Working papers

The Blurring Lines between Private and Public Ownership

As companies choose to stay private longer, they increasingly resemble their public counterparts. Along multiple dimensions, the shift from private to public status resembles a gradual transition rather than a regime shift. First, there is growing overlap between the sources of capital employed by private and public firms. Second, corporate governance structures such as the Board of Directors evolve over the years both preceding and following the IPO. As private firms become larger with more disperse ownership, their governance demands more closely resemble those of public firms; post-IPO dynamics are consistent with governance demands continuing to evolve over the firm’s life cycle. Third, while going public has been characterized as a means to obtain an acquisition currency, firms are increasingly growing via acquisition prior to the IPO. Macro-level changes reward economies of scale and scope, and the increased availability of capital to private firms facilitates acquisitions as a means to obtain rapid growth.

Firms' Transition to Green: Innovation versus Lobbying

We study the lobbying choices of firms that invest in green innovation. Using a novel method to determine the direction of a firm’s lobbying efforts, we find that green innovators are equally likely to lobby in favor of green or brown legislative agendas. To understand why firms’ lobbying efforts do not correspond to their innovation efforts, we examine firms’ current sources of cash flows and firms’ competitive position. We find that firms whose current business relies more on brown technologies and firms with more market power spend significantly more on brown lobbying. Given the technological and regulatory uncertainty associated with the transition to a greener economy, our results suggest that firms view green innovation as real options on future cash flows, delaying their green investments and devoting resources to lobbying activities that protect the status quo. 

Local IPOs and Household Stock Market Participation (with Feng Jiang and Yiming Qian) 

We posit that IPOs of local companies will lead to increased stock market participation. First, local IPOs attract attention to the market, through both increased information production and publicity. Second, local IPOs generate wealth, not just for people associated with the heretofore private company but also for the wider community through local agglomeration effects. Consistent with predictions, we find that local IPOs increase both households’ propensity to own stock and equity holdings as a percent of wealth. Tests of the mechanisms underlying this relation support the attention channel. We find little evidence in support of the wealth channel. Given prior evidence that stock market participation represents a key factor toward building wealth, our findings highlight that the benefits of IPOs extend beyond those people directly involved with the offering. 

Regulatory Fragmentation (with Joseph Kalmenovitz and Ekatarina Volkova)

Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government’s official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. We find that fragmentation increases the firm’s costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry. These effects arise from regulatory redundancy and, more prominently, regulatory inconsistency between agencies. Our results uncover a new source of regulatory burden: companies pay a substantial economic price when regulatory oversight is fragmented across multiple government agencies.

Are All ESG Funds Created Equal? Only Some Funds are Committed (with Pingle Wang and Kelsey Wei)

Although flows into ESG funds have risen dramatically, it remains unclear whether these funds are truly committed to sustainable investments and how much their investments matter. We shed light on this debate by examining the incentives of fund managers. We find that conditional on similarly large ESG investments, ESG funds vary in their incentives to engage with portfolio firms. ESG funds with higher incentives to engage – committed ESG funds – hold their ESG investments longer, pay more attention to firms’ ESG risk exposure and implement less negative screening. Strikingly, only investments by committed ESG funds contribute to real ESG-improvements, and these funds have outperformed other ESG funds on their ESG holdings. Our paper highlights the importance of incentives when assessing the real impacts of sustainable investments and calls for greater investor awareness of a hidden form of greenwashing. 

The Gender Pay Gap: Pay for Performance and Sorting across Employers (with Daniel Bradley, April Knill, and Jared Williams) 

We document a gender pay gap among business professors at Florida public universities. Part of this gap is driven by the fact that females are disproportionately likely to work at schools with low pay, controlling for faculty productivity. However, this sorting effect does not completely explain our findings: Using strict fixed effects to control for discipline, employer, rank, productivity, and experience, we find that women are paid approximately 3.5% less than men. Women’s pay is less sensitive to their publication performance, and the pay gap is economically largest among full professors.