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This study aims to investigate the role of the market for corporate control as an external governance mechanism and its effect on executive risk-taking incentives. Managers tend to be risk-averse as they are more exposed to idiosyncratic risk, resulting in sub-optimal risk-taking that does not maximize shareholders’ wealth. The takeover market alleviates this problem, inducing managers to take more risk. Therefore, risk-taking incentives inside the firm are less powerful when the outside takeover market is more active.

Exploiting a novel measure of takeover vulnerability recently constructed by Cain et al. (2017), the authors explore how takeover vulnerability influences executive risk-taking incentives. Using a large sample of US firms, the authors use fixed-effects regressions, propensity score matching and instrumental variable analysis.

Consistent with this study’s hypothesis, a more active takeover market results in less powerful risk-taking incentives. Specifically, a rise in takeover vulnerability by one standard deviation diminishes executive risk-taking incentives by 22.39%, which is an economically meaningful magnitude.

To the best of the authors’ knowledge, this study is the first to explore the effect of the takeover market on managerial risk-taking incentives, using a novel measure of takeover susceptibility. The authors’ measure of takeover vulnerability is considerably less susceptible to endogeneity, enabling the authors to draw causal inferences with more confidence.

The purpose of this paper is to explore corporate social responsibility (CSR) inequality, which is the inequality across different CSR categories. Higher inequality suggests a less balanced CSR policy. To determine if CSR inequality is beneficial or harmful, this paper investigates how independent directors view CSR inequality, using an exogenous regulatory shock introduced by the passage of the Sarbanes–Oxley Act.

To draw causality, this study relies on a quasi-natural experiment based on an exogenous regulatory shock that forced certain firms to raise board independence. This approach is significantly less vulnerable to endogeneity and is much more likely to show a causal effect. The results using propensity score matching, principal component analysis and instrumental-variable analysis are confirmed.

The difference-in-difference estimates show that independent directors view CSR inequality unfavorably. Specifically, board independence diminishes CSR inequality by approximately 34%-43%. Because the empirical strategy is based on a quasi-natural experiment, the results are more likely to show causality. The results also imply that CSR inequality is a crucially important aspect of CSR.

Although a substantial volume of research has examined CSR, one vital aspect of CSR has been largely unexplored. Filling this void in the literature, the CSR inequality is investigated. The study is the first to explore how independent directors view CSR inequality using a quasi-natural experiment.

The purpose of this study is to examine if consumers, after missing a price discount on a desired product, prefer to buy the latter at a smaller discount or prefer to pay full price but offset some of it with windfall money.

In four experiments, participants imagine that they have missed an opportunity to buy a box of chocolates at $50 off and are offered a second chance to buy them at a less attractive discount ($25) or pay full price, but partially offset the full price with various windfall lotteries ($25, $50, $75) and gift cards ($50).

Participants are more likely to buy the chocolates at the less attractive (second) discount rather than pay full price using windfall money. In doing so, they show that they are willing to be more, rather than less, poor from an overall wealth perspective to acquire the chocolates. This anomaly surfaces irrespective of the windfall amounts or preference elicitation methods (joint versus separate evaluation). The negative transaction utility of paying full price mediates the purchase method effect (discount versus windfall) on purchase likelihood, but gift cards are able to reduce the negative transaction utility of paying full price.

The research reveals a judgmental anomaly in how consumers assess product acquisition value following a lost opportunity and suggests that marketing managers may be able to reduce consumer inertia by strategically matching rewards with the source of the lost chance.