Carlson School of Management

2014 Spring Corporate Finance Conference

May 16-17, 2014
Hanson Hall 1-103

The University of Minnesota's Carlson School of Management Finance Department is pleased to announce its annual Corporate Finance Conference, to be held May 16-17, 2014.

Confirmed guest participants include:

Alexander Ljungqvist - Stern School of Business, New York University -

PAPER: Do Measures of Financial Constraints Measure Financial Constraints?

Co-Authored with: Joan Farre-Mensa, Harvard Business School

Discussant: Ing-Haw Cheng, Tuck School of Business, Dartmouth College

Daniel Paravisini - London School of Economics -

PAPER: The Incentive Effect of IT: Randomized Evidence from Credit Committees

Co-Authored with Antoinette Schoar, Sloan School of Management, MIT

We distinguish the impact of information technology adoption on information processing and agency costs by conducting a randomized control trial with a bank that adopts a new credit-scoring tool. The availability of scores significantly increases credit committees' effort and output on difficult-to-evaluate loan applications. Output increases almost as much in a treatment where the committee receives no new information, but anticipates the score becoming available after it evaluates an application, which suggests that scores reduce incentive problems inside the credit committee. We also show that scores improve efficiency by decentralizing decision-making and equalizing marginal returns across loans.

Discussant: Erik Gilje, The Wharton School, University of Pennsylvania

Gordon Phillips - Marshall School of Business, University of Southern California -

PAPER: Outside Purchase Contracts and Firm Capital Structure

Co-Authored with S. Katie Moon, Securities and Exchange Commission

Discussant: Santiago Bazdresch, Carlson School of Management, University of Minnesota

David Robinson - Fuqua School of Business, Duke University -

PAPER: Firm Age, Investment Opportunitites, and Job Creation

Co-Authored with Song Ma and Manuel Adelino

Discussant: Hengjie Ai, Carlson School of Management, University of Minnesota

Amit Seru - Chicago Booth School of Business, University of Chicago -

PAPER: Technological Innovation, Resource Allocation and Growth

Co-Authored with Leonid Kogan, Dimitris Papanikolaou and Noah Stoffman

Discussant: Frederico Belo, Carlson School of Management, University of Minnesota

Kelly Shue - Chicago Booth School of Business, University of Chicago -

PAPER: Growth through Rigidity: Understanding Recent Trends in Executive Compensation

Co-authored with Richard Townsend, Tuck School of Business, Dartmouth College

We explore a rigidity-based explanation of the dramatic and off-trend growth in US executive compensation during the late 1990s and early 2000s. We show that executive option and stock grants are rigid in the number of shares granted. In addition, salary and bonus exhibit downward nominal rigidity. Rigidity implies that the value of executive pay will grow with firm equity returns, which averaged 30% annually during the Tech Boom. Rigidity also explains the increased dispersion in pay across firms, the difference in growth rates between the US and other countries, and the increased correlation between pay and firm-specific equity returns. Regulatory changes requiring the disclosure of the value of option grants helps explain the moderation in executive pay in the late 2000s. Finally, we present suggestive evidence that number-rigidity in executive pay is generated by money illusion and reference points, the same behavioral biases that may underlie downward nominal wage rigidity among rank and file workers.

Discussant: Rajesh Aggarwal, Carlson School of Management, University of Minnesota

Tracy Yue Wang - Carlson School of Management, University of Minnesota -

PAPER: Corporate Scandals and Household Stock Market Participation

Co-authored with Mariassunta Giannetti, Stockholm School of Economics, CEPR and ECGI

We show that after the revelation of corporate fraud in a state, the equity holdings of households in that state decrease significantly both in the extensive and the intensive margins. Using an exogenous shock to fraud detection and within-state variation in households’ lifetime experiences of corporate fraud, we establish that the impact of fraud revelation in local companies on household stock market participation is causal. Even households that did not hold stocks in the fraudulent firms decrease their equity holdings, and all households decrease their holdings in fraudulent firms as well as non-fraudulent firms. As a consequence of the decrease in local households’ demand for equity, firms headquartered in the same state as the fraudulent firms experience a decrease in valuation and in the number of shareholders.

Discussant: Vojslav Maksimovic, Robert H. Smith School of Business, University of Maryland

Yuhai Xuan - Harvard Business School -

PAPER: The Contract Year Phenomenon in the Corner Offfice: An Analysis of Firm Behavior During CEO Contract Renewals

This paper investigates how executive employment contracts influence corporate financial policies during the final year of the contract term, using a new, hand-collected data set of CEO employment agreements. On the one hand, the impending expiration of fixed-term employment contracts creates incentives for CEOs to engage in manipulative, window-dressing activities. We find that, compared to normal periods, CEOs manage earnings more aggressively when they are in the process of contract renegotiations. Accordingly, during CEO contract renewal times, firms are more likely to report earnings that meet or narrowly beat analyst consensus forecasts. Moreover, CEOs also reduce the amount of negative firm news released during their contract negotiation years. On the other hand, we find that merger and acquisition deals announced during the contract renegotiation year yield higher announcement returns than deals announced during normal periods, suggesting that the upcoming contract expiration and renewal can also have disciplinary effects on potential value-destroying behaviors of CEOs. In addition, we show that firms whose CEOs are scheduled or expected to leave their posts upon contract expiration do not experience such corporate policy changes in the contract ending year and that CEOs who engage in manipulation during contract renewal obtain better employment terms in their new contracts, in terms of contract length, severance payment, and salary and bonus. Overall, our results indicate that job uncertainty created by expiring employment contracts induces changes in managerial behaviors that have significant impacts on firm financial activities and outcomes.

Discussant: Claudia Custodio, W.P. Carey School of Business, Arizona State University


If you wish to attend, or if you have any additional questions, please contact David Coral at (612) 626-7108 or

Hotel reservations can be made through Aloft Hotel: (612) 455-8400 | 900 Washington Ave. S., Minneapolis, MN 55415.

By reservation, Aloft offers a complimentary shuttle service to and from the conference.

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If you have any questions, please contact David Coral at or 612-626-7108.


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