We find that a firm’s stock price drops when its compensation peer firm announces a severe say-on-pay voting failure. This price drop causes a reduction in the focal firm CEO’s pay in the following period. The effect on CEO pay is stronger when the board of directors is more powerful, when the proxy advisor holds a negative view of the CEO’s pay, and when the hired compensation consultant is less reputable. Directors who cut their CEO’s pay following the price drop receive more voting support from investors than other directors. Our findings show that the peer firm’s voting failure induces a market-feedback effect for focal firm directors.

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.

We study how deposit competition affects a bank's decision to securitize mortgages. Exploiting the state-specific removal of deposit market caps across the U.S. as a source of competition, we find a 7.1 percentage point increase in the probability that banks securitize mortgage loans. This result is driven by an 11 basis point increase in deposit costs and corresponding reductions in banks' deposit holdings. Our results are strongest among banks that rely more on deposit funding. These findings highlight a hitherto undocumented and unintended regulatory cause that motivates banks to adopt the originate-to-distribute model.

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.

Wissenschaft lebt vom Austausch kluger Köpfe über Grenzen hinweg. IWH-Ökonom Simon Wiederhold hat vier Wochen an der Stanford University geforscht. Einblicke in eine höchst anregende Erfahrung.

The economic transformation is visibly reshaping the world of work. At the Halle Institute for Economic Research (IWH), the Structural Change and Productivity Department will intensify its analysis of these developments – and is evolving in the process. A high-profile conference with an unusual format recently provided important momentum.

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.