Gender Discrimination in College Apps

There’s an article today about how leaked documents reveal that BYU used to favor male applicants:

A document titled, “New Freshman Index 2013-2014,” shows that during that time, applicants to the university were scored on several factors to determine whether they’d be admitted to the school and male applicants were given an extra point.

Another article–this one from the WaPo in 2015–shows that BYU was far from alone in this practice:

Getting accepted to an elite college has never been more difficult. So to all the young women who got in this year I say: Great job! You earned it.

To the young men I say: Congrats. But just be thankful you didn’t have to apply as a woman.

Why? Because one of academia’s little-known secrets is that private college admissions are exempt from Title IX’s ban on sex discrimination—a shameful loophole that allows some of the most supposedly progressive campuses in the nation to discriminate against female applicants.

Why are colleges–BYU and other private schools–doing this? Because women outperform men academically, and so (according to WaPo again):

…this is happening because elite schools field applications from many more qualified women than men and thus [elite private colleges] are trying to hold the line against a 60:40 ratio of women to men.

The whole thing is very odd. Ordinarily, if a particular group is underrepresented in college campuses, you would expect one set of people to be very concerned about doing whatever it took to preserve campus diversity and another group to be adamantly insistent on blind admissions standards. But, in this case, those two groups have switched their usual positions. One side sees discrimination where it otherwise would see diversity, and the other has decided that blindness is suddenly no virtue.

Political Opposition to Immigration

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From a recent job market paper:

In this paper, I exploit variation in the number of immigrants received by US cities between 1910 and 1930 to study the political and economic consequences of immigration. Using a leave-out version of the shift-share instrument (Card, 2001), I show that immigration had a positive and significant effect on natives’ employment and occupational standing, as well as on economic activity. However, despite these economic benefits, the inflow of immigrants also generated hostile political reactions, inducing cities to cut tax rates and limit redistribution, reducing the vote share of the pro-immigration party, and increasing support for the introduction of immigration restrictions.

Exploiting variation in immigrants’ background, I document that natives’ backlash was increasing in the cultural distance between immigrants and natives. These findings suggest that opposition to immigration may arise not only because of economic, but also because of cultural considerations. Moreover, they highlight the existence of a potential trade-o§. Immigrants may bring larger economic gains when they are more different from natives. However, higher distance between immigrants and natives may trigger stronger political backlash. Ultimately, by retarding immigrants’ assimilation, and favoring the rise of populism and the adoption of inefficient policies, natives’ reactions may be economically and socially costly in the medium to long run (pg. 38-39).

A 2016 paper found that accurate information regarding immigration can change minds, but I’m becoming less and less hopeful.

Sexual Abuse: Are Female Perpetrators More Common Than We Thought?

Sexual Victimization by Women Is More Common Than Previously Known

From a recent Scientific American:

In 2014, we published a study on the sexual victimization of men, finding that men were much more likely to be victims of sexual abuse than was thought. To understand who was committing the abuse, we next analyzed four surveys conducted by the Bureau of Justice Statistics (BJS) and the Centers for Disease Control and Prevention (CDC) to glean an overall picture of how frequently women were committing sexual victimization.

The results were surprising. For example, the CDC’s nationally representative data revealed that over one year, men and women were equally likely to experience nonconsensual sex, and most male victims reported female perpetrators. Over their lifetime, 79 percent of men who were “made to penetrate” someone else (a form of rape, in the view of most researchers) reported female perpetrators. Likewise, most men who experienced sexual coercion and unwanted sexual contact had female perpetrators.

We also pooled four years of the National Crime Victimization Survey(NCVS) data and found that 35 percent of male victims who experienced rape or sexual assault reported at least one female perpetrator. Among those who were raped or sexually assaulted by a woman, 58 percent of male victims and 41 percent of female victims reported that the incident involved a violent attack, meaning the female perpetrator hit, knocked down or otherwise attacked the victim, many of whom reported injuries.

