• Research Interests
Corporate Finance, Corporate Governance

  • Publications
The Effect of Short-Selling Threats on Incentive Contracts: Evidence from an ExperimentForthcoming in the Review of Financial Studies.
Authors: David De Angelis, Gustavo Grullon, Sébastien Michenaud
Abstract: This paper examines the effects of a shock to the stock-price formation process on the design of executive incentive contracts. We find that an exogenous removal of short-selling constraints causes firms to convexify compensation payoffs by granting relatively more stock options to their managers. We also find that treated firms adopt new anti-takeover provisions. These results suggest that when firms face the threat of bear raids, they incentivize managers to take actions that mitigate the adverse effects of unrestrained short selling. Overall, this paper provides causal evidence that financial markets affect incentive contract design.

Input Hedging, Output Hedging, and Market PowerForthcoming in the Journal of Economics and Management Strategy.
Authors: David De Angelis, S. Abraham Ravid
Abstract: We argue that commodity input hedging is different from commodity output hedging. Output hedging can be detrimental to “sector play.” Furthermore, firms with market power that hedge outputs have incentives to over-produce and distort market prices. In rational markets such hedging will be expensive and we expect to see a negative relationship between hedging and market power in “output industries” but not in “input industries.” We test these predictions on a sample of S&P500 firms from 2001 to 2005. Our results support both hypotheses. Placebo tests show that the same empirical regularities do not apply to currency hedging. Finally, our empirical framework, which differentiates between hedging inputs and hedging outputs, can also help reconcile conflicting results in prior studies.

Performance Terms in CEO Compensation Contracts, Review of Finance 19 (2015), 619-651.
Authors: David De Angelis, Yaniv Grinstein
Abstract: In December 2006, the Securities and Exchange Commission issued new rules that require enhanced disclosure on how firms tie CEO compensation to performance. We use this new available data to study the terms of performance-based awards in CEO compensation contracts in S&P 500 firms. We observe large variations in the choice of performance measures. Our evidence is consistent with predictions from optimal contracting theories: firms rely on performance measures that are more informative of CEO actions.

  • Working Papers
On the Importance of Internal Control Systems in the Capital Allocation Decision: Evidence from SOX
Author: David De Angelis
Abstract: I examine the effect of information frictions across corporate hierarchies on internal capital allocation decisions using the Sarbanes-Oxley Act (SOX) as a quasi-natural experiment. I find that after SOX, the capital allocation decision in conglomerates is more sensitive to the performance reported by their business segments. The effects are most pronounced in conglomerates that are prone to information problems and agency conflicts within the organization. In addition, conglomerates’ productivity and market value relative to stand-alone firms increase after SOX. These results support the argument that inefficiencies in the capital allocation process are partly due to information frictions across corporate hierarchies.

Relative Performance Evaluation in CEO Compensation: A Non-Agency Explanation
Authors: David De Angelis, Yaniv Grinstein
Abstract: We examine the contractual terms that govern relative performance evaluation (RPE) in CEO compensation and compare them to their counterparts in the theoretical literature. We find limited support for theories predicting that RPE is used to filter out noise from performance measures and for tournament theories predicting that RPE is used to reward CEOs for outperforming their peers. We find stronger support for theories predicting that RPE is used to pay CEOs for their talent relative to peers. Based on the observed RPE terms, we introduce a new empirical test to detect RPE and find support to the pay-for-talent explanation.

Debt Contracting on Management
Authors: Brian Akins, David De Angelis, Maclean Gaulin
Abstract: This paper shows that lenders can influence firms’ governance outside of payment and technical default states by exerting ex-ante control over managerial turnover via retention and selection decisions. Examining private loan agreements, we find 8.5% of firms have change of management restriction (CMR) clauses. CEO turnover analysis suggests CMRs are binding. We find lenders include CMRs to mitigate human capital risk and creditor-shareholder conflicts of interest. CMRs provide a way to contract on soft information and retain management with creditor-friendly style. Finally, CMRs are associated with lower yields, indicating they are in place to protect lenders, not to entrench management.

  • Previous Research Papers
Relative Performance Evaluation in CEO Compensation: Evidence from the 2006 Disclosure Rules, 2011
Authors: David De Angelis, Yaniv Grinstein

A Multirisk Approach to Measuring Corporate Hedging and its Determinants
, 2008
Authors: David De Angelis, René Garcia