Conference Agenda
Overview and details of the sessions of this conference. Please select a date or location to show only sessions at that day or location. Please select a single session for detailed view (with abstracts and downloads if available).
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Session Overview | |
Location: Room "Connect" |
Date: Friday, 31/Mar/2023 | |
9:00am - 10:45am | C1: Corporate Transactions and Data Location: Room "Connect" Session Chair: Douglas Cook, University of Alabama |
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Monitoring Capital and the Decision to Go Public 1University of Denver; 2Virginia Tech; 3Hong Kong Polytechnic University; 4National University of Singapore Does the availability of monitoring capital influence private firms’ decision to go public? Using a geographic framework, we measure the amount of monitoring capital provided by institutional investors and banks in each U.S. region. When the capital of institutional investors in a region is abundant, young collateral-poor resident firms are more likely to go public. They also do so at a younger age. In contrast, when regional bank capital is abundant, these firms are less likely to go public. To sharpen our empirical analysis, we design a quasi-exogenous experiment using out-of-state pension flows and banking deregulation to show that regional economic factors do not drive our findings. Overall, the evidence is consistent with the theoretical prediction that monitoring capital alleviates collateral constraints and provides firms with the opportunity to obtain financing (Holmstrom and Tirole, 1997). What do market participants learn from share repurchases? Evidence from a return decomposition University of Bern, Switzerland This paper analyzes cash flow and cost of capital dynamics around share repurchase announcements of publicly traded US firms by decomposing stock returns into news related to cash flows and discount rates. After repurchase announcements, the cost of capital decreases significantly, while cash flows do not change. The decrease in the cost of capital is largest for firms that appear underpriced. These firms also experience the highest long-term returns after repurchase announcements. The volatility of the discount rate and cash flows also decreases but is not systematically related to long-term returns. The findings suggest that market participants learn about a temporary overestimation of the cost of capital when firms announce share repurchases. Consumer Privacy and Value of Consumer Data 1EPFL, Switzerland; 2Smeal College of Business, Penn State, United States of America; 3University of Lausanne, Switzerland We analyze how the adoption of the California Consumer Privacy Act (CCPA), which limits the acquisition, processing, and trade of consumer personal data, heterogeneously affects firms with and without previously gathered customer data. Exploiting a novel and hand-collected data set of 11,436 conversational-AI firms with rich personal information on U.S. consumers, we find that the CCPA gives a strong protection and advantage to firms with previously accumulated (in-house) data. First, products of these firms generate more customer feedback and exhibit higher product ratings after the adoption of the CCPA. Second, publicly traded firms with in-house data exhibit higher valuations, profitability, asset utilization, and they invest more after the adoption of the CCPA. Third, earnings of such firms can be more accurately predicted by analysts. To rationalize these empirical findings, we build a general equilibrium model where firms produce intermediate goods using labor and data in the form of intangible capital. Data can be traded with other firms subject to a cost representing regulatory and technical challenges. Firms differ in their ability to collect data internally, driven by their business models and/or the size of their customer base, and reliance on data. When the introduction of the CCPA increases the cost of trading data, firms with a low ability to collect in-house data and high reliance on data suffer the most as they cannot adequately substitute the previously externally purchased data. |
11:20am - 12:30pm | C2: Reputational Risk Location: Room "Connect" Session Chair: Shahram Amini, University of Denver |
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The Mitigation of Reputational Risk via Responsive CSR: Evidence from Securities Class Action Lawsuits 1Louisiana State University, Shreveport; 2University of Alabama; 3Kent State University; 4James Madison University We examine the strategic production of CSR as a post-shock damage control instrument (responsive CSR). We proxy for the negative shock using securities class action lawsuits (SCAs) and find that net CSR increases 53% after a filing. We create a hand-collected dataset that reveals lawsuit firms strategically place news releases to blunt short-term effects from negative news related to the litigation process. Moreover, firms use responsive CSR synergistically with advertising for short-term effect. We find that responsive CSR mostly represents window dressing – it does not add long-term