The available evidence suggests that common ownership – the phenomenon that publicly traded stock is increasingly held by the same diversified investors, especially index fund managers – is much more pervasive in the US than in Europe. However, the ownership data situation in these jurisdictions is vastly different. In the US, institutional investors have to disclose periodically all their equity holdings on Form 13F, while no such disclosure exists in most other jurisdictions, including the EU and its Member States. The question, therefore, arises whether observed differences reflect actual differences or simple measurement error. In this paper, I develop a framework to quantify the extent to which US ownership statistics hinge on 13F filings. While 13F data greatly improve US coverage of institutional ownership in general, I show that the relevance of this extra coverage varies across different measures of common ownership. Most notably, firm-pairwise profit weights are hardly affected and tend to even decrease at the margin. Qualitatively, the observation that there is much more common ownership in the US than in Europe holds even if ownership information exclusively available via 13F filings is disregarded.

This study documents a significant negative relationship between policy uncertainty and venture capital (VC) investment in startups across emerging venture capital markets (i.e., outside the United States). The adverse effect of policy uncertainty is exacerbated for younger and early-stage startups. By contrast, the effect is attenuated for startups that have headquarters in cities with a high concentration of global VC investment, in countries with more developed stock markets, or if the VC is led by a bank or a corporate entity. Using close national elections to alleviate endogeneity concerns, we find that the baseline results continue to hold. Furthermore, this study provides evidence that uncertainty increases the number of financing rounds, decreases the fraction of investment amount during the first round, and reduces the likelihood of successful exit through acquisition. Finally, we also find that policy uncertainty reduces the amount of cross-border VC investment.

In this paper I collect fee, leverage, and target return data, using it to calibrate a structural model of private equity fund leverage choice. The empirically calibrated model generates outputs that closely match moments in the data. The modeling process includes developing a tradeoff theory of fund capital structure and a theory of investor return targeting. Catch-up fee provisions in incentive contracts enable more skillful fund managers to extract higher fees while also satisfying investors’ levered return targets. Results indicate that fixed carry hurdle rate and share percentage contracting terms are used to help screen lower-skill fund managers from the PE market.

Why do half of S&P 500 firms have duality, that is, a CEO who is also the Chair of the Board? We show theoretically that duality can play an important role in the competition for CEOs. Empirically, we document that duality changes are concentrated at times when new CEOs are hired and firms are more likely to offer duality to CEOs with greater ability. This finding is robust to different measures of CEO ability and types of succession plans. We also show that the correlation between duality and CEO ability is stronger in industries that feature a greater competition for CEOs.

Well-constructed, country-specific “corporate governance indices” can predict higher firm values in emerging markets. However, there is little credible research on which aspects of governance drive that overall relationship. We study that question across four major emerging markets (Brazil, India, Korea, and Turkey). We build overall country-specific governance indices, comprised of indices for disclosure, board structure, ownership structure, shareholder rights, board procedure, and control of related party transactions. Disclosure (especially financial disclosure) predicts higher market value across all four countries. Board structure (principally board independence) has a positive coefficient in all countries and is significant in two countries. The other indices do not predict firm value. These results suggest that regulators and investors, in assessing governance, and firm managers, in responding to investor pressure for better governance, would do well to focus on disclosure and board structure.

Exploiting the natural experiment created by the adoption of wrongful discharge laws (WDLs) across U.S. states, we examine the effect of legal protection against unjust employment termination on firm-level cost behavior. We find that the adoption of WDLs increases the asymmetric sensitivity of costs to activity (i.e., cost stickiness). The effect of WDLs on cost stickiness varies across firms and industries, as well as by adoption timing and multiplicity. Our evidence suggests that changes in the state-level legal environment have a significant effect on firm-level resource adjustment decisions and asymmetric cost behavior.

What is the purpose of tax deductions? A common view among tax law scholars is that tax deductions are required to properly measure income. I present an alternative theory of tax deductions, relying on standard economic efficiency grounds. I develop a model which highlights the fact that economic activities have costs and benefits, but an income tax system taxes only some of those benefits. The efficient deduction rule allows the deduction of a share of the cost equal to the share of the benefit that is taxed. I also show that the deadweight loss due to a departure from the efficient deduction rule increases quadratically with the departure, making larger departures from the rule much more costly than smaller ones. I then review various tax deduction rules in the Internal Revenue Code, analyzing each rule under the two theories of tax deductions, and demonstrating that the efficiency theory is useful both for teaching tax deductions and as a guide to optimal tax policy.