Articles scientifiques

Are Novice Private Equity Funds Risk-Takers? Evidence From a Comparison with Established Funds


Journal of Corporate Finance: Contracting, Governance and Organization

août 2014, vol. 27, pp.55-71

Départements : Finance

Mots clés : Private equity funds, Venture capital, Buyouts, Learning, Reputation, Risk-taking

This paper explores whether private equity firms that are new to the industry take excessive risks relative to funds from established firms. We use differences between the implicit incentives of managers of experienced and of novice funds as an identification strategy. We find that novice funds invest more slowly than experienced funds, contradicting the risk-taking hypothesis. However, the size of their investments, in value and as fraction of fund size, is larger; this could be consistent with risk-shifting by novice funds but also with alternative hypotheses. We find that the size difference increases over time and is absent from buyout investments. We also find that novice funds tend to underperform most dramatically for early large investments, and that the size of their investments increases after a first successful exit. These and other findings are in conflict with the excessive risk-taking hypothesis, but largely consistent with alternative explanations that emphasize differences in expertise

Asynchronicity and coordination in common and opposing interest games


Theoretical Economics

mai 2014, vol. 9, n°2, pp.409-434

Départements : Finance, GREGHEC (CNRS)

Mots clés : Revision games, Pre-opening, finite horizon, Equilibrium selection, Asynchronous moves

We study games endowed with a pre-play phase in which players repare the actions that will be implemented at a predetermined deadline. In the preparation phase, each player stochastically receives opportunities to revise her actions, and the ?nally-revised action is taken at the deadline. In 2-player “common interest” games, where there exists a best action pro?le for all players, this best action pro?le is the only equilibrium outcome of the dynamic game. In “opposing interest” games, which are 2 × 2 games with Pareto-unranked strict Nash equilibria, the equilibrium outcome of the dynamic game is generically unique and corresponds to one of the stage-game strict Nash equilibria. Which equilibrium prevails depends on the payo? structure and on the relative frequency of the arrivals of revision opportunities for each of the players.

CEO Optimism and Incentive Compensation


Journal of Financial Economics

novembre 2014, vol. 114, n°2, pp.366-404

Départements : Finance

Mots clés : CEO optimism, Incentive compensation, Compensation contract

I study the effect of chief executive officer (CEO) optimism on CEO compensation. Using data on compensation in US firms, I provide evidence that CEOs whose option exercise behavior and earnings forecasts are indicative of optimistic beliefs receive smaller stock option grants, fewer bonus payments, and less total compensation than their peers. These findings add to our understanding of the interplay between managerial biases and remuneration and show how sophisticated principals can take advantage of optimistic agents by appropriately adjusting their compensation contracts

CEO Pay and Firm Size: An Update After the Crisis

Xavier Gabaix, A. LANDIER, Julien Sauvagnat

Economic Journal

février 2014, vol. 124, n°574, pp.F40-F59

Départements : Finance, GREGHEC (CNRS)

In the ‘size of stakes’ view quantitatively formalised in Gabaix and Landier (Quarterly Journal of Economics, 121(1):49–100, 2008), CEO compensation reflects the size of firms affected by talent in a competitive market. The years 2004–11 were not part of the initial study and offer a laboratory to examine the theory with new positive and negative shocks. Executive compensation (measured ex ante) did closely track the evolution of average firm value, supporting the ‘size of stakes’ view out of sample. During 2007–9, firm value decreased by 17%, and CEO pay by 28%. During 2009–11, firm value increased by 19% and CEO pay by 22%

Epistemological foundations for the assessment of risks in banking and finance


Journal of Economic Methodology

2014, vol. 21, n°2, pp.125-138

Départements : Finance, GREGHEC (CNRS)

Mots clés : financial crises, causal process, forecasting, research program, risk