Governance and Finance
Corporate governance today is about more than just making profits for shareholders. It now aims to balance the needs of all stakeholders-employees, investors, creditors, and business partners. Good governance helps companies run better, attract talent, gain customer trust, and lower financial costs. Conversely, poor governance can lead to scandals, job losses, and broken contracts.
The “Governance and Finance” research group studies how governance works in modern financial markets. One of the focuses is on how firms choose, motivate, and keep talented leaders, especially CEOs, since exemplary leadership is key to company success.
The group is also interested in investigating how changes in financial markets, like the rise of big shareholders, activist investors, or even creditors, affect company decisions. The goal is to understand how different players and institutions influence company behavior and what that means for the future of business.
Research Cluster
Financial Resilience and RegulationYour contact
- Department Financial Markets
Refereed Publications
CEO Personality Traits and Compensation: Evidence from Investment Efficiency
in: Review of Quantitative Finance and Accounting, Vol. 65 (4), 2025
Abstract
We examine the effects of the big five personalities of CEOs (openness, conscientiousness, extroversion, agreeableness, and neuroticism) on their annual compensation. We hand-collect the tweets of S&P 1500 CEOs and use IBM's Watson Personality Insights to measure their personalities. CEOs with high ratings of agreeableness and conscientiousness get more compensation. We further find that the firms with these CEOs outperform their peers due to better investment efficiency. Firms are willing to pay higher compensation for talent, especially for firms with better operations, located in states with higher labor unionization, or facing higher competition in the product market. Overall, CEO personality is a valid predictor of CEOs' compensation.
Climate (In)action? The Relationship between CEO Early-Life Experiences and Corporate Climate Policies
in: Ecological Economics, Vol. 237 (November), 2025
Abstract
While the drastic physical impacts of climate change and related natural hazards are increasingly apparent, little is known about the long-term behavioral consequences of climate change-related experiences. Psychological evidence suggests that climate change (CC)-related experiences induce people to make more climate-friendly choices. Building on Upper Echelons Theory and relevant psychological literature, we investigate whether early-life natural hazard experiences of Chief Executive Officers (CEOs) are associated with more climate-friendly policies during their tenure. Our sample covers decisions taken between 1991 and 2018 by 447 US-born CEOs. While we observe an effect of hazard experiences on climate policies, we do not observe the same effect when focusing only on CC-related experiences. This result is robust across different measures of corporate climate performance.
The Effect of Different Saving Mechanisms in Pension Saving Behavior: Evidence from a Life-Cycle Experiment
in: Journal of Risk and Financial Management, Vol. 18 (5), 2025
Abstract
We examine how institutional saving mechanisms influence retirement saving decisions under bounded rationality and income risk. Using a life-cycle experiment with habit formation and loss aversion, we test mandatory and voluntary binding savings under deterministic and stochastic income. Voluntary commitment improves saving performance only when income is predictable; under uncertainty, it fails to improve performance. Mandatory savings do not raise total saving, as participants reduce voluntary contributions. These results emphasize the role of income smoothing in enabling behavioral interventions to improve long-term financial outcomes.
Social Connections and Information Leakage: Evidence from Target Stock Price Run-up in Takeovers
in: Journal of Financial Research, Vol. 48 (2), 2025
Abstract
Does information leakage in a target's social networks increase its stock price prior to a merger announcement? Evidence reveals that a target with more social connections indeed experiences a higher pre-announcement price run-up. This effect does not exist during or after the merger announcement, or in windows ending two months before the announcement. It is more pronounced among targets with severe asymmetric information, and weaker when the information about the upcoming merger is publicly available prior to the announcement. It is also weaker in expedited deals such as tender offers.
The Corporate Investment Benefits of Mutual Fund Dual Holdings
in: Journal of Financial and Quantitative Analysis, Vol. 60 (2), 2025
Abstract
Mutual fund families increasingly hold bonds and stocks from the same firm. We present evidence that dual ownership allows firms to increase valuable investments and refinance by issuing bonds with lower yields and fewer restrictive covenants, especially when firms face financial distress. Dual holders also prevent overinvestment by firms with entrenched managers. Overall, our results suggest that mutual fund families internalize the agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.
