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This paper shows that the likelihood of post‐acquisition CEO turnover can act as a constraint on risky acquisition decisions. The acquisition premium in pay decreases by over 50% once the dismissal risk is controlled for. Given a smaller pay premium for undertaking acquisitions and a non‐zero risk of dismissal, shareholders are shown to be able to exercise some control over managerial incentives to engage in risky acquisitions through the mechanism for dismissal.

AbstractThis article analyzes the risk of CEO turnover in US firms over the period 1993–2011. There is an increase in the CEO turnover rate and a 41% decline in median tenure. Where firm performance is poor, CEOs are increasingly replaced, either by the board or in the process of the firm being taken over. US corporate governance regulations had some success in mitigating the agency problem. In the wake of those reforms, CEO turnover outcomes are more strongly associated with firm performance. The declining CEO tenure may have structural impacts on CEO pay.

This paper estimates the compensating differential in CEO pay for the increasing risk of dismissal using contracted severance pay eligibility of the CEO as the main instrument. US CEOs receive a 3 per cent premium in pay for each percentage point increase in the risk of dismissal. In pointing to the dismissal risk as a determinant of CEO pay, these findings contribute to the debate on the recent growth in CEO pay and the potential impacts of governance reforms.

In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of Members of Parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment, we demonstrate higher equity returns for FTSE 350 firms connected to an MP due to the increase in the expected value of political access. Following the amendment, MPs with corporate connections are more likely to be members of parliamentary select and joint committees where legislative bills are drafted. They also attend more committee meetings relative to MPs without corporate connections. Firms react to the increased value of direct political access by rebalancing their political activities. We demonstrate that firms shift board appointments towards sitting MPs, away from other politicians, and reduce their political donations. The benefits of higher political access are greater for firms with family ownership and lower accounting transparency.

In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of Members of Parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment, we demonstrate higher equity returns for FTSE 350 firms connected to an MP due to the increase in the expected value of political access. Following the amendment, MPs with corporate connections are more likely to be members of parliamentary select and joint committees where legislative bills are drafted. They also attend more committee meetings relative to MPs without corporate connections. Firms react to the increased value of direct political access by rebalancing their political activities. We demonstrate that firms shift board appointments towards sitting MPs, away from other politicians, and reduce their political donations. The benefits of higher political access are greater for firms with family ownership and lower accounting transparency. ; publishedVersion

In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of Members of Parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment, we demonstrate higher equity returns for FTSE 350 firms connected to an MP due to the increase in the expected value of political access. Following the amendment, MPs with corporate connections are more likely to be members of parliamentary select and joint committees where legislative bills are drafted. They also attend more committee meetings relative to MPs without corporate connections. Firms react to the increased value of direct political access by rebalancing their political activities. We demonstrate that firms shift board appointments towards sitting MPs, away from other politicians, and reduce their political donations. The benefits of higher political access are greater for firms with family ownership and lower accounting transparency.

AbstractUsing a field experiment, we investigate the impact of working in a diverse team on team and individual performance. We find no short‐term effect of team diversity on team performance, but a positive (albeit small) effect on subsequent individual performance. In the latter case, it is diversity in terms of nationality which matters, not diversity in terms of gender or ability. Our results suggest that the gains from asymmetries in work teams are assimilated by individuals.

In 2002, an amendment to UK parliamentary regulations removed restrictions on the participation of members of parliament (MPs) in parliamentary proceedings related to their corporate interests. Using this amendment as a quasi-natural experiment, we demonstrate gains in firm value and profitability for firms with prior connections to MPs. These benefits are higher for firms with family ownership and lower accounting transparency. Both firms and politicians to change their behaviour. Post-amendment, firms are more likely to appoint MPs and also reduce political donations. Politicians with corporate connections were more likely to both become members of, and conditional on this, attend meetings of parliamentary select and joint committee. Our results highlight mechanisms of returns from political influence in well-developed institutional contexts.