Abstract: Can relationship lending be sustained in public financial markets? We use firms' call decisions as a laboratory to study this question. After a fixed-price call forces existing bondholders to sell their bonds back at below market prices, existing bondholders are far less likely to participate in firms' subsequent bond issuances. The effects are strongest for the largest fund families, such that the call leads to a reduction in their total ownership of these firms' bonds. In turn, firms delay calling their bonds when they have more large fund families in their bondholder base. Finally, firms' borrowing costs are affected by the reputation they develop from their past call decisions. Our results reveal the importance of relationship lending in bond markets and show how firms' financial policies affect these relationships.
Abstract: We compile a comprehensive database of senior federal regulators and trace their full career paths since college graduation across the private and public sectors. We find that moving between the private and public sectors is ubiquitous, persistent, correlated with economic cycles, and typically occurs several times over the course of one’s career. Such revolving-door behavior is correlated with more regulatory (but not deregulatory) activity, stricter enforcement, and higher regulation complexity. Revolving-door regulators work for stronger firms, come from relatively poorer backgrounds, and accumulate more wealth throughout their careers. Overall, we quantify regulators’ incentives to build financial, bureaucratic, and human capital.
Discussant: Ana-Maria Tenekedjieva, Federal Reserve Board of Governors
Abstract: Managing CEO succession is one of the board's most important tasks. We develop a dynamic model of CEO succession to analyze executive hiring, firing, and entrenchment. The board learns about the CEO's and successor's ability and can decide to replace the executives internally or externally. Our model explains the board's preference towards internal CEO successions, which become more likely with more efficient executive labor markets. We also demonstrate that the CEO's ability to sabotage the successor can make the CEO more entrenched but can also backfire and get the CEO fired.
