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Job Market Candidates

Filippo Ippolito (Corporate Finance, Theory)

Zacharias Sautner (Corporate Finance, Empirical Finance)

 

 

Filippo Ippolito

Sad Business School, University of Oxford Park End St, OX1 1HP Oxford, UK

Office: +44 (0)1865 288513

Fax: +44 (0)1865 288805

Email: filippo.ippolito@@sbs.ox.ac.uk (Please remove  one @ to avoid spamming)

http://users.ox.ac.uk/~sant1033/teaching/

 

Curriculum Vitae

 

 

Working Papers

Ippolito F. Takeover Defenses, Firm-Specific Skills and Managerial Entrenchment (Job Market Paper)

Abstract
We examine the shareholder wealth effects of takeover defenses by developing a model in which takeovers facilitate the implementation of technological innovations. In the rational expectations equilibrium of the model with explicit contracts, we show that takeover defenses are deployed to insure employees' firm-specific skills and that defenses dominate severance payments as an insurance mechanism because the latter distort the incentives of employees to exert effort. However, takeover defenses also result in managerial entrenchment. Managers of firms with weak boards choose takeover defenses which maximize their benefits of control, rather than shareholder wealth: golden parachutes serve to align managerial and shareholder preferences.

JEL Classification: G34, J24, J41

Keywords: hostile acquisitions, takeover defenses, managerial entrenchment, golden parachutes
 

 
Ippolito F. Capital Structure and Seniority in Entrepreneurial Firms

 

Abstract
We present a model of cash constrained entrepreneurs who need an investor to finance their project. Investors can either be uninformed, such as individual bondholders, or informed, such as venture capitalists and banks. There is an entrepreneurial moral hazard problem, which can be partially overcome through monitoring only by informed investors. However, monitoring is only effective if investors can commit ex ante to liquidate the project after observing a poor signal. We show that a capital structure that minimizes commitment and information costs requires informed investors to hold senior convertible debt, uninformed investors to hold junior debt and entrepreneurs to hold common stock.

JEL Classification: G21, G24, G32, G33

Keywords: bank, venture capital, monitoring, liquidation, seniority, convertible debt

 

 

 

 

Zacharias Sautner

Sad Business School, University of Oxford Park End St, OX1 1HP Oxford, UK

Office: +44 (0)1865 288965

Mob: +44 (0)794 6947363

Fax: +44 (0)1865 288805

Email: zacharias.sautner@@sbs.ox.ac.uk (Please remove  one @ to avoid spamming)

http://users.ox.ac.uk/~mast1288/

 

Curriculum Vitae

 

 

Working Papers



Corporate Governance and the Design of Stock Option Programs (Job Market Paper) (with M. Weber)


Abstract

Investors and academics increasingly criticize that features of employee stock option (ESO) programs like no indexing to market movements reflect rent-extraction by managers rather than optimal contracting (managerial power view). It is argued that design of option programs illustrates the inability of corporate governance mechanisms in monitoring executives. We use a unique European data set to investigate design features of ESO programs and the relationship between the design of ESO plans and corporate governance structures. We find that our sample companies show a very large variation with respect to the characteristics of their stock option plans (e.g. in the use of relative performance targets that need to be met before options become exercisable). We document that ownership structures are related to the ESO design in a way that is consistent with the managerial power hypothesis: when ownership concentration is low and the exposition to the U.S. capital market little, firms more often have poorly implemented ESO plans. Moreover, we show that firms with weak creditor rights more often have badly designed option plans. Our findings also suggest that ineffective board structures (insider-dominated boards) are related to the ESO design in a way that supports the arguments of a self-dealing view.
 

 

Stock Options and Employee Behavior (with M. Weber)

Abstract
Employee stock options (ESOs) are a widespread and economically highly significant phenomenon, both at a company and at an employee level. Despite its economic importance and due to data limitations, there exists very little empirical research that examines the behavior of employees in stock option programs. Our study attempts to fill this gap by empirically analyzing the behavior of option holders in a distinct ESO plan at a very large German corporation. By combining individual-level option exercise data with detailed data from an extensive questionnaire, we study how employees exercise their stock options and how they dispose of company stock acquired in ESO programs. Moreover, we investigate which rational and behavioral factors explain differences in the observed exercise behavior. We find that employees exercise their options very early and in a few large transactions. A large majority of option recipients sell the shares acquired on exercise. Furthermore, our results suggest that, inconsistent with traditional ESO theories, exercise behavior is not driven by factors like risk aversion or individuals' holdings of company stock that are included in rational models of exercise. Our findings suggest that individuals' exercise decisions depend on the psychological factors miscalibration and mental accounting.

 

 

How do Employees Value their Stock Options? (with M. Weber)


Abstract

This paper investigates the value employees place on their stock options and how this valuation relates to option exercises. To perform this task, we are able to use a data set combining employee-level option exercises with subjective option values extracted by means of an internal survey at a German DAX company. We can combine this data with a wide set of individual variables like risk aversion, diversification or loss aversion. Inconsistent with economic theory, we find that the individuals in our data set substantially overvalue the options they received. We can show that option values are unrelated with measures of risk aversion. Loss aversion, however, does a better job in explaining the heterogeneity in option values: higher degrees of loss aversion are associated with lower option values. We also document that optimism and overconfidence measures are significantly related to option values. We show that managers that are very optimistic about company stock place higher values on their options. This finding is consistent with the sentiment hypothesis presented in recent research by Oyer and Schaefer (2005) and Bergman and Jenter (2004). Moreover, we find only weak support for the hypothesis that higher option values are associated with later exercise decisions.