Research

Research Interests:

My research focuses on corporate governance. I am particularly passionate about research projects with rich institutional details whose results have important implications for practitioners.

Academic Publications:

Racial Diversity Exposure and Firm Responses Following the Murder of George Floyd

Joint work with Karthik Balakrishnan, Daniela De la Parra, and K. Ramesh.
Journal of Accounting Research.
Available at http://dx.doi.org/10.1111/1475-679X.12484.

George Floyd's murder caused many firms to reveal how exposed they are to racial diversity issues. We examine investor and firm behaviors after this socially significant event to provide evidence on the valuation effects of the exposure and ensuing corporate responses. We develop a text-based measure of a firm's exposure to racial diversity issues from conference call transcripts and find that, after the murder of George Floyd, firms with diversity exposure experience a stock price decrease of approximately 0.7% around the date of the conference call. We provide evidence that this effect is attributable to race-related exposure and not gender-related exposure. Initiatives taken by firms mitigate the negative market reaction. We document that firms with racial diversity exposure respond by appointing Black directors. The stock market views appointments of Black directors more favorably after George Floyd's murder, except when they are perceived as symbolic. We also find that firms with greater exposure to racial diversity are more likely to establish diversity, equity, and inclusion (DEI) departments, appoint DEI leaders, specify diversity goals, increase supply chain diversity, and donate to racial justice causes. Our paper provides evidence that exposure to racial diversity issues adversely affects firm value, and companies address the exposure by taking actions.

Working Papers:

Proxy Advisors' Recipe for Compensation Analysis

Job Market Paper

I explore a novel setting in which ISS, the most prominent proxy advisor, has partnership arrangements with compensation consultants ("partner consultants"). I find that firms that engage partner consultants reduce the incidence of ISS negative recommendations for say-on-pay and equity compensation plan proposals by 21% to 30%, compared to the unconditional probability. In addition, these firms provide roughly 7% higher compensation to their CEOs. My results also show that, when voting for say-on-pay proposals, shareholders of firms that engage partner consultants underweight positive recommendations from ISS. Overall, my findings are consistent with firms obtaining incremental information about the compensation model of ISS by engaging partner consultants. Firms exploit this information to reduce the likelihood of an ISS negative recommendation, while increasing executive compensation for what appears to be opportunistic reasons. The findings suggest a conflict of interest in which ISS benefits from partnership arrangements that could ultimately hurt shareholders.

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Front-Loaded Equity Awards: An Efficient Contracting or Rent Extraction Tool?

Joint work with Sunil Parupati.

Front-loaded equity awards (FLEAs) are one-time equity grants intended as compensation for multiple years. We manually identify FLEAs and document that 9.1% of the firms in our sample grant their CEOs such an award at least once. We fail to find evidence that FLEAs are used to deliver excess compensation. Consistent with the efficient contracting hypothesis, we find that firms facing greater growth opportunities, announcing an acquisition, incurring a loss, and hiring a new CEO are more likely to adopt FLEAs. We find little support for the rent extraction hypothesis. While firms avoid FLEAs when shareholder voting rights are stronger, the announcement of a FLEA is associated with a positive and statistically significant stock market reaction of approximately 1%. We also examine how other stakeholders perceive FLEAs, and we find that media articles are more negatively toned. In addition, ISS is 39% more likely to recommend against say-on-pay, and the subsequent voting dissent is largely driven by shareholders following ISS recommendations. Overall, our results suggest that some firms avoid adopting an unconventional compensation design that may increase firm value because of the potential criticism from information intermediaries.

Works in Progress:

Shareholder Disclosures of Voting Intentions

Joint work with Federico Siano.

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