Do female directors reduce corporate misconduct? with David Carter and Matthew Wynter
S&P 500 companies with more violations issued by the U.S. Department of Justice tend to have a higher percentage of female directors. However, we find that, after accounting for gender disparities in local director markets, companies with higher percentages of female directors actually receive fewer violations than their industry peers, particularly companies with recent violations or more women on select committees. After violations, firms with a higher proportion of women on their boards of directors tend to have higher CEO turnover and lower CEO compensation. The findings suggest that gender disparities confound the negative impact of female directors on misconduct.
Local Culture and Firm Risk Raking: The Role of Religion in Mergers and Acquisitions with Nomalia Manna and Nathan Mauck
This paper examines both the proportion of Catholics and the overall religiosity at the firm-county level and the risk taking in mergers and acquisitions. The results indicate that higher proportions of Catholics and lower religiosity are associated with riskier behavior in the form of more deal activity, a greater likelihood of diversifying deals, and a greater proportion of private target firms. Importantly, both the specific religion (Catholic) and the overall religiosity are significant predictors of M&A deal risk. These results have important implications on the role of local culture in corporate decision making.
Does Wealth Measure Investor Sophistication: An Examination Using Sports Betting Data with Ummahani Akter and David Carter
This paper challenges the common assumption that wealth equates to financial sophistication by employing a novel dataset in the football sports betting market. Focusing on differences between wager amounts, known as sharp money, we examine over 200 NFL and NCAA games from the 2023 season. Contrary to expectations, we find no evidence that gamblers that place bigger wagers are any more accurate than other gamblers. These results have important implications for the finance and economic literature.
Socially Responsible Corporate Networks with David Carter and Yuri Hupka
In this paper, we document a strong comovement between a firm’s corporate social responsibility (CSR) score and the CSR scores of their social network. This result is strongest for the CEO’s social network and when firms that have a high number of connections or more central positions within a network. Our results are robust within firm (firm fixed effect model) and cross sectional variation (industry fixed effect model). Furthermore, our results are robust to exogenous shocks to social networks including forced CEO turnover and the death of a director. Our research documents that social network-based peer effects have an important role in corporate CSR policy.
Anchoring Bias in the NFL Gambling Market with Andy Fodor and Fernando Patterson
Economic Letters (2025)
We explore the impact of the anchoring bias in the NFL betting market to overcome limitations within the financial literature regarding investor behavior. Consistent with an anchoring bias, we find that bettors prefer to bet on teams with better pre-season Super Bowl odds throughout the entire season. Importantly, we document that there is a significant relationship with profitability and pre-season odds in weeks two through eight of the NFL season, suggesting that sportsbooks do not take advantage of gamblers’ biases. Additionally, we provide evidence that sportsbooks continue to incorporate pre-season odds into their closing lines throughout the entire season, suggesting they may anchor to pre-season odds themselves. Our findings offer novel insights into anchoring behavior with important implications for understanding biases in financial markets.
Local Vibrancy and Innovation Spillover with Ani Mathers
International Review of Economics and Finance (2025)
We show evidence of local spillover effects in corporate innovation productivity. Specifically, we find that firms’ patent counts and patent citations are positively related to the innovation output of other local firms, including those firms in different industries. We rule out exogenous local area shocks and local social capital as the driver of this relationship and instead discuss the importance of local endogenous interactions, described as local vibrancy. Our evidence suggests that the quality of the local labor market is an important aspect of local vibrancy affecting innovation spillover. Specifically, we find that local spillover effects are concentrated in areas with high income, larger populations, greater educational attainment, and a greater concentration of technology-related businesses, suggesting that having a large and educated workforce with transferable technological skills are driving our spillover results.