…We [also] found that, contrary to assumptions, the biggest threat to women serving time does not come from male corrections staff. Instead, female victims are more than three times as likely to experience sexual abuse by other women inmates than by male staff. Also surprisingly, women inmates are more likely to be abused by other inmates than are male inmates, disrupting the long held view that sexual violence in prison is mainly about men assaulting men. In juvenile corrections facilities, female staff are also a much more significant threat than male staff; more than nine in ten juveniles who reported staff sexual victimization were abused by a woman.

This information certainly does not diminish the claims of the women:

To the contrary, we argue that male-perpetrated sexual victimization remains a chronic problem, from the schoolyard to the White House. In fact, 96 percent of women who report rape or sexual assault in the NCVS were abused by men. In presenting our findings, we argue that a comprehensive look at sexual victimization, which includes male perpetration and adds female perpetration, is consistent with feminist principles in important ways.

…[T]he common one-dimensional portrayal of women as harmless victims reinforces outdated gender stereotypes. This keeps us from seeing women as complex human beings, able to wield power, even in misguided or violent ways. And, the assumption that men are always perpetrators and never victims reinforces unhealthy ideas about men and their supposed invincibility. These hyper-masculine ideals can reinforce aggressive male attitudes and, at the same time, callously stereotype male victims of sexual abuse as “failed men.” Other gender stereotypes prevent effective responses, such as the trope that men are sexually insatiable. Aware of the popular misconception that, for men, all sex is welcome, male victims often feel too embarrassed to report sexual victimization. If they do report it, they are frequently met with a response that assumes no real harm was done.

The researchers conclude,

To thoroughly dismantle sexual victimization, we must grapple with its many complexities, which requires attention to all victims and perpetrators, regardless of their sex. This inclusive framing need not and should not come at the expense of gender sensitive approaches, which take into account the ways in which gender norms influence women and men in different or disproportionate ways.

Male-perpetrated sexual victimization finally came to public attention after centuries of denial and indifference, thanks to women’s rights advocates and the anti-rape movement. Attention to sexual victimization perpetrated by women should be understood as a necessary next step in continuing and expanding upon this important legacy.

Important stuff.

Are a Few Bad Apples Behind the Racial Discrimination in Law Enforcement?

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I did a summary of the data on racial bias and policing last year with an additional post a few months ago. Now, a new job market paper uses data from the Florida Highway Patrol to determine the extent of racial discrimination:

The large racial disparities in the criminal justice system have led many to claim discrimination as the root cause. We argue in this paper that identifying discrimination at the level of the individual criminal justice agent is crucial for understanding the best policy for mitigating the disparities in outcomes. We study speeding tickets and the choice of officers to discount drivers to a speed just below an onerous punishment.

By using a bunching estimator approach that allows for officer-by-race measures of lenience in tickets, we can explore the entire distribution of both lenience and discrimination on the part of officers. We find that 90% of the gap in discounting can be attributed to discrimination. The rest of the gap is due to underlying differences in driving speeds across races. Officers are very heterogeneous in their degree of discrimination, with 40% of members explaining the entirety of the aggregate discrimination. We explore whether discrimination is predictable by regressing individual officers’ bias on demographic and personnel characteristics. We find that officers tend to favor their own race, older officers are more racially biased, and women and college-educated officers are less biased on average. Personnel information, such as failing an entry exam, receiving civilian complaints, and seeking a promotion, are not strongly informative about bias.

Using a model of driver speeding and officer decision-making, we confirm that while minorities drive faster on average, our officer-level estimates of bias are not confounded by differences in speeding across groups. We find that setting discrimination to zero across officers fails to remove the majority of the treatment gap, due to the fact that minorities tend to live in regions where officers are less lenient toward all drivers. Because of this fact, policies directed at reducing discrimination directly have a significant but modest effect on the treatment gap. Policies that instead target officers’ lenience, by reassigning lenient officers to minority neighborhoods, are much more effective at reducing the aggregate treatment disparity (pgs. 30-31; emphasis mine).