firm value and is associated with board members who have significant reputational concerns. CEO Personal Reputation and Financial Misconduct 1Durham University, United Kingdom; 2King's College London, United Kingdom; 3University of Cambridge, United Kingdom We examine the effect of CEO personal reputational capital on financial misconduct. We find that Home CEOs (defined as those who manage firms located within 100 miles of their birthplaces) are associated with significantly less misconduct than firms with non-home CEOs. However, home CEOs also appear to rationally calculate the effect of corporate events on personal reputation. When their firms are financially distressed, home CEOs do not act differently from non-home CEOs in the levels of firm misconduct at their firms, perhaps because the catastrophic reputational damage of bankruptcy is higher than the reputational costs of engaging in financial misconduct. |
2:00pm - 3:45pm | C3: Labor Markets Location: Room "Connect" Session Chair: Philip Valta, University of Bern |
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The Financial Channels of Labor Rigidities: Evidence from Portugal. 1Università degli Studi Federico II, CSEF, SUERF, UECE-ISEG; 2Universidad Carlos III de Madrid, Northwestern University; 3Università di Bologna, CESifo, CEPR We study how labor rigidities affect firms' responses to credit shocks. Using novel data on the universe of workers, firms, banks and credit in Portugal, we establish three main facts. First, a short-term credit supply shock leads to a decrease in firms' employment and size and to a greater probability of exit, but the effects are concentrated on firms deriving greater value added from labor within their industries. Second, this exposure to liquidity risk stems from exposure to high-skill workers' compensation: the shock disproportionately affects productive firms with a high-skilled specialized labor force that requires greater investment in on-the-job training. Third, given labor costs exposure, productivity does not attenuate the effects of credit shocks. Our findings suggest that labor rigidities are an important driver of the lack of productivity-enhancing reallocation throughout financial crises. Non-Compete Agreements and Labor Allocation Across Product Markets University of Mannheim, Germany I analyze the effect of non-compete agreements (NCAs) on career trajectories of 600,000 inventors in the US. NCAs constrain the employment choice set of inventors, who are unable to move to competitors. I show that inventors bypass their NCAs by moving to new employers in more distant product markets. I identify causal effects using staggered changes in NCA enforcement across US states. There is significant reallocation as 1.5 in 100 inventors annually move to more distant product markets after higher NCA enforcement. Reallocated inventors are subsequently less productive. Inventors move to new employers who are less reliant on NCAs and they patent in unfamiliar technologies. There is a lower quality match between inventors and their new employers. I highlight regulatory frictions which lead to unintended detrimental reallocation of human capital in the economy. Which workers suffer (or benefit) from firm-level uncertainty shocks? 1Rotterdam School of Management, The Netherlands; 2Universitat Pompeu Fabra (UPF), Spain; 3LSE, United Kingdom An established theoretical literature argues that uncertainty shocks are important determinants of firm decisions and aggregate fluctuation. However, few studies estimate the causal effects of these shocks on firm level employment dynamics, usually focusing on samples of public firms, with limited information on the firms' employment decisions. In this paper, we shed light on the interplay between firm-level uncertainty shocks and heterogeneous employment decisions using a matched workers-firms dataset of the population of Swedish firms for 1997-2017, with more than 18 million worker-level observations. Using shrinkage methods on commodity prices, we construct a firm-specific expected profits shock, and the associated second moment uncertainty index. We use them to measure the causal effect of exogenous changes in uncertainty on the employment decisions of firms. We find that negative first moment profitability shocks significantly reduce hiring and increase firing uniformly across different categories of workers. Conversely, uncertainty shocks change little the overall employment levels, but have significant and quantitatively important compositional effects. In particular, when uncertainty increases, firms are less likely to fire younger and short-tenured workers, are more likely to hire workers with previous experience in the same sector, and are more likely to both hire and fire more skilled workers, relative to normal times. The results emphasize the importance of workers heterogeneity, especially along the flexibility dimension, in driving the effects of uncertainty shocks on employment dynamics. Additional robustness checks confirm this interpretation and highlight the role of disruptive high uncertainty episodes as creative destruction periods for the labour force. |