Promotions in the Internal and External Labor Market: Evidence from Professional Football Coaching Careers

We study job movements of professional football coaches. The likelihood of an external promotion is strongly related to measures of individual performance and only weakly related to team performance. In contrast, the likelihood of an internal promotion is not related to individual performance. This difference arises from the process governing internal job openings, since openings are negatively related to performance. Conditional on the presence of an opening, promotion likelihood is increasing in individual performance. Relationships matter, as coaches are often hired and fired as a group. These findings have implications for several issues related to incentives and organizational design.

The Costs of Outside Equity Control: Evidence from Motion Picture Financing Decisions

Recent theoretical work suggests that outside investor control may have costs as well as benefits, particularly in small, entrepreneurial firms. The possibility of investor opportunism can reduce an entrepreneur's incentives to invest personal effort into the firm. I investigate this issue in the context of motion picture financing decisions. Filmmakers face the choice of using studio financing (and giving up control) or of obtaining independent financing (and retaining control). I find that independent financing is more common when a filmmaker's private artistic stake in a film is high and also for films requiring a relatively high level of creative effort.

Hidden Gems: Do Market Participants Respond to Performance Expectations Revealed in Compensation Disclosures?

We find that a new compensation disclosure item on expected payouts from performance-based stock grants reveals unique information regarding future firm performance. Extracting inferred performance expectations from the disclosures, we find that firms disclosing the highest expected grant payout significantly outperform in ROA, Q, sales growth, and profit margin over the next two years, while those disclosing the lowest expected payout underperform. The embedded information is not captured by other information channels, such as managerial earnings guidance, 10-K sentiment, insider selling activities, unexplained CEO pay, and analyst forecasts. Investors and analysts do not fully incorporate the information and are later surprised around earnings announcement days. A portfolio that buys firms with the highest performance expectation and shorts firms with the lowest expectation earns significantly positive abnormal returns. Our findings suggest that the enhanced compensation disclosure contains valuable information, but investors underreact to information that is difficult to collect and process

Corporate Equity Ownership and the Governance of Product Market Relationships

We assemble a sample of over 10,000 customer-supplier relationships and determine whether the customer owns equity in the supplier. We find that factors related to both contractual incompleteness and financial market frictions are important in the decision of a customer firm to take an equity stake in their supplier. Evidence on the variation in the size of observed equity positions suggests that there are limits to the size of optimal ownership stakes in many relationships. Finally, we find that relationships accompanied by equity ownership last significantly longer than other relationships, suggesting that ownership aids in bonding trading parties together. Copyright 2006 by The American Finance Association.

Investment, Financing Constraints, and Internal Capital Markets: Evidence from the Advertising Expenditures of Multinational Firms

We find a significant positive relation between a firm's advertising spending in the United States and its contemporaneous foreign cash flow. This relation holds even after controlling for factors that should be related to the optimal level of domestic advertising, and it is stronger for subsets of firms that we expect to be relatively more financially constrained. Our evidence supports the hypothesis that there is a causal and economically substantial link between cash flow and investment spending, even for intangible investments such as advertising. Our evidence also suggests that firms have active internal capital markets in which capital is moved across geographic regions. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please email: [email protected]., Oxford University Press.