Kose John

• PhD Doctor of Philosophy
• Professor at New York University

We develop an economic model to compare equilibrium security of Proof-of-Work (PoW) versus Proof-of-Stake (PoS) blockchains. We derive general conditions to determine when PoW blockchains are more secure than otherwise equivalent PoS blockchains and vice versa. Applying real-world parameter values to these conditions, we demonstrate that PoS blockc...

Motivated by the ethical dilemma in managerial financial reporting decisions, we explore and reveal an unintended “crash” consequence following accelerated patenting information dissemination. Employing the American Inventor’s Protection Act (AIPA) that accelerated the publication of patent applications, we find that accelerated dissemination of pa...

Islamic assets, assets compliant with ethical and religious norms as codified in Sharia law, broaden the investor base. Do such investments contribute to mean-variance efficiency, and if so, how? Using daily data on stock, bond, and money market indices from nine Islamic countries and 37 non-Islamic ones from May 2007 to June 2010, we show that add...

We explain the mechanics of smart contracts. We then highlight the benefits of smart contracts, such as overcoming commitment problems. We also discuss limitations, such as the difficulty for smart contracts to access information external to the blockchain and the difficulty of integrating smart contract code with traditional legal enforcement. We...

The purpose of this paper is to examine how banks changed their executive pay disclosure practices in the aftermath of the global financial crisis. In particular, we examine banks’ response to regulations meant to curb banks’ short-term risk-taking incentives. We document that differences in the compliance strategies among banks are function of ban...

We present a novel methodology to calculate the jump-induced tail risk premium for individual stocks and examine its effect on the following-month's returns. The existence of a premium for bearing negative jump-induced tail risk is significantly associated with negative one-month future returns. In contrast, the existence of a positive premium for...

We survey extant literature on the economics of blockchain fundamentals, with particular focus on Bitcoin, proof-of-work, and proof-of-stake. We formally clarify Bitcoin's economic significance in solving the double-spending problem without a centralized entity. We then transition to the economics literature, highlighting the key endogenous economi...

We demonstrate theoretically that Bitcoin’s limited adoption arises as an equilibrium outcome rather than as a short-lived property. Our results are driven by negative network effects which arise due to Bitcoin’s need for consensus and the existence of network delay. As the Bitcoin network expands, network delay grows thereby prolonging the time ne...

We find that an increase in a firm’s incentives to use trade secrets to protect its intellectual property results in a more actively managed capital structure. Exploiting U.S. states’ adoption of the Uniform Trade Secrets Act as a positive “shock” in the protection afforded to trade secrets, we find that firms covered by the Act reduce debt levels...

Research summary Agency perspectives suggest long-tenured independent directors (LTIDs) may be cronies of the CEO, making their boards less effective, but we theorize that LTIDs may have particular expertise and motivation to improve board effectiveness and ultimately firm performance. We find strong support for this prediction using 15 years of da...

We conjecture that high stock liquidity negatively affects firm valuation by inducing inefficient investment. Using takeovers of public targets to study the empire-building motive, we find that a liquid firm is more likely than an illiquid firm to acquire a public firm. Such a takeover by a bidder with higher stock liquidity destroys bidder value t...

This paper studies the important but unexplored relationship between R&D investment intensity and different components of stock price volatility. The total volatility of stock price is decomposed into a continuous component and a jump component. We find that firms with higher R&D investment intensity have less jump volatility of stock price. We exp...

We examine the change in the level and significance of accrual and real earnings management over the period 1996–2018. Our univariate results show that both accrual and real earnings management continue to persist, although they have significantly decreased over time. After controlling for significant factors that have been shown to affect earnings...

We study the effects of country-level creditor protections on the firm-level choice of debt structure concentration. Using data from 46 countries, we show that firms form more concentrated debt structures in countries with stronger creditor protection. We propose a trade-off framework of optimal debt structure and show that in strong creditor right...

In this paper, we study how different categories of crucial COVID-19 information influence price dynamics in stock and option markets during the period from 01/21/20 to 01/31/21. We present a theoretical model in which the behavioral traders make perceptual errors based on the intensity of sentiment arising from different types of news. In addition...

We investigate how the level of religiosity in the county in which a firm is headquartered affects the incidence of shareholder lawsuits and employee whistleblowing. We hypothesize that the local religiosity promotes an environment in which employees are prone to be more truthful, less expedient and more prone to whistleblowing if their managers ma...

We examine the impact of age similarity between independent directors and the CEO on earnings management. Using changes in independent director composition due to same-aged director deaths and retirements for identification, we find that firms with the presence of independent directors who have the same age with the CEO are more likely to manage ea...

We develop an international model of the design of institutions for regulating innovative activities of private corporations. Informational limitations faced by the social planner preclude complete contracting with private firms. Corporate innovation creates positive and negative externalities. The social planner in each country takes into account...

