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CEOs and Entrepreneurs

Paper Session

Friday, Jan. 5, 2018 8:00 AM - 10:00 AM

Loews Philadelphia, Commonwealth Hall A1
Hosted By: American Finance Association
  • Chair: Dirk Jenter, London School of Economics

Political Connections and Allocative Distortions

David Schoenherr
,
Princeton University

Abstract

This paper exploits a unique institutional setting to examine the mechanism underlying the allocation of government resources to politically connected firms. After winning the election, the new president appoints members of his networks as CEOs of state-owned firms, who serve as intermediaries in allocating government contracts to private firms. I find that private firms experience an increase in government contracts only from state firms in which the president appoints a CEO from the same network. Contracts allocated to connected private firms are executed systematically worse and experience more frequent cost increases, suggesting that connections lead to a misallocation of contracts.

Entrepreneurship and Information on Past Failures: A Natural Experiment

Christophe Cahn
,
Bank of France
Mattia Girotti
,
Bank of France
Augustin Landier
,
Toulouse School of Economics

Abstract

We analyze how public information on past entrepreneurial failure affects an entrepreneur's ability to borrow. We exploit a policy shock from 2013 in France, which eliminated a highly salient public reporting to banks of managers involved in non-fraudulent corporate liquidations. We find that the elimination of this flagging system makes failed entrepreneurs significantly more likely to restart a business or to borrow from a surviving business, despite the fact that bankers can find the failure information from other public sources for a small cost. The effect is more pronounced for industries where failure is a stronger signal about entrepreneurial ability. Restarters create companies that have a higher probability of default.

What Prevents Female Executives from Reaching the Top?

Matti Keloharju
,
Aalto University
Samuli Knüpfer
,
BI Norwegian Business School
Joacim Tåg
,
Research Institute of Industrial Economics (IFN)

Abstract

Exceptionally rich data from Sweden makes it possible to study the gender gap in executives’ career progression and to investigate its causes. In their forties, female executives are about one-half as likely to be large-company CEOs and about one-third less likely to be high earners than males. Abilities, skills, and education likely do not explain these gaps because female executives appear better qualified than males. Instead, slow career progression in the five years after the first childbirth explains most of the female disadvantage. During this period, female executives work on average shorter hours than males and are more often absent from work. These results suggest that aspiring women may not reach the executive suite without trading off family life.
Discussant(s)
Mara Faccio
,
Purdue University
Will Dobbie
,
Princeton University
Amalia Miller
,
University of Virginia
JEL Classifications
  • G3 - Corporate Finance and Governance