Research

Director Appointments and Board Dynamics

Job market paper

Abstract: This paper develops a model of director appointments and their impact on firm value. A new appointee can bring new ideas to the incumbent board and change the direction of the firm; CEOs anticipate their arrival and set board agendas. The model features two frictions: CEO moral hazard and costs that directors face when opposing the CEO. Shareholders may rationally avoid appointing the best available candidate, as there is a trade-off between appointing this candidate, who adds the most value through new ideas, versus appointing a lower-quality director who prevents value destruction. These results provide novel predictions on director appointments and a positive benchmark for interpreting the effects of director appointments.

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Feedback Between the Financial Market and the Product Market

with Joel Shapiro

Revise and resubmit at the Review of Finance

Abstract: We study a model in which consumers learn from financial markets. Consumer learning creates a feedback effect; speculators trade on information about firm profitability, while consumers - who drive profitability - react to market information. The firm's pricing decision determines how informative the market becomes: high prices attract only high-valuation consumers, making speculator information about consumer valuations profitable; low prices induce all consumers to purchase, eliminating uncertainty and making speculator information worthless. Financial markets increase expected firm profits and can incentivize higher product quality. However, consumers may not benefit from financial market information, as it enables firms to extract consumer surplus.

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Financing Green Transitions with Technology Choices

with Huiyao Chen and Itay Goldstein