Tuck School at Dartmouth
100 Tuck Hall
Hanover, NH 03755
NBER Working Papers and Publications
|September 2013||Equity Vesting and Managerial Myopia|
with Alex Edmans, Vivian W. Fang: w19407
This paper links the impending vesting of CEO equity to reductions in real investment. Existing studies measure the manager's short-term concerns using the sensitivity of his equity to the stock price. However, in myopia theories, the driver of short-termism is not the magnitude of incentives but their horizon. We use recent changes in compensation disclosure to introduce a new empirical measure that is tightly linked to theory - the sensitivity of equity vesting over the upcoming year. This sensitivity is determined by equity grants made several years prior, and thus unlikely to be driven by current investment opportunities. An interquartile increase is associated with a decline of 0.11% in the growth of R&D (scaled by total assets), 37% of the average R&D growth rate. Similar resul...
|December 2011||CEO Preferences and Acquisitions|
with Dirk Jenter: w17663
This paper explores the impact of target CEOs' retirement preferences on the incidence, the pricing, and the outcomes of takeover bids. Mergers frequently force target CEOs to retire early, and CEOs' private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs' private merger costs, we find strong evidence that target CEO preferences affect merger patterns. The likelihood of receiving a takeover bid increases sharply when target CEOs reach age 65. The probability of a bid is close to 4% per year for target CEOs below age 65 but increases to 6% for the retirement-age group, a 50% increase in the odds of receiving a bid. This increase in takeover activity appears discretely at the age-65 threshold, with no...
Published: “CEO Preferences and Acquisitions” (2013) with Katharina Lewellen. Journal of Finance, Volume 70, Issue 6, December 2015, Pages 2813–2852 citation courtesy of
|December 2006||Security Issue Timing: What Do Managers Know, and When Do They Know It?|
with Dirk Jenter, Jerold B. Warner: w12724
We study put option sales undertaken by corporations during their repurchase programs. Put sales' main theoretical motivation is market timing, providing an excellent framework for studying whether security issues reflect managers' ability to identify mispricing. Our evidence is that these bets reflect timing ability, and are not simply a result of overconfidence. In the 100 days following put option issues, there is roughly a 5% abnormal stock price return, and the abnormal return is concentrated around the first earnings release date following put option sales. Longer term effects are generally not detected. Put sales also appear to reflect successful bets on the direction of stock price volatility.
Published: Jenter, Dirk, Katharina Lewellen, and Jerold B. Warner. "Security Issue Timing: What Do Managers Know, and When Do They Know It?" Journal of Finance 66, 2(April 2011): 413-43. citation courtesy of