Incorporating Feedback
How Does Going Public Affect Employee Satisfaction? Evidence from Glassdoor Reviews
Meng Li & Jedson Pinto
Management Science, forthcoming
Abstract:
We examine how initial public offerings (IPOs) influence employees' satisfaction with their employers. Using millions of company reviews and a generalized difference-in-differences method, we document that employees become less satisfied after their employers go public. The effect is driven by employees who joined the company before the IPO rather than those who joined after it and is stronger for employees whose tasks relate to regulatory compliance, for smaller firms, and firms with Big 4 auditors at the IPO. The effect is weaker for IPO firms in industries with low environmental, social, and governance (especially social) reputation risk. Using the 2012 Jumpstart Our Business Startups Act to explore changes in regulatory burdens associated with an IPO, we find that the adverse effect of an IPO on employee satisfaction is weaker for IPO firms that benefit from reduced regulatory burden. Overall, our findings provide novel insights into how going public can affect employee welfare and one potential mechanism behind this effect.
Managing the Workload of the Proxy Season
Paul Calluzzo & Simi Kedia
Journal of Law and Economics, November 2025, Pages 871-900
Abstract:
About 52 percent of all shareholder meetings happen in the proxy season, a period that lasts from the fourth week of April until the end of May. This concentration leads to an increased workload for Institutional Shareholder Services (ISS), the largest proxy advisor, during which time it must make recommendations on an average of 303 proposals each day, compared with 28 proposals outside the proxy season. We find that ISS makes fewer negative recommendations in this busy period and that the recommendations are of lower quality. The evidence is consistent with ISS managing its workload by both increasing the threshold that triggers further investigation of proposals and reducing the time its analysts spend on each proposal. These findings suggest that the clustering of annual meetings in the proxy season may hinder the informativeness of proxy recommendations.
Agency Cost of Choosing Green
Mariya Letdin et al.
Florida State University Working Paper, November 2025
Abstract:
This study examines whether firms occupy green-certified headquarters to maximize shareholder value or due to agency costs. We find a significant decline in firm value by 2.9% following occupancy of a certified building, an effect more pronounced for buildings with multiple certifications. Event-time analysis confirms valuation declines occur post-certification, ruling out reverse causality. Consistent with an agency-based explanation, the negative effect is amplified in firms with weak corporate governance. Furthermore, a trading strategy that short-sells firms transitioning into green buildings yields positive abnormal returns. Our results suggest green headquarters could function as indirect managerial compensation, imposing agency costs that diminish shareholder value. These findings challenge assumptions about the financial benefits of corporate environmental investments and underscore the importance of governance.
What Happens to Corporate Investment in Bad Times?
Shahram Amini et al.
Management Science, forthcoming
Abstract:
Recent studies suggest monitoring increases during economic downturns. In this study, we test whether firms' abnormal investment activity changes across the business cycle. Focusing on recessions, we find that firms not only curtail overinvestment but also reduce underinvestment, with the combined effect representing a significant 9% of average investment. Employing various proxies for monitoring intensity, we demonstrate that stronger governance mechanisms are associated with more pronounced reductions in abnormal investment. Importantly, the influence of governance on abnormal investment is magnified during recessions relative to other periods. These results are robust to a wide array of control variables, methodologies, and potential endogeneity concerns. Our findings underscore the time-varying benefits of corporate monitoring and highlight the periods when governance mechanisms may be most effective.
Is Delaware Different? Stockholder Lawyering in the Court of Chancery
Jessica Erickson, Adam Pritchard & Stephen Choi
University of Richmond Working Paper, November 2025
Abstract:
Delaware corporate law rests on private enforcement, with stockholder litigation serving as the primary check on managerial misconduct. Delaware judges use attorneys' fees as a lever in these cases to shape the incentives of plaintiffs' counsel. Yet little empirical evidence exists on how Delaware judges exercise their discretion in awarding these fees. Using a hand-collected dataset of stockholder suits filed in the Court of Chancery, this Article provides a systematic analysis of Delaware's fee-award practices. Contrary to Delaware's longstanding judicial assumptions, we find little evidence that fee awards reflect either the risk that these lawyers face when they file contingent cases or the lawyers' performance in these cases. Our data also show that plaintiffs' attorneys receive significantly higher fees in Delaware stockholder cases than in comparable federal securities class actions, despite the similar risk profiles of these cases. The data suggest that current practices may over-reward repeat players and large recoveries while undercompensating smaller claims. These findings raise important questions about Delaware's discretionary approach to setting fees. The Delaware judiciary's reliance on broad discretion has produced a system that lacks consistent benchmarks and may reward factors unrelated to risk or performance. Because these awards are ultimately paid from stockholder or corporate funds, the implications extend beyond the bar to Delaware's standing as the preeminent forum for corporate law. The Article outlines several pathways for reform, including enhanced transparency in fee decisions, empirical benchmarking across cases, and multiplier caps to constrain outlier awards. More broadly, the analysis demonstrates how data-driven oversight can strengthen the legitimacy and effectiveness of Delaware's system of corporate adjudication. By situating Delaware's approach within the broader landscape of representative litigation, this study also contributes to ongoing debates about the proper calibration of incentives in private enforcement regimes.
