Spring 2023

Topics include:

Human capital. The starting point is the literature examining the influence of individual managers on firm outcomes. Are humans homogeneous inputs into production functions, or do they have individual effects? This is a large and growing literature.

Organizational capital (OC). OC is embodied in organizational structure, management practices and key talent. A fascinating aspect of OC is that the value emanating from key talent must be split between the shareholders and the talent. Bargaining power plays a central role in determining the share accruing to the firm. 

Managerial ability (MA): how is it measured and what is the influence of MA on firms’ outcomes.

Other approaches for estimating intangible capital stocks. We will explore recent research that has developed various approaches to estimating intangible capital stock and its impact on firm valuation.

Human Capital disclosure.  There is significant pressure on firms to disclose information on human capital. We will look at a series of papers that examine the determinants and consequences of such disclosures.

Session Details

Session 1 Wednesday March 15 12:00pm to 3:00pm

Individual managers: Manager fixed effects

Papers for Class Discussion

• Marianne Bertrand, Antoinette Schoar, 2003, Managing with Style: The Effect of Managers on Firm Policies. The Quarterly Journal of Economics, Vol. 118, 4

• C. Edward Fee, Charles J. Hadlock, Joshua R. Pierce, 2013. Managers with and without Style: Evidence Using Exogenous Variation. The Review of Financial Studies, Vol. 26, 3.

• Bushman, Robert M. and Gao, Janet and Martin, Xiumin and Pacelli, Joseph, 2021. The Influence of Loan Officers on Loan Contract Design and Performance. JAE, SSRN: https://ssrn.com/abstract=3433063

Related Literature

• Dyreng, S. D., M. Hanlon, and E. L. Maydew. 2010. The effects of executives on corporate tax avoidance. The Accounting Review 85 (4): 1163–89.

• Graham, J. R., S. Li, and J. Qiu. 2012. Managerial attributes and executive compensation. Review of Financial Studies 25 (1): 144–86.

Session 2 Wednesday March 22   12:00pm to 3:00pm

Individual managers: Manager Characteristics

Background papers for discussion:

• Malmendier, Ulrike and Wachter, Jessica A., 2022. Memory of Past Experiences and Economic Decisions. Prepared for the Oxford Handbook of Human Memory.

• Hanlon, Michelle and Yeung, Kelvin and Zuo, Luo, 2022 Behavioral Economics of Accounting: A Review of Archival Research on Individual Decision Makers. CAR, SSRN: https://ssrn.com/abstract=3923891

• Papers for Class Discussion

• Davidson, R. H., A. Dey, and A. J. Smith. 2015. Executives’ “off-the-job” behavior, corporate culture, and financial reporting risk. Journal of Financial Economics 117 (1): 5–28.

• Bank CEO Materialism: Risk Controls, Culture and Tail Risk, with Rob Davidson, Aiyesha Dey and Abbie Smith. Journal of Accounting and Economics

• Malmendier, Tate, and Yan, 2011. Overconfidence and Early-Life Experiences: The Effect of Managerial Traits on Corporate Financial Policies. Journal of Finance. SSRN: https://ssrn.com/abstract=174906

• Related Literature

• Malmendier, U. 2021. Experience effects in finance: Foundations, applications, and future directions. Review of Finance, vol 25(5).

• Malmendier, Ulrike, 2021. Exposure, Experience, and Expertise: Why Personal Histories Matter in Economics. NBER Working Paper No. w29336.

• Schoar, Antoinette and Zuo, Luo, 2017. Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles.  Review of Financial Studies.

• Davidson, R. H., A. Dey, and A. J. Smith. 2019. CEO materialism and corporate social responsibility. The Accounting Review 94 (1): 101–26.

• Bernard, D., W. Ge, D. Matsumoto, and S. Toynbee. 2020. Implied tradeoffs of Chief Financial Officer accounting expertise: Evidence from firm-manager matching. Management Science

• Malmendier, U., and G. Tate. 2005. CEO overconfidence and corporate investment. Journal of Finance 60 (6): 2661–700.

• Malmendier, U., G. Tate, and J. Yan. 2011. Overconfidence and early-life experiences: The effect of managerial traits on corporate financial policies. Journal of Finance 66 (5): 1687–733.

• Graham, J. R., C. R. Harvey, and M. Puri. 2017. A corporate beauty contest. Management Science 63 (9): 3044–56.