It really is a minority group (though a sizable one) of officers that are ruining it for everyone.

Myths About the 1 Percent

Gallup’s Jonathan Rothwell has provided some important insights about inequality in the U.S., from zoning laws to a lack of competition among the elites. In a recent New York Times piece, he lays out the evidence against certain myths regarding the 1% in a succinct fashion. Here are some “common misconceptions” about income inequality:

  • Trade:A rise in international trade — as a share of G.D.P., measured as either imports or exports using data from the Penn World Tables — is associated with equality, not inequality. The United States imports only a small fraction of the value of its total economy, whereas Denmark and the Netherlands are highly dependent on imports.”
  • Information Technology:Countries with higher rates of invention — as measured by patent applications filed under the Patent Cooperation Treaty, an indicator of patent quality — exhibit lower inequality than those with less inventive activity. As it happens, tech industries in the United States have contributed just a tiny bit to the rise of the 1 percent, and the salaries of engineers and software developers rarely reach the 1 percent threshold of an annual income of $390,000.”
  • Decline of Unions: “Unions are thought to redistribute income from owners to workers, but there is no correlation across countries between the change in labor’s share of G.D.P. since 1980 and an increase in the income share of the top 1 percent. Britain saw an increase in the labor share of G.D.P. but also one of the sharpest increases in inequality. The Netherlands saw a large fall in labor’s share but no rise in inequality. Scandinavian countries are heavily unionized and egalitarian, but Denmark experienced a large decrease in the share of workers represented by unions from 1980 to 2015, according to O.E.C.D. data, and very little change in inequality. Unionization rates dropped precipitously in the Netherlands and especially New Zealand over the period, but inequality rose as much if not more in Spain, where unionization rates rose.
  • Immigration: “There is no correlation between changing immigration shares since 1990 and rising top-income shares. In fact, the countries that have absorbed the most immigrants — on a per-capita basis — have seen overall income inequality (measured by the Gini coefficient) fall. An assumption implicit in this argument is that immigrants drag down earnings at the bottom of the distribution, making inequality worse. If this were an important factor, rising inequality should coincide with large gaps in income between foreign-born and native-born adults. It doesn’t. My analysis of data from the Gallup World Poll from 2009 to 2016 shows that foreign-born adults earn 37 percent less than native-born adults in the Netherlands, after adjusting for age and gender. This is the largest gap among O.E.C.D. countries, and yet, the country saw no change in top-income inequality. Canada (minus 8 percent) and Britain (minus 7 percent) have small gaps but high and rising inequality.”
  • Manager Compensation:Most top earners in the United States are neither executives nor even managers. People in those occupations make up just over one-third of all top earners in the United States. This share has been falling — particularly for corporate executives — and is lower than in many other advanced countries. In Denmark, Canada and Finland, close to half of top earners are in managerial occupations, according to my analysis of data from the Luxembourg Income Study.”

So what gives?

Image result for the 1%The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives.

…A new book, “The Captured Economy” by Brink Lindsey and Steven Teles, argues that regressive regulations — laws that benefit the rich — are a primary cause of the extraordinary income gains among elite professionals and financial managers in the United States and of a reduction in growth.

This year, the Brookings Institution’s Richard Reeves wrote a book about how people in the upper middle class have shaped both legal and cultural norms to their advantage. From different perspectives, Joseph Stiglitz, Robert Reich and Luigi Zingales have also written extensively about how the political power of elites has undermined markets.

Problems cited by these analysts include subsidies for the financial sector’s risk-taking; overprotection of software and pharmaceutical patents; the escalation of land-use controls that drive up rents in desirable metropolitan areas; favoritism toward market incumbents via state occupational licensing regulations (for example, associations representing lawyers, doctors and dentists that block efforts allowing paraprofessionals to provide routine services at a lower price without their supervision).

