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This thesis examines three important topics in corporate governance: the relationship between activist hedge funds and other institutional investors, the role of perks in the market for CEO talent, and public scrutiny and the changing nature of perks. First, I provide an in depth study of the interaction between activist hedge funds and other institutional investors. Hedge funds are more likely to target firms with high levels of institutional ownership, and demonstrate a preference for short term focused institutional investors. Hedge fund activism generates short run and long run abnormal returns without increasing stock return volatility. Regardless of investment horizon, volatility is inversely related to prior period institutional ownership. The trading behavior of institutional owners with different investment horizons is consistent with hedge fund activism creating value. These findings hold regardless of whether investment horizon is based on portfolio churn rate or type of institution. Overall, the results suggest a mutually beneficial relationship between activist hedge funds and other institutional investors. Second, in a coauthored paper with Drs. Seungijn Han and Jiaping Qiu, I provide the first comprehensive analysis on how CEOs’ wage and perks are jointly determined in a competitive CEO market. The underlying theory shows that in equilibrium, firm size, wage, perks and talent are all positively related. Perks are more sensitive than wage to changes in firm size. The more perks enhance the CEO’s productivity, the faster perks increase in firm size. Closed form solutions allow the recovery of the cost function of providing perks. I examine the determinants of CEO perquisite compensation using hand-collected information for S&P 500 companies and find consistent empirical evidence. Third, I examine the impact of public scrutiny on CEO compensation using the unique opportunity provided by the 2008 financial crisis, government support, and legislated compensation restrictions. I introduce novel data on executive perks at S&P 500 firms from 2006 to 2012. Overall, my results are consistent with increased public scrutiny having lasting impact on perks and temporary impact on wage, and with legislated compensation restrictions having temporary impact on wage. Changes in specific perks items provide evidence on which perks firms perceive as excessive and which provide common value. / Thesis / Doctor of Philosophy (PhD)

京都大学 / 新制・課程博士 / 博士(地球環境学) / 甲第23592号 / 地環博第219号 / 新制||地環||42(附属図書館) / 京都大学大学院地球環境学舎地球環境学専攻 / (主査)教授 宇佐美 誠, 教授 佐藤 淳二, 教授 山村 亜希, 准教授 徳永 悠, 教授 服部 高宏 / 学位規則第4条第1項該当 / Doctor of Global Environmental Studies / Kyoto University / DGAM

Executive compensation and its potential importance in aligning shareholder and management interests has been an extensively researched area within corporate finance. We study executive compensation while addressing several unresolved issues in the literature. In essay one, we examine CEO compensation following spin-offs. We find that CEOs are rewarded for undertaking a spin-off. Change in compensation for CEOs of spin-off firms following spin-offs is significantly higher than that for matching firms. We also find that the increase in compensation following spin-off is negatively associated with the change in firm size following the spin-off. Unlike mergers and acquisitions through which increases in executive compensation seem to be more related to size than performance, we show that CEO compensation increases following spin-offs even though spin-offs reduce firm size. In the second essay, we study changes in CEO salaries and their relation to firm performance. We document that changes in CEO salaries, which are a more permanent form of compensation change, are related to long term measures of performance. We find that CEO salaries change much more in relation to long term stock returns than short term stock returns. We also study the asymmetry in the relation between salary changes and firm performance. We find that while short term negative returns are related to changes in CEO salaries; only long term positive returns are significantly associated with CEO salary changes. This asymmetric relation is also present between total CEO compensation changes and stock returns. In essay three, we examine managerial decision horizons for target and acquirer firms in mergers and acquisitions. We find that acquirer CEOs have longer decision horizons than target firm CEOs in stock financed mergers. Acquirer CEOs in cash financed mergers and acquisitions also have longer decision horizons than target CEOs. Acquirer CEOs in both stock and cash financed mergers have significantly higher proportions of equity based compensation and significantly lower proportions of cash based compensation than target CEOs. In logistic regressions, measures of decision horizons for target and acquirer CEOs are not significantly related to the odds of stock financing in mergers and acquisitions. Our results do not offer strong support to the implications from the Shleifer and Vishny theory on the rationale for stock financed acquisitions.

