Binay K. Adhikari

Do Women Stay Out of Trouble? Evidence from Corporate Litigation and Policies

We use a unique hand-collected dataset on corporate lawsuits to examine the effect of female representation in top management on corporate litigation. We find that firms with higher representation of women in the top management team face fewer lawsuits overall, particularly lawsuits related to product liability, environment, medical liability, labor and contracts. These results continue to hold under several alternative specifications and accounting for endogeneity using a novel instrument. The results are driven by the presence of multiple women in top management positions and are likely due to gender diversity in top management rather than an artifact of tokenism. Among firms with higher litigation risk, greater representation of female executives positively impacts the value of cash holdings. Overall, our results uncover an important and previously unidentified benefit of gender diversity in top management.

Gender Differences in Corporate Financial Decisions and Performance

This study examines the financial decisions of female CEOs of the S&P 1500 companies, their operating performance and the market’s evaluation of their presence in these firms. Firms headed by female CEOs hold more cash, maintain lower financial leverage and make lower levels of capital expenditure compared to those with male CEOs. Moreover, firms led by female CEOs have a lower operating performance in terms of industry adjusted ROA and these firms also have somewhat lower systematic risk. Market seems to place less value on firms with female CEOs as manifested by somewhat lower industry adjusted Tobin’s Q and less favorable reaction to the announcements of new female CEOs compared to the announcements of new male CEOs in similar circumstances. These findings are mostly robust to the correction for endogeneity due to omitted variables bias and selection bias, and are consistent both in full sample and matched sample analysis. Overall, this paper provides evidence of greater conservatism of female CEOs in making corporate financial decisions in the setting of United States where corporate ownership is largely separated from control, and contributes meaningfully to the recently growing literature on gender and corporate finance.

Local Investors' Preferences and Capital Structure

We provide evidence that publicly listed firms respond to capital supply conditions shaped by local investing preferences. The local supply of credit is higher and more stable in areas where demographics suggest that local investors prefer safer portfolios. We find that firms headquartered in these areas use more debt financing. The demographics-leverage relation is more pronounced for non-investment-grade and unrated firms that cannot easily tap public markets (about two-thirds of U.S. public companies). Analyses of firms’ financing activities around exogenous shocks to credit supplies - including interstate banking deregulation and the 2008-2009 financial crisis - support the capital supply effect. As demographics change slowly, local investors’ preferences may contribute to the heterogeneity and persistence of public firms’ capital structures.

Female executives and corporate cash holdings

ABSTRACT I find that firms led by female top executives hold more cash, partly due to precautionary motives. To overcome endogeneity concerns, I employ several econometric techniques, including an instrumental variable analysis based on a historical event that resulted in a plausibly exogenous variation in the female workforce participation. Overall, my results are consistent with the view that greater risk-aversion leads female executives to hold more cash.

Peer Influence on Payout Policies

Using a large sample of US public companies, we find robust evidence that firms’ payout policies, i.e., dividends and share repurchases, are significantly influenced by the policies of their industry peers. To overcome endogeneity problems, we employ instrumental variable techniques based on peers’ stock price shocks. Peer influence on payouts is more pronounced among firms that face greater product market competition and operate in better information environments. With regards to dividends, firms, especially smaller and younger firms, are more sensitive to industry peers that are similar to them in size and age. However, mimicking repurchases is concentrated among large and mature firms only. Peer influence on dividends, compared to repurchases, seems more stable across firm and industry conditions. Overall, peer influence on dividends, and, to a less extent, on repurchases, is consistent with a rivalry-based theory of imitation, which posits that firms imitate peers’ actions to maintain their competitive parity.

The VIX, VXO and realised volatility: a test of lagged and contemporaneous relationships

The VIX has traditionally been considered a forward indicator of realised volatility. This follows from its original formulation as the implied volatility of an option on the S&P 100 index and its later incarnation based on the fair price of a realised volatility swap. We focus on the related issue of Granger causality. Our results suggest that realised volatility Granger causes the VIX. In fact, it appears that the VIX lags realised volatility by about one month. Overall, our results are consistent with the notion that participants rely more on objective probabilities derived from past observations and less on future subjective probabilities. We also use threshold analysis to investigate asymmetric relationships between realised and implied volatility.