These are just some of the causes contributing to the 1 percent’s high and rising income share. Reforming relevant laws can make markets more efficient and egalitarian, and in contrast with trade, immigration and technology, the political causes of the 1 percent’s rise are directly under the control of citizens.

In short, populists (trade), conservatives (immigration, IT), and leftists (executive compensation, unions) are wrong. It’s protectionist regulations that are the problem.

Was the Clovis Culture the Second Wave of American Immigrants?

So this is interesting:

It’s been one of the most contentious debates in anthropology, and now scientists are saying it’s pretty much over. A group of prominent anthropologists have done an overview of the scientific literature and declare in Science magazine that the “Clovis first” hypothesis of the peopling of the Americas is dead.

For decades, students were taught that the first people in the Americas were a group called the Clovis who walked over the Bering land bridge about 13,500 years ago. They arrived (so the narrative goes) via an ice-free corridor between glaciers in North America. But evidence has been piling up since the 1980s of human campsites in North and South America that date back much earlier than 13,500 years. At sites ranging from Oregon in the US to Monte Verde in Chile, evidence of human habitation goes back as far as 18,000 years.

In the 2000s, overwhelming evidence suggested that a pre-Clovis group had come to the Americans before there was an ice-free passage connecting Beringia to the Americas. As Smithsonian anthropologist Torben C. Rick and his colleagues put it, “In a dramatic intellectual turnabout, most archaeologists and other scholars now believe that the earliest Americans followed Pacific Rim shorelines from northeast Asia to Beringia and the Americas.”

Now scholars are supporting the “kelp highway hypothesis,” which holds that people reached the Americas when glaciers withdrew from the coasts of the Pacific Northwest 17,000 years ago, creating “a possible dispersal corridor rich in aquatic and terrestrial resources.” Humans were able to boat and hike into the Americas along the coast due to the food-rich ecosystem provided by coastal kelp forests, which attracted fish, crustaceans, and more.

No one disputes that the Clovis peoples came through Beringia and the ice free corridor. But the Clovis would have formed a second wave of immigrants to the continent.

Does Speaking Up Benefit Women?

Well, this is depressing, if unsurprising:

A lot of research suggests that those who speak the most in groups tend to emerge as leaders.

But does it matter who speaks up, or how they do it? In a forthcoming article in Academy of Management Journal, my colleagues Elizabeth McClean, Kyle Emich, and Todd Woodruff and I share how we explored these questions in two studies. We found that those who speak up can gain the respect and esteem of their peers, and that increase in status made people more likely to emerge as leaders of their groups — but these effects happened only for some people and only when they spoke up in certain ways. Specifically, speaking up with promotive voice (providing ideas for improving the group) was significantly related to gaining status among one’s peers and emerging as a leader. However, speaking up with prohibitive voice (pointing out problems or issues that may be harming the team and should be stopped) was not. We further found that the gender of the person speaking up was an important consideration: The status bump and leader emergence that resulted from speaking up with ideas only happened for men, not for women.

The researchers studied cadets at the United States Military Academy at West Point and Master Workers on Amazon Mechanical Turk:

Participants were randomly assigned to one of four conditions, in which they listened to an audio recording of (1) a man speaking up with an idea for improving the process, (2) a woman speaking up with an idea for improving the process, (3) a man pointing out a problem with the process, or (4) a woman pointing out a problem with the process. Participants then rated how much status they perceived the speaker to have in the group and answered several questions about how effective the speaker was in influencing the team (a common method of assessing leadership emergence).

Across both studies—using both field and experimental research designs and very different populations of respondents—we saw the same pattern of results: Men who spoke up with ideas were seen as having higher status and were more likely to emerge as leaders. Women did not receive any benefits in status or leader emergence from speaking up, regardless of whether they did so promotively or prohibitively. Neither men nor women who spoke up about problems suffered a loss of status or had a lower likelihood of emerging as a leader (though they weren’t helped by speaking up, either). Also of note, men and women both ascribed more status and leadership emergence to men who spoke up promotively, compared with women who did so.

