Essays in finance

Abstract

This thesis consists of three essays pertaining to labor economics in a broad sense. They shed light on the effects of a particular recently-passed set of U.S. labor laws and on some aspects of corporate hiring and pay. The first essay of thesis essay contributes to the literature on labor regulations by providing the first quantitative, retrospective, and large-scale evidence of the effects of predictive scheduling laws (PSLs) on employment and wages, which mandate that workers be given advance notice of schedules and preferential access to hours. Within affected county-by-industry units, PSLs have accelerated income growth of up to 1.6 pct. points, elevated income levels by up to 3%, and reduced the job growth rate by up to 2 pct. points. There is weak evidence that in counties with a higher share of the working-age female population, PSLs had larger effects. This would be consistent with the argument that women face bigger work-life conflicts which PSLs aim to resolve. Employers saw a significant increase in total wage levels, but not in the total wage growth rate. The increase in income is likely mediated by employers assigning longer hours to individual workers. The findings suggest that PSLs have largely benefited workers while placing some financial burdens on employers. In the second essay, I shed light on whether companies who voice support for Diversity follow up their words with actions. Earnings call transcripts are scanned for mentions of Race, Diversity and Inclusion, and Equality (RDIE), which allows me to illustrate the prominence of these issues in the corporate world. I further investigate which board characteristics explain discussing RDIE and then analyze changes in hiring patterns following the death of George Floyd. The findings show that firms were less likely to hire White directors and more likely to hire Black directors during this subsequent period and that firms who mentioned RDIE after May 2020 were 1 pct. point per mention more likely to hire a Black director. The entry requirements for Black directors, by multiple measures, were reduced after May 2020. For firms mentioning RDIE, the characteristics of new Black hires did not change after the death of George Floyd but had already been different from other firms' before. These results help elucidate executives' attitudes towards social issues in a time of heightened public pressure and suggest that speaking out is associated with according action. The third and final essay argues that some CEOs exhibit competitive preferences and care more strongly about their peers' pay. Professor Tse-Chun Lin and I document that the pay of CEOs with competitive preferences is more sensitive to that of their peers. To do so, we use an overconfidence measure to identify competitive CEOs. Consistent with conjectures derived from the psychological literature, the peer effect is stronger for CEOs in smaller firms, as well as during economic booms. Our study contributes to the literature by establishing competitive preferences of CEOs as an individual-level (rather than firm-level) determinant of pay.