Using the staggered and reciprocal passage of interstate bank deregulation as an exogenous variation in the degree of bank integration, we investigate how and why bank integration influences the market for corporate control for nonfinancial firms. We posit that bank integration affects acquisitions either through reducing the information asymmetry...

Time-varying depreciation rates are estimated for research and development of the United States aggregate economy and innovation-intensive industries. Mean annual R&D depreciation rates are 31.5% for software, 41% for pharmaceuticals, 42% for semiconductors, and 30.4% for aggregate economy during 1978-2014. R&D depreciation rates vary across indust...

Black pepper is one of the most valued and widely used spices in the world and dominates multi-billion dollar global spices trade. India is amongst the major producers, consumers and exporters of black pepper. In spite of its commercial and cultural importance, black pepper has received meagre attention in terms of generation of genomic resources....

We provide cross country evidence from microfinance institutions (MFIs) that are Sharia-compliant and their comparisons with non-Sharia-compliant MFIs. We find that, compared with non-Sharia-compliant conventional MFIs, Sharia-compliant Islamic MFIs have less credit risk but are less profitable and financially sustainable, have better poverty outre...

We develop an international model of the design of institutions for regulating innovative activities of private corporations. Informational limitations faced by the social planner preclude complete contracting with private firms. Corporate innovation creates positive and negative externalities. The social planner in each country takes into account...

Advanced technology, Big data, and complex AI/ML algorithms have provided benefits to both consumers and lenders. Fintech has a potential to disrupt and to create new types of risk. Regulators around the globe are working diligently and thoughtfully to provide consumer protection and to maintain financial stability while at the same time to create...

We document that a firm’s culture, specifically, its religiosity, affects its cost of debt. Firms in higher-religiosity counties have higher credit ratings and lower debt costs. The impact of religiosity is stronger for firms with greater information asymmetry and during recessions. Further, religiosity has additional explanatory power for the cost...

Employment protection increases labor adjustment costs and hence the expected costs of financial distress for labor-intensive firms. It follows that these firms are likely to increase their cash holdings to reduce the risk of financial distress when employment protection is strengthened. Consistent with this prediction, we find that labor-intensive...

A novel compact planar UHF RFID tag with broadband operation and enhanced read range characteristics are presented. The structure of the tag consists of a T- matched dipole antenna whose arms are orthogonally loaded with Triangular SRR arrays. Triangular SRR arms loaded in the structure produce compactness and good impedance matching which is neede...

This paper examines corporate tax evasion from both a financial and governance perspective: one, the impact of tax evasion on a multinational (MNC)'s financial performance and secondly, whether corporate governance levels affect the probability of the multinational committing tax evasion. We specifically address: (i) whether MNCs suffer any adverse...

This paper studies the impact of interest rate news surprises on Islamic and conventional stock and bond indices, using a dataset which covers interest rate announcements and forecasts, as well as stock and bond indices in three Islamic and eight non-Islamic countris. We find that interest rate surprises tend to have a smaller impact on the returns...

Using the percentage of outside directors as a proxy for board monitoring, we find empirical evidence that board monitoring and CEO pay–performance sensitivity (PPS) are substitutes. In 2002, major US exchanges began to require that the boards of listed firms have more than 50% outside directors. In the case of firms affected by this requirement, t...

We show that the strength of creditor protection influences corporate debt structures. Using data from 46 countries, we find that managers choose less heterogeneous debt structures and more bank debt in their debt structures, in response to stronger creditor rights. These choices increase the probability of successful renegotiation of distressed de...

We examine the relation between the agglomeration of firms around big cities and chief executive officer (CEO) compensation. We find a positive relation among the metropolitan size of a firm’s headquarters, the total and equity portion of its CEO’s pay, and the quality of CEO educational attainment. We also find that CEOs gradually increase their h...

We find that PIPE issues that do not provide any protections to investors convey positive information about the firm and result in positive announcement period returns. However, PIPE issues that provide protections do not convey any new information about the firm and hence do not result in significant positive or negative announcement period return...

We examine the importance of the tax and microstructure theories in explaining the ex-dividend day behaviour of US REIT stock prices in three tick size regimes-the 1/8th, 1/16th, and decimal eras. We present a new theory that shows how the tax and microstructure effects interact to produce the observed ex-dividend day behaviour. Our theory also sho...

The effect of corporate governance may depend on a firm’s financial slack. On one hand, financial slack may be spent by managers for their private benefits; a high level is likely associated with severe agency conflicts. Thus corporate governance matters more for high financial slack firms (i.e., the wasteful spending hypothesis). On the other hand...

Manuscript Type Review Research Question/Issue We survey the literature on corporate governance in banks in the US and international settings. We discuss how the specialness of banks, deposit insurance, high bank leverage, and bank regulation interact with bank governance. We evaluate bank governance from three perspectives: (1) maximizing bank eq...

We examine the role of bilateral political relations on cross-border merger and acquisition (M&A) activities. Based on a large sample of cross-border deals during 1990- 2010, we find strong and robust evidence that bilateral political relations have large and significant causal effects on cross-border M&As. A one-standard-deviation increase in poli...