The researchers suggest,

Image result for shushing lips gif
Virtually every corporate meeting

Managers who want to promote gender equity on their team — or who just want to make sure they are getting as many good suggestions from their team members as possible — will have to proactively work to counteract the tendencies uncovered in our research. After all, one interpretation of this study is that women, even when they speak up and “lean in,” still may not get equal credit for doing so. And if that is the case, then it is essential not only for women to speak up but also for those around them to give equal weight to what they say.

One way to address this challenge would be for managers to amplify women’s ideas by intentionally giving extra attention to their suggestions. After all, if our natural tendency is to give less recognition to women’s ideas, then we will need to make an extra effort to overcome this bias. And given that women are interrupted more often than men are when speaking up in groups, we suggest managers be vigilant about ensuring that equal respect is shown to women when they are voicing their ideas.

Another approach is to document ideas in real time in order to ensure appropriate credit and recognition is given to each one. Some simple ways to do this would be to write ideas on a whiteboard and note whose idea it is, or to have an email folder for suggestions where people’s ideas can be saved electronically.

Lastly, managers should make it a point to call on women in meetings to hear their input, or to find less formal contexts to ask for women’s improvement-oriented suggestions. These recommendations may also help address another longstanding issue regarding women and voice: that women tend to speak up less in mixed-gender settings.

Yglesias: Bill Clinton Should Have Resigned

It is very, very hard for me not to be extremely cynical about Mathew Yglesias’ 2-decades late realization that Bill Clinton should have resigned. As you may recall, I’ve talked about this pretty recently:

The day we decided Bill Clinton’s abuse and exploitation of women was somehow his personal business and decided to rehabilitate a serial sexual abuser and accused rapist into some kind of grandfatherly political icon was the day that we told every Harvey Weinstein, Kevin Spacey, Bill Cosby, and Neil DeGrasse Tyson in the world: go ahead. It’s open season. As long as you’re powerful enough, we’ll look the other way.

I didn’t have Roy Moore in the list because he wasn’t as big a story when I wrote that post a few weeks ago, but yeah: you can definitely add him on in.

So, I know it’s not very gracious to say, “I told you so.” But there’s a specific reason I want to highlight and respond to Yglesias’s post, and here it is:

…Clinton…mounted the defense that would see him through to victory — portraying the issue as fundamentally a private family matter rather than a topic of urgent public concern….

To this line of argument, Republicans offered what was fundamentally the wrong countercharge. They argued that in the effort to spare himself from the personal and marital embarrassment entailed by having the affair exposed, Clinton committed perjury when testifying about the matter in a deposition related to Paula Jones’s lawsuit against him.

What they should have argued was something simpler: A president who uses the power of the Oval Office to seduce a 20-something subordinate is morally bankrupt and contributing, in a meaningful way, to a serious social problem that disadvantages millions of women throughout their lives.

Now here’s the thing: Yglesias’s age is within one month of my own. And I’m having a hard time connecting with his retelling of the way this went down. My understanding–as a socially conservative Republican at the time–was that the decision to pursue Clinton for perjury charges was only a tactical decision to find a way to hold him responsible for the actual crime: sexual exploitation of a vulnerable young woman. But, since the relationship wasn’t actually illegal–and since Clinton didn’t have the decency to resign–an actual crime was necessary to base the impeachment on.

This is standard. It’s like the old saying goes: it’s not the crime, it’s the coverup. It is absolutely ordinary for a politician to do something reprehensible that is either not technically illegal or impossible to prosecute for some other reason, and so the actual charge that they end up facing is peculiarly unrelated to the real reason they are in trouble.

