Author
Lucian A. Taylor
Other affiliations: University of Chicago
Bio: Lucian A. Taylor is an academic researcher from University of Pennsylvania. The author has contributed to research in topics: Returns to scale & Diversification (finance). The author has an hindex of 17, co-authored 29 publications receiving 1721 citations. Previous affiliations of Lucian A. Taylor include University of Chicago.
Papers
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TL;DR: In this article, the Tobin's q is used to explain both physical and intangible investment, and the authors show that it is a better proxy for both physical investment and intangible capital.
Abstract: The neoclassical theory of investment has mainly been tested with physical investment, but we show it also helps explain intangible investment At the firm level, Tobin's q explains physical and intangible investment roughly equally well, and it explains total investment even better Compared to physical capital, intangible capital adjusts more slowly to changes in investment opportunities The classic q theory performs better in firms and years with more intangible capital: Total and even physical investment are better explained by Tobin's q and are less sensitive to cash flow At the macro level, Tobin's q explains intangible investment many times better than physical investment We propose a simple, new Tobin's q proxy that accounts for intangible capital, and we show that it is a superior proxy for both physical and intangible investment opportunities
465 citations
TL;DR: This paper showed that Tobin's q explains physical and intangible investment roughly equally well, and it explains total investment even better than physical investment at the firm level, compared with physical capital, which adjusts more slowly to changes in investment opportunities.
397 citations
TL;DR: In this article, the authors model investing that considers environmental, social, and governance (ESG) criteria and find that green assets have low expected returns because investors enjoy holding them and because green assets hedge climate risk.
377 citations
TL;DR: The authors empirically analyze the nature of returns to scale in active mutual fund management and find strong evidence of decreasing returns at the industry level and find that performance deteriorates over a typical fund's lifetime.
248 citations
TL;DR: In this paper, the authors evaluate the forced CEO turnover rate and quantify effects on shareholder value by estimating a dynamic model, which features learning about CEO ability and costly turnover, and predict that shareholders value would rise 3% if they eliminated this perceived turnover cost, all else equal.
Abstract: I evaluate the forced CEO turnover rate and quantify effects on shareholder value by estimating a dynamic model. The model features learning about CEO ability and costly turnover. To fit the observed forced turnover rate, the model needs the average board of directors to behave as if replacing the CEO costs shareholders at least $200 million. This cost mainly reflects CEO entrenchment rather than a real cost to shareholders. The model predicts that shareholder value would rise 3% if we eliminated this perceived turnover cost, all else equal. The model also helps explain the relation between CEO firings, tenure, and profitability.
158 citations
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TL;DR: In this paper, the authors propose a new method of testing asset pricing models that relies on using quantities rather than prices or returns, and derive a simple test statistic that allows them to infer, from a set of candidate models, the model that is closest to the true risk model.
727 citations
TL;DR: In this paper, the authors present a unified theory of both the level and sensitivity of pay in competitive market equilibrium, by embedding a moral hazard problem into a talent assignment model.
Abstract: This paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium, by embedding a moral hazard problem into a talent assignment model. By considering multiplicative specifications for the CEO’s utility and production functions, we generate a number of different results from traditional additive models. First, both the CEO’s low fractional ownership (the Jensen–Murphy incentives measure) and its negative relationship with firm size can be quantitatively reconciled with optimal contracting, and thus need not reflect rent extraction. Second, the dollar change in wealth for a percentage change in firm value, divided by annual pay, is independent of firm size, and therefore a desirable empirical measure of incentives. Third, incentive pay is effective at solving agency problems with multiplicative impacts on firm value, such as strategy choice. However, additive issues such as perk consumption are best addressed through direct monitoring. (JEL D2, D3, G34, J3)
563 citations
474 citations
TL;DR: The authors reviewed the financial economics-based research on Environmental, Social, Social and Governance (ESG) and Corporate Social Responsibility (CSR) with an emphasis on corporate finance.
423 citations
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TL;DR: The authors survey arguments that family firms should behave more like non-family firms and professionalize, concluding that despite the apparent advantages of this transition, many family firms fail to do so or do so only partially.
Abstract: The authors survey arguments that family firms should behave more like nonfamily firms and “professionalize.” Despite the apparent advantages of this transition, many family firms fail to do so or do so only partially. The authors reflect on why this might be so, and the range of possible modes of professionalization. They derive six ideal types: (a) minimally professional family firms; (b) wealth dispensing, private family firms; (c) entrepreneurially operated family firms; (d) entrepreneurial family business groups; (e) pseudo-professional, public family firms; and (f) hybrid professional family firms. The authors conclude with suggestions for further research that is attentive to such variation.
414 citations