• Publications
  • Influence
Overconfidence, CEO Selection, and Corporate Governance
We develop a model that shows that an overconfident manager, who sometimes makes value-destroying investments, has a higher likelihood than a rational manager of being deliberately promoted to CEO
CEO Overconfidence and Dividend Policy
We develop a model of the dynamic interaction between CEO overconfidence and dividend policy. The model shows that an overconfident CEO views external financing as costly and hence builds financial
Why Do Firms Smooth Earnings?
We explain why a firm may smooth reported earnings. Greater earnings volatility leads to a bigger informational advantage for informed investors over uninformed investors. If sufficiently many
Do Envious CEOs Cause Merger Waves?
We develop a theory which shows that merger waves can arise even when the shocks that precipitated the initial mergers in the wave are idiosyncratic. The analysis predicts that the earlier
Optimal Contracts When Agents Envy Each Other
We examine the characteristics of endogenously-determined optimal incentive contracts for agents who envy each other and work for a risk-neutral (non-envious) principal. Envy makes each agent care
Information Reliability and Welfare: A Theory of Coarse Credit Ratings
An enduring puzzle is why credit rating agencies (CRAs) use a few categories to describe credit qualities lying in a continuum, even when ratings coarseness reduces welfare. We model a cheap-talk
Credit Ratings and Litigation Risk
We develop a model of a credit rating agency in which the rating agency expends due-diligence effort to learn about the issuer's credit risk, and the precision of its rating is predicated both on
Pandemic Death Traps
Faced with a pandemic, how does the government decide whether to shut down the economy or employ less economically-damaging mitigation measures, and what are the second-best distortions in this
Green with Envy: Implications for Corporate Investment Distortions
We model agents whose preferences exhibit envy. An envious agent's utility increases with what he has and decreases with what others have. With this setup, we are able to provide a new perspective on
Do CEO Beliefs Affect Corporate Cash Holdings?
We develop an expanded trade-off model of cash holdings that incorporates CEO beliefs. The optimistic CEO views external financing as excessively costly but expects this cost to decline over time,