Do CEOs Benefit from Employee Pay Raises? Evidence from a Federal Minimum Wage Law

Job Market Paper

Abstract: Using an about 40% U.S. federal minimum wage hike as a natural experiment, I establish an about 2.6% spillover effect of worker wages on CEO pay in smaller and medium U.S. public firms by employment size. I exploit a triple-differences methodology based on the distribution of workers across states. After the hike, a 10% increase in employment share in states bound by federal minimum wage leads to an about 7.7% increase in CEO total pay for firms in minimum-wage-sensitive industries relative to other industries. The results are consistent with CEOs demanding a compensation raise following an exogenous employee pay increase due to fairness concerns and inconsistent with the efficiency wages mechanism or CEOs extracting rents due to strong bargaining power. The results are robust to controlling for firm profitability, observable firm characteristics (matched sample), and local economic conditions (sample of firms headquartered in counties along contiguous state borders).

What Drives Racial Diversity on U.S. Corporate Boards?, with Vicki Bogan and Scott Yonker

Abstract: We investigate the trends and drivers of racial diversity on U.S. corporate boards. Cross-sectional regressions indicate that firm size, growth opportunities, and the racial compositions of boards are key predictors of minority director appointments. Through 2019, firms with lower board racial diversity were less likely to appoint minority directors. In 2020, this relationship reversed coinciding with the commencement of the racial justice movement as well as diversity initiatives implemented by the NYSE, Nasdaq, and state of California. Our analysis reveals that the racial justice movement was the primary cause of the changes in minority director appointment behavior. Conservative estimates imply it led to a 125% increase in the number of black director appointments, but had no effect on appointments of other minority groups. Newly appointed black directors have similar qualifications to those appointed prior the racial justice movement. In contrast, the California diversity mandate has primarily benefited racial groups that are not traditionally underrepresented and has suppressed appointments of black directors. Our analysis is suggestive of search frictions, inattention, and racial bias being important potential mechanisms causing the persistent lack of board racial diversity that we document. 

Joint Dynamics of Board and Capital Structures, with Hyunseob Kim

Abstract: coming soon

Elections Have Consequences: Presidential Battleground States and the Geography of Corporate Investment, with Isaac Green

Abstract: Using a regression discontinuity framework combined with a borders-based identification approach, we examine whether federal grant and procurement spending are directed toward closely-contested presidential ”battleground” states, and whether these spending patterns have real effects on the location of corporate activity. Using a dataset of government procurement and grant contracts from 2000-2020, a period that covers six presidential election cycles, we find that counties in located in battleground states receive more federal funds in the years that follow a closely-contested election. We test whether this effect leads firms in government-dependent industries to locate operations in states thought to be crucial in presidential elections.