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Control and diagnosis of complex systems demand accurate knowledge of certain quantities to be able to control the system efficiently and also to detect small errors. Physical sensors are expensive and some quantities are hard or even impossible to measure with physical sensors. This has made model-based estimation an attractive alternative. Model-based estimators are sensitive to errors in the model and since the model complexity needs to be kept low, the accuracy of the models becomes limited. Further, modeling is hard and time consuming and it is desirable to design robust estimators based on existing models. An experimental investigation shows that the model deficiencies in engine applications often are stationary errors while the dynamics of the engine is well described by the model equations. This together with fairly frequent appearance of sensor offsets have led to a demand for systematic ways of handling stationary errors, also called bias, in both models and sensors. In the thesis systematic design methods for reducing bias in estimators are developed. The methods utilize a default model and measurement data. In the first method, a low order description of the model deficiencies is estimated from the default model and measurement data, resulting in an automatic model augmentation. The idea is then to use the augmented model for estimator design, yielding reduced stationary estimation errors compared to an estimator based on the default model. Three main results are: a characterization of possible model augmentations from observability perspectives, an analysis of what augmentations that are possible to estimate from measurement data, and a robustness analysis with respect to noise and model uncertainty. An important step is how the bias is modeled, and two ways of describing the bias are introduced. The first is a random walk and the second is a parameterization of the bias. The latter can be viewed as an extension of the first and utilizes a parameterized function that describes the bias as a function of the operating point of the system. The parameters, rather than the bias, are now modeled as random walks, which eliminates the trade-off between noise suppression in the parameter convergence and rapid change of the offset in transients. This is achieved by storing information about the bias in different operating points. A direct application for the parameterized bias is the adaptation algorithms that are commonly used in engine control systems. The methods are applied to measurement data from a heavy duty diesel engine. A first order model augmentation is found for a third order model and by modeling the bias as a random walk, an estimation error reduction of 50 % is achieved for a European transient cycle. By instead letting a parameterized function describe the bias, simulation results indicate similar, or better, improvements and increased robustness.

In this research, the integration of the servomechanism control and process control for machining processes has been studied. As enabling strategies for next generation quality control, process monitoring and open architecture machine tools will be implemented on production floor. This trend brings a new method to implement control algorithm in machining processes. Instead of using separate modules for servomechanism control and process control individually, the integrated controller is proposed in this research to simultaneously achieve goals in servomechanism level and the process level. This research is motivated by the benefits brought by the integration of servomechanism control and process control. Firstly, the integration simplifies the control system design. Secondly, the integration promotes the adoption of process control on production floor. Thirdly, the integration facilitates portability between machine tools. Finally, the integration provides convenience for both the servomechanism and process simulation in virtual machine tool environment. The servomechanism control proposed in this research is based on error space approach. This approach is suitable for motion control for complex contour. When implement the integration of servomechanism control and process control, two kinds of processes may be encountered. One is the process whose model parameters can be aggregated with the servomechanism states and the tool path does not need real time offset. The other is the process which does not have direct relationship with the servomechanism states and tool path may need to be modified real time during machining. The integration strategies applied in error space are proposed for each case. Different integration strategies would propagate the process control goal into the motion control scheme such that the integrated control can simultaneously achieve goals of both the servomechanism and the process levels. Integrated force-contour-position control in turning is used as one example in which the process parameters can be aggregated with the servomechanism states. In this case, the process level aims to minimize cutting force variation while the servomechanism level is to achieve zero contour error. Both force variation and contour error can be represented by the servomechanism states. Then, the integrated control design is formulated as a linear quadratic regulator (LQR) problem in error space. Force variation and contour error are treated as part of performance index to be minimized in the LQR problem. On the other hand, the controller designed by LQR in error space can guarantee the asymptotic tracking stability of the servomechanism for complex contour. Therefore, the integrated controller can implement the process control and the servomechanism control simultaneously. Cutter deflection compensation for helical end milling processes is used as one example in which the process cannot be directly associated with the servomechanism states. Cutter deflection compensation requires real-time tool path offset to reduce the surface error due to cutter deflection. Therefore, real time interpolation is required to provide reference trajectory for the servomechanism controller. With the real time information about surface error, the servomechanism controller can not only implement motion control for contour requirement, but also compensation for the dimensional error caused by cutter deflection. In other words, the real time interpolator along with the servomechanism controller can achieve the goals of both the servomechanism and process level. In this study, the cutter deflection in helical end milling processes is analyzed first to illustrate the indirect relationship between cutter deflection and surface accuracy. Cutter deflection is examined for three kinds of surfaces including straight surface, circular surface, and curved surface. The simulation-based deflection analysis will be used to emulate measurement from sensors and update the real-time interpolator to offset tool path. The controller designed through pole placement in error space can guarantee the robust tracking performance of the updated reference trajectory combining both contour and tool path offset required for deflection compensation. A variety of cutting conditions are simulated to demonstrate the compensation results. In summary, the process control is integrated with the servomechanism control through either direct servomechanism controller design without tool path modification or servomechanism control with real time interpolation responding to process variation. Therefore, the process control can be implemented as a module within machine tools. Such integration will enhance the penetration of process control on production floor to increase machining productivity and product quality.

