Jesus M. Salas

• Doctor of Philosophy
• Professor (Associate) at Lehigh University

We investigate whether firm-level political connections affect the allocation of exemptions from tariffs imposed on $US 550 billion of Chinese goods imported to the United States annually beginning in 2018. Evidence points to politicians not only rewarding supporters but also punishing opponents: Past campaign contributions to the party controlling...

We examine the likelihood and value relevance of related party transactions in family firms. Based on an extensive hand‐collected sample, we find that founder‐led family firms are more likely to enter into related party transactions than other firms. We also find that the founder‐led family firm valuation premium is reduced when these firms disclos...

Prior research indicates that the CEO has a significant impact on financial reporting decisions. However, there is limited research on the implications of CEO succession origin (hiring a CEO from the inside as opposed to from the outside) for auditors. We find that on average, audit fees are greater by about 8% when a CEO is hired from the outside...

Internally‐promoted CEOs should have a deeper understanding of their firm's products, supply chain, operations, business climate, corporate culture, and how to navigate among employees to get the information they need. Thus, we argue that internally‐promoted CEOs are likely to produce higher quality financial reports than outsider CEOs. Using a sam...

Research Question/Issue Despite the benefits of privatization (i.e., divestiture of government‐owned enterprises), governments still own substantial stakes in economically important firms. Given public concern about excessive compensation and frequent government responses, this paper compares the level and structure of CEO compensation in privatize...

This study finds a positive, economically meaningful impact of generalist chief executive officers (CEOs) on shareholder value using 164 sudden deaths and 345 non-sudden exogenous turnovers. The higher a departing CEO’s general ability index (GAI), independently and relative to her successor, the lower is the abnormal stock return to turnover annou...

Governance scholars debate the value of directors as an effective governance mechanism. We suggest that this value varies with director tenure. We study both how shareholder assessments of the value of individual directors vary with director tenure and whether director tenure actually makes a practical difference to governance effectiveness. Using...

We examine the distinct effects of generalist–specialist versus insider–outsider attributes on Chief Executive Officer (CEO) compensation patterns. Our cross-sectional results show that each attribute has a significant impact on both the level and structure of CEO compensation. CEOs with a high generalist–outsider combination receive the highest to...

This study provides strong evidence of a causal effect of risk-taking incentives provided by option compensation on corporate risk management. We utilize the passage of Financial Accounting Standard (FAS) 123R, which required firms to expense options, to investigate how chief executive officer option compensation affects the hedging behavior of oil...

Purpose – This paper aims to determine the equity and debt market reactions of firms to the news of their hiring a credit rating agency (CRA) analyst. Due to recent controversies related to CRAs, the US Securities and Exchange Commission (SEC) requires disclosure of the hiring of an analyst if the analyst recently worked for a rating agency that pr...

The widespread practice of managers speculating by incorporating their market views into firms’ hedging programs (“selective hedging”) remains a puzzle. Using a 10-year sample of North American gold mining firms, we find no evidence that selective hedging is more prevalent among firms that are believed to possess an information advantage. In contra...

This study provides strong evidence of a causal effect of risk-taking incentives provided by option compensation on corporate risk management. We utilize the passage of Financial Accounting Standard (FAS) 123R, which required firms to expense options, to investigate how chief executive officer option compensation affects the hedging behavior of oil...

Governance scholars debate the value of directors as an effective governance mechanism. We contribute to the resolution of this debate by examining the value placed on directors by shareholders, as evidenced by the market reactions to director exits, given their tenure in the firm. Drawing from human capital theory, and using empirical data from th...

We study the relations between governance mechanisms (internal and external), conference call voluntary disclosures (incidence and length) and CEO compensation. Because voluntary disclosures are found to benefit shareholders, institutions always want to push for more frequent and longer conference calls. Alternatively, boards of directors may prefe...

Very little is known about whether personal characteristics of senior managers convey information about audit risk. We focus on one characteristic of the CEO, the number of years the CEO has worked in the firm before becoming the CEO (CEO in-house experience). We posit that the CEO’s in-house experience mitigates audit risk due to less uncertainty...

