NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Yihui Pan

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers and Chapters

August 2013CEO Investment Cycles
with Tracy Yue Wang, Michael S. Weisbach: w19330
This paper documents the existence of a CEO Investment Cycle, in which firms disinvest early in a CEO’s tenure and increase investment subsequently, leading to “cyclical” firm growth in assets as well as in employment over CEO tenure. The CEO investment cycle occurs for both firings and non-performance related CEO turnovers, and for CEOs with different relationships with the firm prior to becoming CEO. The magnitude of the CEO cycle is substantial: The estimated difference in investment rate between the first three years of a CEO’s tenure and subsequent years is approximately 6 to 8 percentage points, which is of the same order of magnitude as the differences caused by other factors known to affect investment, such as business cycles or financial constraints. We present a variety of tests ...
March 2013Learning about CEO Ability and Stock Return Volatility
with Tracy Yue Wang, Michael S. Weisbach: w18882
When there is uncertainty about a CEO’s quality, news about the firm causes rational investors to update their expectation of the firm’s profitability for two reasons: Updates occur because of the direct effect of the news, and also because the news can cause an updated assessment of the CEO’s quality, affecting expectations of his ability to generate future cash flows. As a CEO’s quality becomes known more precisely over time, the latter effect becomes smaller, lowering the stock price reaction to news, and hence lowering the stock return volatility. Thus, in addition to uncertainty about fundamentals, uncertainty about CEO quality is also a source of stock return volatility, which decreases over a CEO’s tenure as the market learns the CEO’s quality more accurately. We formally model thi...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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