Thesis advisor: Mary Ellen Carter / Thesis advisor: Amy Hutton / Managerial share pledging (using shares as collateral for personal loans) is controversial. Institutional Shareholder Services (ISS), highly publicized anecdotes, and international research suggest that share pledging increases the risk of stock price crashes. Nevertheless, U.S. boards continue to allow the practice, suggesting that share pledging benefits shareholders or some boards are beholden to controlling managers who enjoy the private benefits of share pledging. Using a hand-collected dataset of share pledging by executives and directors of S&P 1500 firms from 2007-2020, I document three benefits-greater incentive alignment, reduced executive pay and lower voluntary executive turnover-while finding little evidence of increased crash risk. Interestingly, these benefits do not exist for firms with high managerial control. However ISS's 2012 policy denouncing share pledging did little to reduce share pledging among these firms. Instead the ISS policy increased negative shareholder votes at firms with both high and low managerial control with any share pledging, coinciding with a reduction in share pledging at firms with low managerial control, despite these firms enjoying benefits from share pledging. Overall my findings suggest that, for well-governed firms, managerial share pledging facilitates incentive alignment and lowers executive turnover and pay while not increasing stock price crash risk, calling into question efforts by ISS and others to curb the practice for all firms. / Thesis (PhD) — Boston College, 2024. / Submitted to: Boston College. Carroll School of Management. / Discipline: Accounting.

It is estimated that 50,000 individuals become newly infected with human immunodeficiency virus (HIV) every year in the United States. HIV is a lentivirus that is primarily spread through sexual contact. If left untreated, this viral infection can lead to decreased CD4+ T cells, increased susceptibility to opportunistic infections, and eventually progression to acquired immunodeficiency syndrome (AIDS) and death. HIV viral loads can be decreased to undetectable levels with the use of combination antiretroviral therapy (cART). In 2012 the Food and Drug Administration approved cART therapy, Truvada (tenofovir/emtricitabine), for safe use as pre-exposure prophylaxis (PrEP). When detectable levels of drug are present in the blood stream of patients, there is up to a 92% relative risk reduction in HIV infection compared to placebo. The implementation of PrEP has the potential to decrease the incidence of new HIV infections in at-risk populations worldwide. Because PrEP treatment is relatively new (2012), there are many barriers to administration to patients. Increased risky sexual behavior, known as risk compensation, is one of the concerns providers cite as a reason against prescribing PrEP. Most publications on PrEP have described randomized controlled trials that focused on safety, efficacy, and to a lesser extent, risk compensation behaviors. Now that Truvada is widely available, researchers are starting to elucidate patients’ sexual habits while using PrEP in the outpatient settings. However, there is a need for more longitudinal research regarding the behaviors of individuals using PrEP, specifically to determine how often risk compensation occurs and under what conditions. This study will initiate a PrEP clinic at Boston Medical Center and run a 3 year, open-label randomized controlled trial of eligible men who have sex with men (MSM) patients, who either start PrEP immediately or are delayed by one year. It is hypothesized that condom usage will decrease among immediate PrEP participants compared to the delayed participants. The study aims to determine if risk compensation occurs in these patients by following condom usage, development of sexually transmitted infections, number of sexual partners, and number/type of sexual encounter. Secondary outcomes will include measurements of medication adherence and number of HIV-seroconverters. These data will be collected through surveys and laboratory testing. The resulting information will help medical professionals better understand the risks and benefits of PrEP and also how to implement it most effectively in the fight to reduce the worldwide HIV burden.