The Consequences to Directors for Deploying Poison Pills
William Johnson, Jonathan Karpoff & Michael Wittry
Management Science, forthcoming
Abstract:
Using director-specific, within-firm variation in poison pills, we find that pill-adopting nonexecutive directors experience a decrease in shareholder votes, an increase in termination rates across all their directorships, and a decrease in the likelihood of new board appointments. These consequences are not because of poor firm performance, active bid resistance, or hedge fund activism, and accrue especially when the adopted pill is relatively costly to the firm. Firms have positive stock price reactions when pill-associated directors die unexpectedly, compared with negative returns for other directors. We conclude that pill-adopting directors experience a decrease in the value of their services.
Market Feedback Effect on CEO Pay: Evidence from Peers' Say-on-Pay Voting Failures
Agnes Cheng et al.
Journal of Financial and Quantitative Analysis, forthcoming
Abstract:
This paper shows that when a compensation peer firm experiences a significant failure in its say on pay (SOP) voting, the focal firm's stock price is adversely affected, resulting in reduced CEO pay in the subsequent period. This pay-reduction effect is amplified when the board is more powerful when proxy advisors express concerns about CEO pay and when the compensation consultant lacks quality. Directors who react to the price drop and cut the CEO's pay receive higher votes in future director elections, implying a market feedback effect for directors of the focal firm triggered by their peers' SOP voting failure.
Disclosure Costs of Relative Performance Evaluation
Melissa Martin & Oscar Timmermans
Management Science, forthcoming
Abstract:
Relative performance evaluation has become an increasingly common component of executive compensation contracts. We study how these incentive plans relate to corporate disclosure and predict that they introduce an incremental disclosure cost. This cost arises because disclosures can help competitors make better investment decisions, enhancing their performance and thereby reducing managers' expected compensation. Consistent with this prediction, we find a negative association between relative performance plans and voluntary value-relevant management forecasts, alongside a positive association with redactions in mandatory filings. This pattern is specific to plans with accounting-based metrics and absent for plans with price-based metrics. The results for price-based metrics are consistent with the idea that the incentive to reduce information asymmetry with market participants outweighs disclosure costs in these plans. The results for accounting-based metrics are more pronounced for managers whose plans provide stronger incentives and for those whose forecasts provide meaningful information spillovers to peers. Overall, this paper contributes the idea that relative performance plans can impose disclosure costs, thereby shedding light on contracting mechanisms that discourage disclosure -- a less well-understood aspect of disclosure research.
The Role of Identity in Corporate Governance: Evidence from Gender Differences in the Audit Committee Chair-Chief Financial Officer Dyad
Musaib Ashraf, Aishwarrya Deore & Ranjani Krishnan
Review of Accounting Studies, forthcoming
Abstract:
We examine the role of identity in corporate governance, focusing on an important dyad: the audit committee chair (ACC) and the chief financial officer (CFO). Drawing on identity theory, which argues that people have lower trust in those they perceive to be different from themselves, we posit that the ACC's trust in the CFO is lower when there is a gender difference. Using audit committee (AC) meetings as a proxy for ACC monitoring, we find that an ACC-CFO dyadic gender difference is associated with more AC meetings, consistent with the ACC having lower trust in the CFO. This effect is attenuated when a firm has value-based controls that promote a culture of diversity tolerance or when the CFO appears to be more trustworthy. We find no evidence that these increased AC meetings help improve financial reporting quality. However, we find some evidence that these increased AC meetings generate a negative externality: distracting the CFO, as proxied by lower operational performance. Our findings underscore the importance of identity in corporate governance generally and in dyadic-level monitoring specifically.
Why do firms repurchase their shares when they are overpriced?
Jacob Oded
Journal of Banking & Finance, January 2026
Abstract:
Firms are commonly assumed to engage in repurchase programs in order to take advantage of mispricing and buy their shares when they are underpriced. However, recent empirical evidence indicates these programs are often executed when shares are overpriced. We characterize the situations in which repurchase of overpriced shares is likely to occur and show it can actually be value enhancing. In the model, informed insiders trade-off private benefits from free cash waste against common benefits from waste prevention. Since private benefits from waste are negatively related to governance quality, our findings highlight the importance of having good governance in place when boards approve repurchase programs.