We conjecture that these arguments jointly suggest that managers are better motivated to pursue innovation when they are given more incentive compensation with longer vesting periods for unexercised options and yet some protection from disruptive takeover threats. Our evidence for a sample of newly public firms is consistent with more innovative firms jointly choosing such a combination.