Moqi Groen-Xu

Strategic News Releases in Equity Vesting Months

We find that CEOs release 20% more discretionary news items in months in which they are expected to sell equity, predicted using scheduled vesting months. These vesting months are determined by equity grants made several years prior and thus unlikely to be driven by the current information environment. The increase arises for positive news, but not neutral or negative news, nor nondiscretionary news. News releases fall in the month before and month after the vesting month. News in vesting months generates a temporary increase in stock prices and market liquidity, which the CEO exploits by cashing out shortly afterwards.Received August 29, 2014; editorial decision March 20, 2018 by Editor Laura Starks. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

CEO Career Concerns and Risk Taking

We introduce a novel measure of CEO career concerns: the distance to contract expiration. Using a sample of 3,954 CEO employment contracts, we show that the distance to contract expiration predicts CEO turnover and that CEO turnover is sensitive to performance only when contracts are close to expiration. We use within-CEO variation in contract-related turnover probability to isolate the effect of career concerns on risk taking. Protection against dismissal should encourage CEOs to engage in projects with less certain outcomes. We find that firms exhibit higher return volatility, higher idiosyncratic risk, and invest more when CEO turnover probability is low.

CEO Contract Horizon and Innovation

Innovating firms face a dilemma when setting contractual terms for management. Competing theories make opposing predictions on the relationship between contract-duration and innovation. Using novel data, we estimate that an additional year of CEO-contract-duration leads to higher-quality innovation. We support a causal interpretation by exploiting exogenous variation spurred by CEO contract-limits regulation. We provide evidence illustrating the process through which quality increases. Longer-contract-horizon CEOs allocate more resources to exploratory R&D and set longer term incentives for CROs. The evidence is consistent with the view that longer contracts facilitate long-term investment and greater risk-taking by mitigating managerial myopia and career concerns.

Short-Termism in Science: Evidence from the UK Research Excellence Framework

Research evaluations are essential for allocating resources, yet their deadlines can affect scientific output. We document increases in research output quantity – accompanied by decreases in quality – near the time of government-set deadlines for university evaluations. For such evaluations, researchers submit (on average) 35% more papers that were published in the year preceding a deadline than in the year following that deadline. This effect is more pronounced for slower-paced fields, and pre-deadline publications receive (on average) 12% fewer citations. We conclude that evaluation deadlines may reduce the quality of research, highlighting the importance of an appropriate length for evaluation periods.

CEO Turnover and Risk Taking under Long-Term Employment Contracts

We introduce a novel measure of CEO career concerns: the distance to contract expiration. Using a sample of 3,954 CEO employment contracts, we show that the distance to contract expiration predicts CEO turnover and that CEO turnover is sensitive to performance only when contracts are close to expiration. We use within-CEO variation in contract-related turnover probability to isolate the effect of career concerns on risk taking. Protection against dismissal should encourage CEOs to engage in projects with less certain outcomes. We find that firms exhibit higher return volatility, higher idiosyncratic risk, and invest more when CEO turnover probability is low.

CEO Turnover and Volatility under Long-Term Employment Contracts

We introduce a novel measure of CEO career concerns: the distance to contract expiration. Using a sample of 3,954 CEO employment contracts, we show that the distance to contract expiration predicts CEO turnover and that CEO turnover is sensitive to performance only when contracts are close to expiration. We use within-CEO variation in contract-related turnover probability to isolate the effect of career concerns on risk taking. Protection against dismissal should encourage CEOs to engage in projects with less certain outcomes. We find that firms exhibit higher return volatility, higher idiosyncratic risk, and invest more when CEO turnover probability is low.

Long-Term CEO Contracts, Turnover, and Risk Taking

We introduce a novel measure of CEO career concerns: the distance to contract expiration. Using a sample of 3,954 CEO employment contracts, we show that the distance to contract expiration predicts CEO turnover and that CEO turnover is sensitive to performance only when contracts are close to expiration. We use within-CEO variation in contract-related turnover probability to isolate the effect of career concerns on risk taking. Protection against dismissal should encourage CEOs to engage in projects with less certain outcomes. We find that firms exhibit higher return volatility, higher idiosyncratic risk, and invest more when CEO turnover probability is low.

The Costs and Benefits of Long-Term CEO Contracts

This paper uses a new data set of 3,954 US CEO employment agreements to study their contractual time horizon. Longer contracts offer protection against dismissals: turnover probability increases by 12% each year closer to expiration. This should encourage CEOs to pursue long-term projects, and CEOs with more contractual time indeed invest more. However, because longer contracts make it harder to dismiss managers, they also impose less discipline. Consistent with this argument, CEOs with a longer contractual horizon receive more salary increases. Overall, firm value does not differ across contract types.