Current payout policy literature contends that firms’ propensity to pay dividends declined between 1978 and 1998. Using the Oaxaca decomposition methodology, we measure changes in the propensity to pay dividends between 1978 and 1998. Results suggest that firms today have only a slightly lower propensity to pay dividends. Furthermore, when we also...

We hand collect a database that includes a direct measure of the incoming CEO’s in-house experience at the time of succession. In contrast to previous studies that rely on an insider-outsider binary variable, our continuous variable allows us to examine compensation incentives following CEO successions across a continuum of in-house experience. We...

Surveys of corporate risk management document that selective hedging, where managers incorporate their market views into firms’ hedging programs, is widespread in the U.S. and other countries. Stulz (1996) argues that selective hedging could enhance the value of firms that possess an information advantage relative to the market and have the financi...

The ongoing global financial crisis has led to the largest increase in state intervention since the Great Depression. Direct government ownership in publicly-traded corporations has increased dramatically since 2008. How will this increase in public ownership affect the governance of these erstwhile private companies? We examine the impact of gover...

Surveys of corporate risk management document that selective hedging, where managers incorporate their market views into firms’ hedging programs, is widespread in the U.S. and other countries. Stulz (1996) argues that selective hedging could enhance the value of firms that possess an information advantage relative to the market and have the financi...

Explaining the observed average positive stock price reaction to dividend initiations has proven to be difficult. Signaling theory evidence is mixed and agency theory evidence is scarce. This paper uses the stock price reaction to dividend initiations to test the agency theory of dividends. Results suggest that the stock price reaction is positivel...

We examine why firms hedge selectively even though prior research shows that the gains from such speculative activities are economically insignificant. We find that smaller firms speculate more than larger firms, and that firms with a higher probability of bankruptcy speculate more than firms with a lower probability of bankruptcy. These cross-sect...

In many markets, changes in the spot price are partially predictable. We show that when this is the case: (1) although unbiased, traditional regression estimates of the minimum variance hedge ratio are inefficient, (2) estimates of the riskiness of both hedged and unhedged positions are biased upward, and (3) estimates of the percentage risk reduct...

To study managerial entrenchment, I use the stock price reaction to unexpected senior executive deaths. If a highly effective manager dies unexpectedly, the stock price reaction should be negative. If, however, death removes an entrenched manager when the board would or could not, the stock price reaction should be positive. While, individually, ag...

Grossman and Hart (1980), Easterbrook (1984), and Jensen (1986) argue that dividends may help reduce the agency problem by reducing the amount of cash executives have at their disposal. In this paper, I use the stock price reaction to dividend initiations to test this "cash holdings" hypothesis. I find that the stock price reaction is indeed positi...

seminar participants at MIT and the University of Oklahoma for their comments. We also thank Ted Reeve for providing us with his derivative surveys of gold mining firms, and Sridhar Gogineni and Leung Kam Ming for excellent research assistance. We are responsible for any remaining errors.

We study the selective hedging puzzle, using data on the speculative activity of a sample of 92 North American gold mining firms, a setting that seems likely to satisfy the conditions stipulated by Stulz (1996) for shareholder value-maximizing selective hedging. Contrary to our predictions, we find that smaller firms speculate more than larger firm...

In this paper, I explore the information content of dividends by looking at dividend initiation announcements. While earlier literature has used analyst forecasts to explore the information content of dividends, they have all focused on dividend changes. I show that analysts revise their one-year-ahead (long-run growth) forecasts upwards (downward)...

Fama and French (2001) argue that firms today have a lower propensity to pay dividends than in 1978. To our knowledge, no previous studies have econometrically measured the magnitude of this lower propensity to pay dividends. In this paper, we employ a unique decomposition technique to measure this lower propensity to pay dividends. After controlli...

Deaths of executives provide a special case to explore management turnover since the decision to leave the firm is determined by neither the executive nor the board. In this paper, I document stock price changes to eighty - four events in which either the CEO or the chairman of the board died unexpectedly. Our results show that abnormal returns are...