CEO mobility and corporate payouts

We examine how chief executive officer (CEO) mobility affects corporate payouts. We exploit US state courts’ staggered adoption of the inevitable disclosure doctrine (IDD) to obtain exogenous variation in mobility. We report several findings. First, we find that firms in IDD-adopting states increase dividend payouts, whereas the effect of IDD on share repurchases is insignificant relative to firms not in IDD-adopting states. Second, the increase in dividends is concentrated on firms run by CEOs having high ability. Third, CEOs increasing dividends are less likely to be forced to leave their jobs. Fourth, the increase in dividends is concentrated on firms run by early-career CEOs rather than retiring CEOs. Last, CEOs increasing dividends receive more favorable shareholders’ say on pay votes for higher pay. Our evidence supports the notion that restricted mobility induces CEOs to choose a dividend policy that enhances their positions with their shareholders.     

Emergence of subprime lending in minority neighborhoods

Subprime lending is concentrated in minority neighborhoods. However, the literature provides little evidence for what led to this concentration. We use the endorsement of credit scores in mortgage underwriting by the Government Sponsored Enterprises (GSEs) in 1995 to answer this question. We show that prime lenders were substituted by subprime lenders in minority neighborhoods. As a result, the share of subprime lending increased by 5 percentage points in minority neighborhoods, relative to nonminority neighborhoods. Prime lenders with a stronger relationship with the GSEs reduced their lending in minority neighborhoods more, and the level of securitization by the GSEs in minority neighborhoods also decreased.