Laura Anne Lindsey

Blockholder Heterogeneity, CEO Compensation, and Firm Performance

We examine the relation between blockholder presence and firm performance with a focus on the inherent differences in organizational form and the stated intent among large shareholders. Using hand-collected information on blockholdings for a panel of S&P 1500 firms, we find that firms targeted by blockholders with organizational forms typically associated with performance-sensitive compensation or who file as active experience subsequent improvements in operating and stock price performance. Controlling for the endogeneity of blockholder presence and type, we observe no such improvements for firms targeted by blockholders with weaker compensation incentives or those taking a passive role. Moreover, performance effects are stronger for firms where information asymmetries are more pronounced and for firms with better corporate governance, indicating that, while outside blockholders may serve as a substitute for other monitoring mechanisms, it does not appear that they can fully compensate for shortcomings in governance.

Angels, Entrepreneurship, and Employment Dynamics: Evidence from Investor Accreditation Rules

This paper examines the effects of a shock to angel finance on entrepreneurial activity and employment. Using U.S. Census data, we estimate the state-level fraction of households that lost accreditation status from Dodd–Frank’s elimination of housing wealth in determining accreditation. A larger reduction in the pool of potential investors reduces firm entry and employment at small entrants, particularly in areas with alternate sources of financing. Employment increases at small and young incumbents, and relative wages for the startup sector decline, especially for high-skilled workers and industries. These results suggest that angels are an important source of entrepreneurial finance to high-quality, competitive firms.

Non-Executive Stock Options and Firm Performance

We examine whether options granted to rank and file employees have effects on the performance of the firm, by exploring the link between broad-based option grants, option portfolio implied incentives and firm operating performance. We employ an instrumental variables approach that combines information about the labor market characteristics in which firms compete with information on firm option programs from the Investor Responsibility Research Center to identify causal effects. Firms that broadly grant options to non-executive employees exhibit higher operating performance than firms that do not grant options broadly. We find a similar positive relationship between the implied incentives of the portfolio of outstanding non-executive options and subsequent firm operating performance. Consistent with economic theory, we find that the incentive-performance effect is larger in smaller firms, and in firms with higher growth opportunities and higher growth options per employee. Finally, we find that the performance effect is concentrated solely in firms that grant options broadly to non-executive employees, supporting the argument that options may induce monitoring among co-workers.