Working Papers
Common Ownership and CEO Social Ties Across Portfolio Firms
in: IWH Discussion Papers, No. 9, 2026
Abstract
This paper examines whether common institutional ownership is associated with CEO connectedness across firms. We document that higher common ownership between two same-industry firms predicts a greater likelihood that a newly appointed CEO has preexisting social ties to the incumbent CEO of the peer firm. To address endogeneity, we use mergers among institutional investors in a stacked difference-in-differences design. In a hiring-firm-peer panel that carries connection status forward from the most recent appointment, exposure to a merger-induced common blockholder approximately doubles the probability that the pair is observed in a connected-CEO state. In a broader firm-pair panel, it increases the probability of CEO connections by 48.7%. We further document that gaining CEO connections through another firm’s CEO appointment is associated with improvements in peer firms’ returns on assets and Tobin’s Q, in both OLS and IV specifications. Peer firms that gain such a connection also experience positive abnormal returns around other firms’ CEO hiring announcements, corresponding to an average increase of $112.5 million in shareholder value. These performance patterns suggest that CEO connections may be valuable from a portfolio-level perspective. Consistent with this interpretation, the association between common ownership and CEO connections is concentrated among product-similar and organizationally complex firms and strengthens after the 2008–2009 financial crisis, when connections appear more valuable. Our findings point to CEO connection as a potential governance channel through which common institutional ownership is linked to firm outcomes, complementing prior work on executive compensation, shareholder voting, and board interlocks.
Common Ownership, Tacit Know-How, and the Market for Technology
in: IWH Discussion Papers, No. 3, 2026
Abstract
Firms increasingly rely on markets for technology to acquire innovations developed outside their boundaries, yet acquiring intellectual property rights alone often does not guarantee successful implementation. Many technologies depend on tacit know-how that must be supplied by the provider after the transaction is completed. This paper examines whether common ownership between a technology provider and a potential adopter mitigates this implementation problem. I develop a model in which overlapping institutional investors cause the provider to partially internalize the adopter’s gains from successful implementation, strengthening incentives to transfer tacit know-how. This mechanism operates only when know-how is unverifiable – absent this friction, common ownership leaves matching and outcomes unchanged. Under moral hazard, the model predicts that common ownership increases the likelihood of technology transfer to a given adopter, that this effect is stronger when tacit know-how is more important, and that common ownership improves post-transfer outcomes conditional on adoption. I test these predictions using U.S. patent reassignments between publicly traded firms. Using within-deal variation across competing potential adopters and plausibly exogenous variation from passive index-fund holdings, I show that common ownership increases the likelihood that a firm acquires a technology, particularly when the transferred bundle is more tacit. Common ownership predicts stronger subsequent innovation and higher future firm value, especially when ownership overlap is concentrated among investors with stronger incentives to monitor the provider. These findings show how ownership structure shapes interfirm technology transfer by affecting not only who acquires a technology, but also how much value is created.
Delegated Social Responsibility: Is Managerial Prosociality a Source of Agency Cost?
in: IWH Discussion Papers, No. 2, 2026
Abstract
Agency theory holds that managerial discretion over stakeholder decisions creates agency costs through altruistic redistribution. We test this claim in a principalagent experiment where agents choose effort and transfers affecting a third party under unenforceable flat-wage contracts. We find that principals set ethically constrained targets and wages that track fairness benchmarks. Agents, however, do not divert resources to stakeholders: transfers are negative on average, and prosocial traits do not increase giving. Instead, contract terms, though unenforceable, systematically shape effort, transfers, and returns. Notably, prosocial agents generate higher total returns. Prosociality appears to mitigate rather than create efficiency losses, suggesting that discretion channels norm-sensitive loyalty rather than stakeholder redistribution.
From Rivals to Allies? CEO Connections in an Era of Common Ownership
in: IWH Discussion Papers, No. 7, 2025
Abstract
Institutional common ownership of firm pairs in the same industry increases the likelihood of a preexisting social connection among their CEOs. We establish this relationship using a quasi-natural experiment that exploits institutional mergers combined with firms’ hiring events and detailed information on CEO biographies. In addition, for peer firms, gaining a CEO connection from a hiring firm’s CEO appointment correlates with higher returns on assets, stock market returns, and decreasing product similarity between companies. We find evidence consistent with common owners allocating CEO connections to shape managerial decisionmaking and increase portfolio firms’ performance.
From Shares to Machines: How Common Ownership Drives Automation
in: IWH Discussion Papers, No. 23, 2024
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