-- Revise and Resubmit at Management Science
-- Washington University 11th Annual Corporate Finance PhD Poster Session Finalist for Best Paper Award in Honor of Professor Stuart I. Greenbaum
-- Western Finance Association Cubist Systematic Strategies Ph.D. Candidate Award for Oustanding Research
Using the healthcare industry as a novel laboratory, I study whether a firm's use of debt enhances its bargaining power during negotiations with non-financial stakeholders. I find that reimbursement rates negotiated between a hospital and insurers for two homogeneous procedures are higher when the hospital has more debt. This relation is stronger among hospitals with less bargaining power relative to insurers ex ante. I provide direct evidence that debt improves a firm's bargaining outcomes.
This is a summary of the issues discussed and presented at the 2013 Investment Strategy Summit for the Norwegian Government Pension Fund Global. The emphasis of the summit was responsible investing with a special emphasis on ways to strengthen the Fund’s work on responsible investment. The summit brought together experts (both practitioners and academics) and discussed ethical issues, financial performance, and activist investors in the context of social, environmental, and governance concerns.
I give a brief summary of the institutional details of the U.S. healthcare sector with a special emphasis on healthcare finance. In addition to its large size, U.S. healthcare has four unique features that can be used to help answer corporate finance questions: segmented markets, variation in corporate type, extensive data requirements and recent consolidation. I explain how changes over the last 100 years have led to each of these features. Next, I delve deeper into bargaining between insurance companies and hospitals, Medicare pricing, and hospital capital structure decisions during 2008-2012. Finally, I conclude with a brief discussion on how the Affordable Care Act has contributed to these factors.
"Large Index Funds and the Financial Crisis: The Evolution of Mutual Fund Voting" with Audra Boone and Stu Gillan.
The mutual fund industry has progressed towards one with larger funds and a greater proportion of passively managed assets. Given these changes, and recent post-financial crisis regulation, we study the evolution in mutual fund voting on shareholder-sponsored governance proposals. We find bigger funds/fund families are increasingly likely to vote with management, while index funds are less likely to do the same. Consistent with a cost-benefit analysis, smaller and index funds are more likely to rely on proxy advisory firms, with this tendency decreasing over time. Voting in line with other members of the same mutual fund family is high and this consensus has increased, especially for index funds.
We document the role of investors at the periphery of control within a firm - "quasi-insiders" - in shareholder activism. These agents, including founders and former executives, launch campaigns in smaller, worse-performing firms than traditional hedge fund activists, seek greater control, and employ more aggressive tactics. While they are less likely to achieve the stated objectives of their campaigns, these campaigns are associated with positive abnormal returns comparable to those in hedge fund campaigns and subsequent improvements in operating performance. Overall, our results suggest that quasi-insiders play an important and effective role as activists in firms that are less likely to be targeted by hedge funds.
"Entrenched Insiders and Corporate Sustainability (ESG): How Much Does the “G” Matter for “E” and “S” Performance Around the World?" with Alexander Dyck, Karl Lins, Lukas Roth, and Hannes Wagner.
We explore the impact of entrenchment on firms’ environmental and social (E&S) performance by studying a large international sample of firms with detailed data on insider control mechanisms. We hypothesize that entrenched insiders choose corporate social responsibility outcomes conditional on their private benefits of control, and that their preferences may differ from those of outside shareholders. Consistent with this hypothesis, we find that entrenchment has a substantial impact on firms’ E&S performance, with entrenched family control weakening both E&S performance, and government control strengthening social performance. We also show that when control is contestable governance mechanisms which increase outsiders’ voice improve both E&S performance. To the extent that sustainability-oriented outsiders seek to influence firms’ E&S performance, our findings have broad implications for both investors and regulators.