Peter Cziraki

Corporate Governance Rules and Insider Trading Profits

We investigate patterns of abnormal stock performance around insider trades on the Dutch market. Listed firms in the Netherlands have a long tradition of limiting shareholders rights. Using a change in corporate governance regulations as a natural experiment we show that governance rules have a causal effect on insider trading profits. Our results imply that insider transactions are more profitable at firms where shareholder rights are not restricted by anti-shareholder mechanisms. These findings are inconsistent with internal monitoring of insider trading. Rather, we explain this empirical pattern by imperfect substitution between insider trading profits and other private benefits of control.

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 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.

Understanding Bank Payouts During the Crisis of 2007-2009

We provide an extensive analysis of the payout policy of U.S. banks in 2007-2008 to identify the main drivers of their payout decisions. We use established models that relate dividends to fundamentals to provide a benchmark for the normal level of payouts. Based on these models, bank dividends appear excessive in 2007, but not in 2008. We exploit cross-sectional heterogeneity to examine why bank payouts change during the crisis. Banks with low capital ratios have low abnormal payouts during the crisis, and banks with high managerial ownership also have lower payouts. Managers of banks that reduce dividends in 2008 buy more shares than before the crisis. Finally, we examine the correlation between dividends and future performance, as well as announcement returns around dividend changes and repurchases. We find that banks that reduce dividends in 2008 perform worse in 2009, but we do not find that announcements of dividend cuts are associated with a significant negative price reaction in 2007-2008. Our results in general do not support the active wealth transfer hypothesis and provide mixed evidence on banks fearing the adverse effect of dividend cuts.We provide an extensive analysis of the payout policy of U.S. banks around the financial crisis. We find no evidence that banks systematically used their payout policy to transfer wealth to shareholders in anticipation of future problems. Banks hardly reduced dividends until 2009, but significantly reduced share repurchases in 2008. Using established models that relate dividends to fundamentals, dividends in 2008 do not appear excessive. Banks that reduce dividends in 2008 do worse in 2009 than other banks. Insiders of banks that do not reduce dividends in 2008 do not sell more shares than before the crisis.

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.