Alan D. Crane

The Effect of Institutional Ownership on Payout Policy: Evidence from Index Thresholds

We show that higher institutional ownership causes firms to pay more dividends. Our identification relies on a discontinuity in ownership around Russell index thresholds. Our estimates indicate that a one-percentage-point increase in institutional ownership causes a

Shareholder Litigation and Ownership Structure: Evidence from a Natural Experiment

7 million (8%) increase in dividends. We also find differences in shareholder proposals and voting patterns that suggest that even nonactivist institutions play an important role in monitoring firm behavior. The effect of institutional ownership on dividends is stronger for firms with higher expected agency costs.We show that higher institutional ownership causes firms to pay more dividends and repurchase more shares. Our identification strategy relies on a discontinuity in ownership based on the annual composition of the Russell 1,000 and 2,000 indices. We also find evidence of a causal effect on proxy voting, corporate investment, R&D, and equity issuance. Overall, results support agency models where concentrated ownership lowers the marginal cost of delegated monitoring.

The Causal Effects of Short-Selling Bans: Evidence from Eligibility Thresholds

We use a natural experiment to identify a causal effect of the threat of shareholder litigation on ownership structure, governance, and firm performance. We find that when it becomes harder for small shareholders to litigate, ownership becomes more concentrated and shifts from individuals to institutions. Director and officer governance protections drop among these firms, and operating performance drops among firms whose ownership structure does not change. These results suggest that the ability of shareholders to coordinate and litigate against management is important for governance.

Skewness Consequences of Seeking Alpha

We identify the causal effects of short-selling bans on stock prices using regression discontinuity (RD). We exploit three threshold-based rules that determine a stocks short-selling eligibility on the Hong Kong Stock Exchange. Short-selling bans affect short-selling volume at all thresholds. Despite this, bans do not affect price levels. Stock returns, volatility, and crash risk are not different for banned vs. unrestricted stocks when appropriate counterfactual stocks are used to measure a bans effects. Our findings suggest that short-selling bans are not as costly as previously argued, but are ineffective at reducing volatility or buttressing prices.

How Skilled are Security Analysts

Mutual funds seek alpha, but residual coskewness is also an important performance attribute. Alpha and residual coskewness relative to the market are negatively correlated in theory, so funds may generate undesirable residual coskewness in the pursuit of alpha. Empirically, the trade-off exists for mutual funds and is driven by both fund composition and actions of managers. Sorting funds by proxies for active management generates positive alpha, but also undesirable coskewness. Investment styles also carry skewness consequences, but only partially explain the trade-off in funds. A minority of funds overcome the trade-off. Thus, seeking alpha generally comes at a skewness cost.

Is There a Disposition Effect in Corporate Investment Decisions? Evidence from Real Estate Investment Trusts

The majority of security analysts are identified as skilled when the cross‐section of analyst performance is modeled as a mixture of multiple skill distributions. Analysts exhibit heterogeneous skill—some are high‐type, and some are low‐type. On average, the recommendation revisions of both types exhibit positive abnormal returns. The heterogeneity stems from differential ability to produce new information; all analysts can profitably process news. Top analysts outperform because more of their recommendations are influential (i.e., associated with statistically significant returns) and both their influential and noninfluential recommendations are more informative. A majority of research firms are also identified as skilled.