Characteristics of Islamic finance, such as a smaller set of shared information and a lower degree of cross-market hedging, reduce volatility linkages (correlations) between Islamic and conventional stocks, bonds and bills. We use a stochastic volatility model in a Generalized Methods of Moments framework as well as other volatility proxies to esti...

Accounting restatement is generally viewed as an event that can exacerbate a restating firm’s financing environment. We examine restating firms’ financing activities in the post-restatement environment. We document significant declines in the frequency of financing activities as well as the dollar amount of net cash provided by financing activities...

We examine how firms structure payout and debt commitments to address governance weaknesses. Firms with severe agency conflicts precommit through a combination of dividends and debt or through dividends rather than debt alone. Such firms also shift their shareholder payouts towards regular quarterly dividends – a stronger commitment than special di...

Firms that file for Chapter 11 are actively traded. This paper investigates who trades these bankrupt firms and why. We also examine the potential pricing impact of this active trading. We find that the unique lottery-like characteristics of bankrupt firms make them attractive to a particular retail investor clientele who uses them to gamble in the...

This paper examines whether asymmetric benchmarking of pay exists for vice presidents (VPs). Using ExecuComp data for 1992–2007, we find that companies reward VPs for good luck but do not penalize them for bad luck. However, asymmetric benchmarking of VP pay is mitigated by governance, CEO power, gender, and industry factors. The presence of asymme...

We examine a sample of 670 firms that announce asset purchases. We hypothesize that buyer announcement returns should be higher in the presence of better monitoring and better governance. Consistent with the monitoring hypothesis, we find that buyers with higher private debt make purchase decisions that increase shareholder value. Consistent with t...

We examine a sample of 1458 divestitures of domestic assets by U.S. firms to foreign and domestic buyers over the period 1998–2008. Cross-border asset sales yield higher abnormal returns to the seller than domestic sales. This incremental return is driven by liquidity-seeking sellers engaging in cross-border transactions. Larger seller returns in t...

We model the reorganization decision of distressed firms. One of the novel features of our paper is that we examine the asset and liability side restructuring decisions jointly to resolve financial distress. Secondly, we model several institutional features of coping with financial distress such as debtor-in-possession financing, prepackaged bankru...

Firms can mitigate corporate governance weaknesses by precommitting to regular cash payouts. This paper uses differences in state antitakeover protections to examine the effects of governance on the structure of firms' payout and debt commitments. First, we shed new light on the tradeoff between debt and dividends in the context of agency conflicts...

This paper examines the outcomes of corporate acquisitions from the perspective of stakeholder-shareholder agency conflicts. Using state variation in labor rights laws, we show that strong labor rights acquirers experience significantly lower announcement returns. The effect is in part due to such acquirers pursuing deals that are not in the best i...

We test the implications of the misvaluation hypothesis (Shleifer and Vishny, 2003) for a large sample of acquirers of private and public target firms. Consistent with the misvaluation hypothesis we find that acquirers are overvalued. The overvaluation is higher for stock acquisitions of private targets. We find that the announcement period returns...

This chapter surveys the recent literature on managerial compensation, focusing on the main issues that spurred intense debate in the popular press, academia, and from regulatory agencies. In particular, the literature review discusses whether the high levels of executive compensation are justifiable, and whether executive compensation schemes indu...

An underlying assumption in the executive compensation literature is that there is a national labor market for CEOs. The urban economics literature, however, documents higher ability among workers in large metropolitians, which results in a real and stable urban wage premium. In this paper, we investigate the link between the spatial clustering of...

Cooperative financial institutions arose in response to the perceived failure of the conventional banking system to serve marginal communities. Such institutions now enjoy a widespread and growing presence in banking markets across the world. Yet, the costs and benefits of this organizational form remain a theoretical puzzle. We show that the coope...

This paper finds strong support for the argument that heterogeneous adjustment costs significantly affects the speed with which a firm approaches its target capital structure. We find that firms with higher non-debt tax shields (from R&D), and cash holdings adjust faster to their target capital structure. Firms that have higher profitability, growt...

In this paper we show that the volatility of risk is an important factor in explaining capital structure choices of firms. We construct two proxies for the volatility of risk: one based on recent historical month to month changes in the volatility of firm asset values and one based asset volatilities implied by equity option prices. This effect is...

This paper documents a novel agency cost that arises because managers of potential takeover targets forgo merger opportunities in industry merger waves. We present comprehensive evidence that the entrenchment effect of classified board varies dynamically over time by industry. While the effect is strongly economically significant in years when indu...

This paper examines how dividend protection on executive compensation aects corporate pay-out policy. With manually collected data for S&P 500 rms between 2000 and 2009, I show that less than 1% of rms provide a dividend protection on executive option grants while more than 70% of rms pay dividends on unvested restricted stock grants. I nd that the...