Todd Milbourn

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We examine the cross-sectional variation in the marginal value of corporate cash holdings that arises from differences in corporate financial policy. We begin by providing semi-quantitative predictions for the value of an extra dollar of cash depending upon the likely use of that dollar, and derive a set of intuitive hypotheses to test empirically. By(More)
I develop a theory of stock-based compensation contracts for the chief executive officers (CEOs) of firms and confront the theoretical predictions with recent CEO compensation data. The model characterizes the optimal contract for a CEO whose reputation evolves as signals of the executive’s ability are observed by shareholders. Using various proxies for CEO(More)
Principal-agent theory suggests that a manager should be paid relative to a benchmark that removes the effect of market or sector performance on the firm’s own performance. Recently, it has been argued that we do not observe such indexation in the data because executives can set pay in their own interests, that is, they can enjoy “pay for luck” as well as(More)
The credit rating industry has historically been dominated by just two agencies, Moody’s and S&P, leading to longstanding legislative and regulatory calls for increased competition. The material entry of a third rating agency (Fitch) to the competitive landscape offers a unique experiment to empirically examine how in fact increased competition affects the(More)
This paper examines the relationship between investor protection and corporate insiders’ incentive to take value-enhancing risks. In a poor investor protection environment corporations are often run by entrenched insiders who appropriate considerable corporate resources as personal benefits. When these private benefits are large, insiders may undertake(More)
In this paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a “focal point” for firms and their investors. We explore the vital, but previously overlooked implicit contractual(More)
This paper examines whether firms are hedging or timing the market when selecting the interest rate exposure of their new debt issuances. I use a more accurate measure of the interest rate exposure chosen by firms by combining the initial exposure of newly issued debt securities with their use of interest rate swaps. The results indicate that the final(More)
  • Jeffrey M. Bacidore, John A. Boquist, Todd Milbourn, Anjan V. Thakor
  • 2005
Refined economic value added (REVA) provides an analytical framaoork for evaluating operating performance measures in the context of slmreholder value creation. Economic value added (EVA) performs quite well in terms of its correlation with shareholder value creation, but REVA is a theoretically superior measure for assessing whether a firm's operating(More)
We model the distortions that internal power struggles can generate in the allocation of resources between divisions of a diversi ed rm. The model predicts that if divisions are similar in the level of their resources and opportunities, funds will be transferred from divisions with poor opportunities to divisions with good opportunities. When diversity in(More)
Market-based theories predict that differences in CEO skills lead to potentially large differences in pay, but it is challenging to quantify the CEO skill premium in pay. In a first step toward overcoming this empirical challenge, we code detailed biographical information on a large sample of CEOs for a panel of S&P 1,500 firms between 1993 and 2005 to(More)