• Thomas Philippon, Ariell Reshef, 2012. Wages and Human Capital in the U.S. Finance Industry: 1909–2006.  QJE.

Session 3 Wednesday 29   12:00pm to 3:00pm

Organizational Capital: Definition, measurement & implications

Papers for Class Discussion (Guest presenter Vivek Raval from UIC)

• (Eisfeldt, Andrea L. and Papanikolaou, Dimitris, 2013. Organization Capital and the Cross-Section of Expected Returns. Journal of Finance, Volume 68, Issue 4

• Vivek Raval. Organizational Capital and the Effects of Technology Shocks on the Characteristics of Earnings.

• Cai, Wei and Prat, Andrea, 2022. Are New CEOs Reshapers? Measuring CEOs’ Role in the Accumulation of Organizational Capital. SSRN: https://ssrn.com/abstract=4174523

• Lev, Radhakrishnan Zhang, 2009. Organizational Capital. Abacus. Volume 45, Issue3

Related Literature

• Ayyagari, Meghana and Ayyagari, Meghana and Demirgüç-Kunt, Asli and Maksimovic, Vojislav, 2022. The Rise of Star Firms: Intangible Capital and Competition SSRN: https://ssrn.com/abstract=3230154

• Hasan, Mostafa Monzur and Lobo, Gerald J. and Qiu, Buhui, 2021. Organizational Capital, Corporate Tax Avoidance, and Firm Value. Journal of Corporate Finance, Volume 70, SSRN: https://ssrn.com/abstract=3890520

• Lev, Radhakrishnan Zhang, 2009. Organizational Capital. Abacus. Volume 45, Issue3

• Eisfeldt, Andrea L. and Kim, Edward T. and Papanikolaou, Dimitris, 2022. Intangible Value. Critical Finance Review, 2022, 11(2): pp. 299-332, https://ssrn.com/abstract=3720983

Session 4 Wednesday April 5th   12:00pm to 3:00pm

Managerial Ability: Measurement & Implications

Papers for class discussion

• Cai, Wei and Prat, Andrea, 2022. Are New CEOs Reshapers? Measuring CEOs’ Role in the Accumulation of Organizational Capital. SSRN: https://ssrn.com/abstract=4174523

• Demerjian, Peter R. and Lev, Baruch Itamar and McVay, Sarah E., 2012. Quantifying Managerial Ability: A New Measure and Validity Tests.

• Arif, Bushman Donovan and Gopalan, 2023. Assessments of managerial ability: determinants and association with future performance. Coming Soon.

• Eisfeldt, Andrea L. and Falato, Antonio and Xiaolan, Mindy Z., 2022. Human Capitalists. NBER Macroeconomics Annual, Forthcoming, SSRN: https://ssrn.com/abstract=3375849 

Related Literature

• Andrea Prat & Wouter Dessein, 2022. Organizational Capital, Corporate Leadership, and Firm Dynamics. Journal of Political Economy

• Bloom and John Van Reenen, 2007. Measuring and Explaining Management Practices Across Firms and Countries. The Quarterly Journal of Economics, Volume 122, Issue 4

• Edmans, Alex, 2011. Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices. Journal of Financial Economics 101(3), 621-640.

• Demerjian, P. R., B. Lev, M. F. Lewis, and S. E. McVay. 2013. Managerial ability and earnings quality. The Accounting Review 88 (2): 463–98.

Session 5 Wednesday April 12th   12:00pm to 3:00pm

Measuring intangible capital and its effect on firm value

Papers for Class Discussion (Guest Speaker Sean Wang from SMU)

• Nicolas Crouzet, Janice C. Eberly, Andrea L. Eisfeldt, Dimitris Papanikolaou, 2022. The Economics of Intangible Capital . Journal of Economic Perspectives

• Banker, Huang, Natarajan, Zhao, 2019. Market Valuation of Intangible Asset: Evidence on SG&A Expenditure. The Accounting Review (2019) 94 (6): 61–90.

