Jay C. Hartzell

The Impact of CEO Turnover on Equity Volatility

A change in executive leadership is a significant event in the life of a firm. This study investigates an important consequence of a CEO turnover: a change in equity volatility. We develop three hypotheses about how changes in CEO might affect stock price volatility, and test these hypotheses using a sample of 872 CEO turnovers over the 1979-1995 period. We find that volatility increases following a CEO turnover, even when the CEO leaves voluntarily and is replaced by someone from inside the firm. Forced turnovers increase volatility more than voluntary turnovers - a finding consistent with the view that forced departures imply a higher probability of large strategy changes. For voluntary departures, outside successions increase volatility more than inside successions. We attribute this volatility change to increased uncertainty over the successor CEOs skill in managing the firms operations. We also document a greater stock price response to earnings announcements following CEO turnover, consistent with more informative signals of value driving the increased volatility. Our findings are robust to controls for firm-specific characteristics such as firm size, changes in firm operations, and changes in volatility and performance prior to the turnover.

The Role of Corporate Governance in Initial Public Offerings: Evidence from Real Estate Investment Trusts

This study analyzes the impact of corporate governance structures at the initial public offering (IPO) date. We test hypotheses that firms with more shareholder‐oriented governance structures receive higher valuations at the IPO stage and have better long‐term performance. Our sample is a set of 107 IPOs of real estate investment trusts (REITs) between 1991 and 1998. Using a single industry and REITs in particular reduces potentially confounding effects due to differences in risk, transparency, and growth potential. We believe this—combined with our use of IPOs—mitigates the endogeneity problem present in studies of the impact of governance on seasoned firms’ valuation. Our analysis indicates that firms with stronger governance structures have higher IPO valuations and better long‐term operating performance than their peers.

Market reaction to public information: The atypical case of the Boston Celtics

Abstract The publicly traded Boston Celtics Limited Partnership shares provide a unique means of studying the impact of information on equity prices. The results of the Celtics’ basketball games significantly affect partnership share returns, trading volume, and volatility. Controlling for the expectedvalue of the signal using betting-market point spreads has little effect on these relations. Investors respond asymmetrically to wins and losses, and playoff games have a larger impact on returns than regular-season games. Opening prices do not fully reflect game results, consistent with previous findings that significant volatility is caused by traders acting on private information.

What's in it for Me? Personal Benefits Obtained by CEOS Whose Firms are Acquired

We study benefits received by target company CEOs in completed mergers and acquisitions. These executives obtain wealth increases with a median of

Getting the Incentives Right: Backfilling and Biases in Executive Compensation Data

4 to

Is a Higher Calling Enough? Incentive Compensation in the Church

5 million and a mean of

Human Capital and the Supply of Religion

8 to

Incentive Compensation and the Likelihood of Termination: Theory and Evidence from Real Estate Organizations

11 million, roughly in line with the permanent income streams that they sacrifice. CEOs receive lower financial gains from those transactions in which they become executives of the buyer, suggesting that tradeoffs exist between the financial and career-related benefits they extract. Regression estimates suggest that target shareholders receive lower acquisition premia in transactions that involve extraordinary personal treatment of the CEO.

Evidence on Corporate Governance: The Joint Determination of Board Structures and Charter Provisions

We document that backfilling in the ExecuComp database introduces a data-conditioning bias that can affect inferences and make replicating previous work difficult. Although backfilling can be advantageous due to greater data coverage, if not addressed, the oversampling of firms with strong managerial incentives and higher subsequent returns leads to a significant upward bias in abnormal compensation, pay-for-performance sensitivity, and the magnitudes of several previously established relations. The bias also can lead to one misinterpreting the appropriate functional form of a relation and whether the data support one compensation theory over another. We offer methods to address this issue. Received May 12, 2014; editorial decision May 10, 2016 by Editor David Hirshleifer.

Institutional Investors and Executive Compensation Redux: A Comment on "Do Concentrated Institutional Investors Really Reduce Executive Compensation Whilst Raising Incentives"

We study the compensation and productivity of more than 2,000 Methodist ministers in a 43‐year panel data set. The church appears to use pay‐for‐performance incentives for its clergy, as their compensation follows a sharing rule by which pastors receive approximately 3% of the incremental revenue from membership increases. Ministers receive the strongest rewards for attracting new parishioners who switch from other congregations within their denomination. Monetary incentives are weaker in settings where ministers have less control over their measured performance.