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
Creditor-control Rights and the Nonsynchronicity of Global CDS Markets
in: Review of Corporate Finance Studies, Vol. 14 (1), 2025
Abstract
We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Corporate Social Responsibility and Profit Shifting
in: European Accounting Review, Vol. 34 (1), 2025
Abstract
This paper examines the relation between corporate social responsibility (CSR) performance and tax–motivated income shifting. Using a profit–shifting measure estimated from multinational enterprises (MNEs) data, we find that parent firms with higher CSR scores shift significantly more profits to their low-tax foreign subsidiaries. Overall, our evidence suggests that MNEs engaging in CSR activities acquire legitimacy and moral capital that temper negative responses by stakeholders and thus have greater scope and chance to engage in unethical profit-shifting activities, consistent with the legitimacy theory.
The Effects of Antitrust Laws on Horizontal Mergers: International Evidence
in: Journal of Financial and Quantitative Analysis, Vol. 59 (7), 2024
Abstract
This study examines how antitrust law adoptions affect horizontal merger and acquisition (M&A) outcomes. Using the staggered introduction of competition laws in 20 countries, we find antitrust regulation decreases acquirers’ five-day cumulative abnormal returns surrounding horizontal merger announcements. A decrease in deal value, target book assets, and industry peers' announcement returns are consistent with the market power hypothesis. Exploiting antitrust law adoptions addresses a downward bias to an estimated effect of antitrust enforcement (Baker (2003)). The potential bias from heterogeneous treatment effects does not nullify our results. Overall, antitrust policies seem to deter post-merger monopolistic gains, potentially improving customer welfare.
Non-Standard Errors
in: Journal of Finance, Vol. 79 (3), 2024
Abstract
In statistics, samples are drawn from a population in a datagenerating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidencegenerating process (EGP). We claim that EGP variation across researchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants.
Disentangling Stock Return Synchronicity From the Auditor's Perspective
in: Journal of Business Finance and Accounting, Vol. 51 (5), 2024
Abstract
This paper investigates a firm's stock return asynchronicity through the auditor's perspective to distinguish whether this asynchronicity can proxy for the company's firm-specific information or the quality of its information environment. We find a significant and positive association between asynchronicity and audit fees after controlling for auditor quality and other factors that affect audit fees, suggesting that stock return asynchronicity is more likely to capture a company's firm-specific information than its information environment. We also find that asynchronous firms are more likely to receive adverse opinions on their internal controls over financial reporting, but are associated with lower costs of capital and auditor litigation, providing further evidence in support of the firm-specific information argument. Asynchronicity's positive association with audit fees is driven by firms with higher accounting reporting complexity, suggesting stock return asynchronicity captures a firm's complexity, resulting in more significant efforts by the auditor.
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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