Essays on Empirical Corporate Finance
On Wednesday 24 June 2020 Johan Mellberg will hold a trial lecture on a prescribed topic and defend his thesis for the PhD degree at NHH.
Prescribed topic for the trial lecture:
The drivers and consequences of CEO compensation
Trial lecture:
10:15 Zoom video conference, NHH
Title of the thesis:
Essays on Empirical Corporate Finance
Summary:
The first paper studies how CEO pay change following the introduction of binding say-on-pay. In theory, the introduction of say-on-pay strengthens the decision power of shareholders and thus change the contracting environment in which compensation contracts are negotiated. Mellberg uses the exogenous nature of this regulatory change to study whether CEO compensation is partly the outcome of inefficient contracting. Using firms with highly concentrated ownership as controls, he argues that the reform primarily affected firms with dispersed ownership. Overall, the results suggest that say-on-pay worked to correct excessive pay levels without changing investors’ expectations of the long-term value of the firm in either direction, which is consistent with prior rent-extraction by powerful CEOs.
The second paper analyzes the link between risk aversion, the provision of incentives and the CEO’s tendency to hedge the risks embedded in her contract.
They show that CEOs who receive stronger incentives make safer allocation decision, given their level of risk aversion.
This is consistent with risk-averse CEOs responding optimally to the provision of incentives. We also show that risky allocations are negatively related to the firm’s systematic risk component, which suggests that CEOs are mainly using their private wealth to adjust the exposure to market risk. Consistent with this, they find that the return of the private portfolio is only weakly correlated with the firm and highly correlated with the market and that its composition is not sensitive to either incentive strength or firm risk.
The third paper studies how CEO death affects firm performance in private firms. The passing of the incumbent CEO has a clear negative effect on firm performance, suggesting that incumbent CEOs are hard to replace. In addition, successor traits play only a minor role in determining the outcome, suggesting that the average treatment effect is, mainly, driven by CEO uniqueness and not by frictions in the assignment process.
Defense:
12:15, Zoom video conference, NHH
Members of the evaluation committee:
Associate Professor Konrad Raff (leader of the committee), Department of Finance, NHH
Professor Kasper Meisner Nielsen, Copenhagen Business School
Program Director and researcher Joacim Tåg, Lund University
Supervisors:
Professor Karin S. Thorburnd (main supervisor) Department of Finance, NHH
Professor B. Espen Eckbo, Tuck School of Business, Dartmouth College and adjunct professor, Department of Finance, NHH