Research Support Director

WRDSThe Wharton School, University of Pennsylvania

Research

Working Papers

Lawyer CEOs with Todd Henderson, Irena Hutton, and Danling Jiang

We examine the value of CEOs with specialized professional skills by focusing on CEOs with law degrees and their effect on corporate litigation. We find that lawyer CEOs are associated with both lower litigation frequency and less severe litigation. This relation is observed for most of nine types of common corporate litigation. This reduction in litigation is achieved, in part, through a decrease in activities that can lead to litigation, such as earnings management, and an increase in legal oversight by directors with legal expertise. Moreover, CEOs with legal training are associated with higher value in firms with high litigation risk and growth firms.

Regulating Insider Trading

Utilizing a new understanding of firm compliance responses to regulation, I find that Sarbanes-Oxley helped both identify and reduce abnormal returns to informed insider trading. The number of forms insiders file post-SOX increased by 175% per year, causing an 84% increase in firm compliance policies to handle the implicit costs to filing by selecting staff to oversee and orchestrate the trading of insiders. Insiders sign their own insider trading forms identify deviation from firm policy, and signal informed insider trading reaping abnormal annualized returns to their purchases (sales) of 9.6% (-10.8%). Using this novel measure to identify informed insider trading, Sarbanes-Oxley cuts abnormal returns nearly in half. I find that SOX does so by limiting insiders’ ability to sequence smaller trades multiple times, a previously undisclosed strategy. Sarbanes-Oxley’s insider trading provisions work as intended—to limit insiders from using their informational advantages to lucratively trade—and it does so by increasing both the amount and speed of disclosure.

Individuals' Structured Savings (Revision coming soon)

Firm insiders, as a subgroup of the top 1% in U.S. wealth and income, do not follow traditional theoretical savings motives. Using new data on individuals’ use of structured savings products (SSPs), I combine the literatures of individual savings motives and offshoring, which cannot explain the wealthy’s savings and lack strong theoretical motives, respectively. Wealthy individuals are driven by an unstudied motive—asset protection—with those most sensitive to this motive saving 25% more in SSPs, and, conditional on using SSPs, saving $589,660 more per year in these products when facing litigation risk. This relationship is causally identified using the staggered adoption of Domestic Asset Protection Trusts as an exogenous shock to the structured savings options of individuals. Tax avoidance, a motive from the offshoring literature, provides substantial benefits to insiders—avoiding 20% of taxes—however individuals do not respond to exogenous changes in their tax environment. Bequest preferences, a motive from individual savings, predicts bequests to be at least 89.47% less than their empirically observed estates, leaving most of individuals’ savings unexplained. Individuals most sensitive to asset protection motives save 5.33 times more in bequest products that retain control over these savings, indicating savings earmarked for bequests may still be revoked. By examining a new motive for savings, asset protection, I unite the two previously separate literatures of individual savings motives and offshoring.