And yet Yglesias makes this incredibly naive assumption that–since the charges specified perjury–that must be the actual, root motivation of Republicans. That is bizarre. He farther argues–without any justification at all–that mounting this argument somehow excluded mounting the argument that Bill Clinton was “morally bankrupt”.

To which I can only respond: really?

Let me take a moment to explain why I think this is worth talking about.

If you’re a left-leaning living in America today, you live in an environment where the default, working assumption is that conservatives and Republicans are women-hating, anti-feminist misogynists who routinely wage war on women. And I’d like to consign that stereotype to the dumpster, right beside the equivalent belief held by conservatives that liberals and Democrats are America-hating communists who want to put all Christians into concentration camps.

For too long, we’ve turned issues that should be about basic human decency into partisan battlegrounds. It would make me deeply happy if all my liberal friends internalized the idea that many conservatives strongly believe in equal rights for women and are viscerally opposed to behavior that exploits, silences, or in any other way abuses women. Don’t get me wrong, conservatives (often) have different ideas for how to accomplish these goals and I’m not trying to minimize very real political and philosophical differences.

But you know what would be great? If debates about those differences happened in an atmosphere of mutual assumption of positive intent. How much better would that be for everyone than a world where conservatives think liberals hate America and liberals think conservatives hate Americans.

So let me state–clearly and concisely–that for a lot of conservatives and Republicans who were there during Bill Clinton’s sex scandals: that’s what we were saying all along.

Speech on the Silent Sam Memorial at UNC

I was recently allowed to share my thoughts on the Silent Sam Confederate monument at UNC. Beforehand, I shared my anxiety about this.  The full transcript of my speech is available below.  My own recording can be viewed here, and perhaps an official recording if the University releases it.

The speech:

Way back when, during the America Civil War, a number of students here at UNC left their studies, left school, and went to fight in the cause of the Confederacy.

They fought out of a sense of honor,
a sense of duty,
a sense of loyalty,
a sense of service.

They believed the cause they were fighting was
a just a cause,
a noble cause,
and a worthy cause.

They would have heard from
and elected leaders
and news media
their families
and fellow students
and even their professors

— every voice in their lives that they trusted —

that this cause was a just and noble and worthy cause.

Today, we can look back and recognize that it was not.
It was not a noble cause they fought for.

Students today are also fighting.

They are LITERALLY fighting.

They are brawling in the streets,
throwing riots on campuses across the country,
setting fires
smashing in windows
and ribcages,
assaulting innocent bystanders and peaceful demonstrators for holding opinions they dislike.

They are shouting down invited guest lecturers with whom they disagree.

They are shutting down important debates and discussions that are vital to our civic life in democracy.

They are silencing through their activism
and violence
their fellow students,
their professors,
and others on campus.

Students are fighting for speech codes, restricting our first amendment rights to outlaw speech that offends them, calling it hate speech.

Students are opposed to our basic freedoms and liberties dear to our democracy.

Freedom of speech,
freedom of religion and worship,
freedom of conscience
freedom of association
freedom of self-determination

Students are fighting to overthrow free market capitalism

— which has brought us unprecedented prosperity —

and instead replace it with the economic system that all the world over has given us nothing

except Supreme Leaders and zoo meat.

Students are being told that these causes are just, and noble and worthy.

We are being told this by
our politicians
and elected leaders
By the news media
and by Hollywood actors and late night comedians who for whatever reason we listen to
By our families
and fellow students
— more than any other voice —
by our professors.

Every voice in our lives that we trust is telling us that these causes are just and noble and good.

I think the message Silent Sam has to offer UNC students is very important.

It is not the original intended message.

It is instead a call to sober reflection on the lesson of the past.

You can believe you are acting out of principles of virtue.

You can see your cause as so self-evidentially right only evil tyrants would oppose it.

You can feel Lady Justice’s hand on your shoulder, beckoning you to honor and duty.

You can hear from every voice around you that this is the noble cause.

