Offshore and Onboard: Secret Offshore Companies and Director Career Outcomes
Joint work with Leonid Pugachev (Rochester Institute of Technology)
We study U.S. corporate directors who hold secret offshore companies (SOCs). We match a novel dataset of four leaks regarding SOC ownership to the registry of U.S. corporate directors from 2005 to 2021. Our preliminary results show that SOC affiliated directors (SOCADs) are more likely to be male, have backgrounds in accounting, hold CEO and CFO positions, chair the board and audit committees, and receive higher pay. Shareholders penalize directors upon learning of their SOC involvement. SOCADs are more likely to exit the director labor market the year after the leak, lose board seats, and receive ‘against’ votes in re-election campaigns. The leak does not affect firm value of SOCAD’s current employers.
Anti-Money Laundering Infractions of Banks
Joint work with Sandra Tillema (University of Groningen)
Banks have to comply with laws and regulations that aim at preventing money laundering. We investigate the effects of news articles that report on banks which fail to comply with such anti-money laundering (AML) rules, and study whether banks’ shareholders strengthen the effects of regulatory discipline. We find that stock prices decline significantly when news related to AML violations is released and these declines are larger than the monetary fines that supervisors impose. We further study whether institutional investors discipline bank managers by exiting their bank holdings. In line with a market discipline channel, we find that the institutional investor holdings decline significantly after news related to AML violations is released. More generally, our study highlights that regulatory discipline does not undermine but promote market discipline.
Risk committees, Basel regulation and bank risk taking in dual banking systems
Joint work with Amal AlAbbad (LaPenta School of Business)
We investigate empirically whether banks in dual banking countries more likely install risk committees after Basel disclosure requirements have been implemented. Using a hand-collected sample of Islamic banks and matched conventional banks, we find that Basel disclosure requirements make it more likely that banks establish risk committees. After a risk committee has been formed, risk taking of banks declines. These findings suggest that risk-based capital regulation does not only directly affect banks’ risk taking, but it also influences bank risk governance, which in turn affects risk taking. While Islamic banks, due to their compliance to Islamic law, or Shariah, are less likely to establish risk committee than conventional banks, the two show similar responses to changes in regulatory disclosure requirements.