Peter Iliev

Section 404 of the Sarbanes-Oxley Act (SOX) of 2002 has been widely critiqued as imposing excessive compliance costs on smaller firms. However, because SOX was passed during a period of unusual scrutiny of corporate governance practices and around the demise of Arthur Anderson, existing studies could not compare SOX’s effects to the counterfactual: how firms, corporate governance, and auditors would have changed in the absence of SOX. To make progress on this question, my paper exploits a natural quasi-experiment: firms with a public float rule of just under $75 million escaped Section 404. A regression discontinuity design can therefore isolate and quantify the positive and negative effects for firms just above vs. firms just below this threshold. Firms forced to comply [1] effectively paid twice as much in audit fees ($884 vs. $374 thousand per annum), [2] reduced their earnings through more conservative discretionary accruals (by an average of $8.3 million, which represents about one-third of the $23.3 million standard deviation of earnings in the sample), and [3] experienced worse risk-adjusted stock returns (of about 19%) over three years. The results are robust to instrumenting Section 404 compliance to control for firms’ ability to manipulate their public float.

This paper studies institutions, such as firms, in which multiple projects can require attention at unpredictable times. The firm responds [a] by limiting the number of projects it simultaneously undertakes and [b] by building attention capacity. Perhaps the most interesting implication relate to a variable that would otherwise be interpreted as the sign of an agency conflict: operational slack. In our model, it is optimal for the firm and its management to be idle at least some of the time. Simple extensions suggest that managers who want to signal higher quality or who are overoptimistic would take on too many projects.

The theories of decision-making within corporations, with empirical evidence as background. Topics include capital budgeting, risk, securities issuance, capital structure, dividend policy, compensation policy, mergers and acquisitions, real options, financial engineering, securitization.

This course analyzes the role of financial institutions in allocating resources, managing risk, and exerting corporate governance over firms. After studying interest rate determination, the risk and term structure of interest rates, derivatives, and the role of central banks, it takes an international perspective in examining the emergence, operation, and regulation of financial institutions, especially banks.

The function and operation of asset markets; the determinants of the prices of stocks, bonds, options, and futures; the relations between risk, return, and investment management; the capital asset pricing model, normative portfolio management, and market efficiency.

The note is based on my subjective job market experience (Year: 2008, Field: Corporate Finance, Male, East European, Married, Wife not on the market). This advice will change once I step on the other side of the equation. May overlap with advice in other documents. Use at your own risk. Feel free to circulate.

"Connect to the Brown Econ Server from home."

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