And yet be so very wrong.

Thank you.

My speech went over about as well as you would think it would.  Looking back, I perhaps could have been more clear on what I was actually speaking about.  For anyone wishing to characterize my speech as one side or another, the full text is there.

What are the Effects of Short-Term Incentives?

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I’ve written about the negative effects of corporate “short-termism” before. A new study takes a look at the criticisms of short-term incentives. The researchers explain,

Critics of short-term incentives argue that they lead the CEO to take myopic actions that boost the short-term stock price at the expense of long-run value. These critics however, rarely back this up with rigorous evidence. This is partly confirmation bias – willingness to accept ‘evidence’ that confirms one’s prior belief, no matter how flimsy. Since the current political environment is distrustful of businesses, people may be more willing to accept ‘evidence’ that CEOs act in ways that destroy value for personal gain. For example, a recent McKinsey study showed that firms that invested more have enjoyed superior long-run returns, and interprets this finding as “finally, evidence that managing for the long term pays off” (Barton et al. 2017).

…In our most recent work on the topic (Edmans et al. 2017b), we study the long-term consequences of short-term incentives by examining two corporate actions with similarities to investment cuts, but whose long-run consequences could be measured more accurately:

  • Repurchases: These boost the short-term stock price (Ikenberry et al. 1995). CEOs with short-term concerns might have incentives to undertake them. Also like investment cuts, repurchases can either be myopic (if financed by scrapping valuable projects) or efficient (if financed by free cash that would otherwise have been wasted). The long-term stock return measures the return that the firm obtains from the repurchased stock. So, unlike investment cuts, the long-term stock return can be used to diagnose the value implications of the repurchase, even if the return was not caused by the repurchase.
  • M&A: This has different advantages to repurchases. First, M&A has an announcement date, allowing us to cleanly calculate short- and long-term returns. Second, M&A is a much more significant event than an investment cut (or repurchase) – it is arguably the most transformative corporate decision that a firm can undertake – and so it is likely that at least a significant portion of long-run stock returns would be attributable to the M&A. Indeed, prior research (e.g. Agrawal et al. 1992) has used long-run stock returns to assess the long-term value implications of M&A.

Studying “the relationship between vesting equity and repurchases, and vesting and M&A announcements, between 2006 and 2015,” the researchers found that

a one-standard-deviation increase in vesting equity is associated with a 1.2% increase in a firm’s likelihood of conducting a share repurchase in a given quarter, compared to the unconditional repurchase probability of 37.5%. This translates into $6.16m annualised, compared to the finding in Edmans et al. (2017a) of an annualised fall in investment of $1.8m. While economically meaningful, this magnitude is also plausible: a too-large, myopic repurchase may have prompted the board to step in and block it. We find similar results for M&A. A one-standard deviation increase in vesting equity is associated with a 0.6% increase in a firm’s likelihood of announcing an M&A in a given quarter, compared with the unconditional probability of 15.8%.

…A one-standard-deviation increase in vesting equity is associated with an annualised 0.61% higher return over the two quarters surrounding a repurchase, but a 1.11% (0.75%) lower return during the first (second) year after the repurchase. For M&A, the negative association with long-run returns persists for longer. A one-standard-deviation increase in vesting equity is associated with an annualised 1.47% higher return over the two quarters surrounding an M&A announcement, but a 0.81%, 0.35% (insignificant), 0.72%, and 0.62% lower return in the first, second, and third, and fourth subsequent years.

They conclude,

The results are consistent with Graham et al. (2005), who used a survey to find that 78% of executives would sacrifice long-term value to meet earnings targets. We studied a CEO’s actual behaviour and found that short-term incentives indeed have negative long-term consequences. The current debate on CEO pay typically focuses on how big it is. As a consequence, in the UK and US, there will soon be disclosure of pay ratios. Our results suggest that the horizon of CEO incentives is a more important dimension to reform.