• Ewens, Peters, and Wang, 2022. Measuring Intangible Capital with Market Prices. Available at SSRN: https://ssrn.com/abstract=3287437 

Other Literature

• • Iqbal, Aneel and Rajgopal, Shivaram and Srivastava, Anup and Zhao, Rong, Value of Internally Generated Intangible Capital (January 2022). Available at SSRN: https://ssrn.com/abstract=3917998  

  • Regier, and Rouen, 2023. The Stock Market Valuation of Human Capital Creation. Journal of Corporate Finance. https://ssrn.com/abstract=3703948 

  • Eisfeldt, Andrea L. and Kim, Edward T. and Papanikolaou, Dimitris, 2022. Intangible Value. Critical Finance Review, 2022, 11(2): pp. 299-332, https://ssrn.com/abstract=3720983

  • Falato, Antonio, Dalida Kadyrzhanova, Jae Sim, and Roberto Steri, 2022, Rising intangible capital, shrinking debt capacity, and the us corporate savings glut, The Journal of Finance 77, 2799–2852.

  • Kogan, Leonid, Dimitris Papanikolaou, Amit Seru, and Noah Stoffman, 2017, Technological innovation, resource allocation, and growth, The Quarterly Journal of Economics 132, 665–712.

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Session 6 Wednesday April 19 12:00pm to 3:00pm

Human Capital Disclosure

Papers for Class Discussion

• • Bourveau, Thomas and Chowdhury, Maliha and Le, Anthony and Rouen, Ethan, 2022. Human Capital Disclosures. SSRN: https://ssrn.com/abstract=4138543 

  • Zhang, Mingyue, 2022. Determinants and Consequences of Human Capital Management Disclosure. SSRN: https://ssrn.com/abstract=3961202 

  • Haslag, Peter H. and Sensoy, Berk A. and White, Joshua T., 2022. Human Capital Disclosure and Workforce Turnover. SSRN: https://ssrn.com/abstract=3991257

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Other Literature

• Zingales, Luigi, 2000. In Search of New Foundations. Journal of Finance, Volume55, Issue4, 623-1653

• Agrawal, Ashwini K. and Hacamo, Isaac and Hu, Zhongchen, Information Dispersion across Employees and Stock Returns (January 12, 2020). Review of Financial Studies, forthcoming. SSRN: https://ssrn.com/abstract=3180578 

• Klemesh, S., B. Neill, and J. Smith. 2019. How and why human capital disclosures are evolving. Harvard Law Forum on Corporate Governance. https://corpgov.law.harvard.edu/2019/11/15/

• Israelsen, R. D., and S. E. Yonker. 2017. Key human capital. Journal of Financial and Quantitative analysis 52:175-214.

• Demers, Elizabeth and Wang, Victor Xiaoqi and Wu, Kean, 2022. Corporate Human Capital Disclosures: Early Evidence from the SEC’s Disclosure Mandate SSRN: https://ssrn.com/abstract=4153845 

• Mayew, William J. and Zhang, Yuan, 2022. COVID-19 Human Capital Management Response, SEC Disclosure, and Firm Value. Available at SSRN: https://ssrn.com/abstract=4010151 

• Batish, Gordon, Kepler, Larcker, Tayan, Brian and Yu, 2021. Human Capital Disclosure: What Do Companies Say About Their 'Most Important Asset'? SSRN: https://ssrn.com/abstract=3840412

Session 7 Wednesday April 26th   12:00pm to 3:00pm

Intangible investment, Tobin’s q and market concentration

Papers for Class Discussion

• Hayashi, Fumio, 1982.  Tobin's Marginal q and Average q: A Neoclassical Interpretation

• Peters, Ryan H. and Taylor, Lucian A., 2017. Intangible Capital and the Investment-q Relation. Journal of Financial Economics.

• Ayyagari, Meghana and Ayyagari, Meghana and Demirgüç-Kunt, Asli and Maksimovic, Vojislav, 2023. The Rise of Star Firms: Intangible Capital and Competition. SSRN: https://ssrn.com/abstract=3230154

Other Literature

• Eberly, Janice C., and Nicolas Crouzet. 2021. Intangibles, Markups, and the Measurement of Productivity Growth. Journal of Monetary Economics. 124: S92-S109.

• Crouzet, Nicolas, and Janice C. Eberly. 2023. Rents and Intangible Capital: a "Q+" approach. Journal of Finance.

• Cohen, Lauren and Diether, Karl B. and Malloy, Christopher J., 2013. Misvaluing Innovation. The Review of Financial Studies, Volume 26, Issue 3

• Dickhaut, J. 2009. The brain as the original accounting institution. The Accounting Review 84 (6): 1703–12.

• Enache, Luminita and Srivastava, Anup, 2017. Should Intangible Investments Be Reported Separately or Commingled with Operating Expenses? New Evidence Management Science. SSRN: https://ssrn.com/abstract=2715722