Do CEOs with daughters have greater board gender diversity? with Fernando Patterson and Toni Sipic
International Journal of Accounting and Information Management (2025)
Purpose: This study investigates the influence of a CEO's children's gender on board gender diversity by leveraging insights from the female socialization theory. It posits that CEOs with daughters are more likely to internalize gender-inclusive values, and thus exhibit a more favorable attitude towards female representation in corporate governance. Methodology: We examine the effects of a CEO with a daughter, multiple daughters, and specifically a daughter as their first-born child, on the gender composition of the firm's board of directors. Our analysis encompasses the percentage of women on the board, likelihood of achieving critical mass (defined as having three or more female directors), representation of women on key board committees, and shareholder voting patterns for female directors. Findings: Aligning with our hypotheses, firms led by CEOs with daughters demonstrate significantly higher board gender diversity. Furthermore, the presence of female directors is correlated with more favorable perceptions and increased support from shareholders. Originality: This study enhances the growing body of literature on the determinants of female director appointments and the broader implications of CEO personal attributes on corporate governance practices. Implications: Our findings suggest that the personal characteristics and gender-related perspectives of CEOs are pivotal in promoting an inclusive corporate environment and advancing gender diversity in board leadership.
Terror Threat and Investor Sentiment: International Evidence with Thomas Boulton
Global Finance Journal (2024)
Terrorism remains a persistent threat to global peace and stability, but its impact extends beyond the realm of security. We examine the impact of terrorism on an important capital market transaction – initial public offerings (IPOs). Consistent with the notion that terrorism dampens investor sentiment, we find robust evidence that first-day returns are lower in countries with higher Global Terrorism Index scores. Examining this issue in an international setting allows us to advance the literature in two important ways. First, we provide direct evidence that greater terror threat associates with lower investor sentiment. Second, we shed light on factors – strong democratic principles, high-quality governance institutions, and transparent accounting disclosures – that moderate the negative impact of terror threat on investor sentiment and IPO returns.
Do Unhealthy Cities Produce Unhealthy Returns? with Nicole Choi and John Nofsinger
International Journal of Corporate Governance (2024)
We examine how firms headquartered in poor health communities affect their stock returns and valuations. We find that poor health throughout a community, measured through obesity rates, self-reported poor health status, and self-reporting poor physical or mental health, lowers stock returns and creates lower valuations. Specifically, we find that a 1% increase in overweight rates is associated with $100 billion in lost value to the United States stock market. Furthermore, this effect is more prominent in stocks with more retail investors. This suggests that poor community health influences local investor behavior more strongly than employees affect local stock returns. These results have important implications as obesity rates continue to rise throughout the world.
Do Religiosity and Political Beliefs Affect Female Representation and Firm Performance?. with David Carter
International Review of Financial Analysis (2023)
We investigate the effect of the community values surrounding a firm’s headquarters on the percentage of women on a firm’s board of directors. We use religiosity and political affiliation measures to capture the values associated with the community norms. We find that firms headquartered in counties with lower religiosity and a lower percentage of Republican voters are more likely to have a greater number of female board members. Furthermore, firms with more female directors located in more Republican areas or more religious cities are more likely to have lower valuations, as measured by Tobin’s Q. These results have implications for corporate culture and the supply of female directors.
CEO Narcissism and Corporate Misconduct with Han Donker and John Nofsinger
Economics Letters (2023)
Narcissistic CEOs tend to act to preserve a favorable public image. We contend that in their avoidance of behaviors that might harm their reputation as a great leader, a narcissistic CEO minimizes actions that cause corporate misconduct. Consistent with our hypothesis, we find empirical evidence that corporations with narcissistic CEOs have fewer violations and pay lower fines in penalties. When a non-narcissistic CEO is replaced with a narcissistic CEO, the number of corporate violations diminishes, but the converse occurs when a narcissistic CEO is replaced with a non-narcissistic CEO. The findings provide insight into the complex relationship between CEO personality attributes and corporate behavior.
Momentum Trading in the NFL Gambling Market with John Nofsinger
Finance Research Letters (2023)
We explore the impact of momentum trading in the NFL betting market at the aggregate weekly level. Bettors prefer to bet on momentum rather than mean reversion in the totals market. The effect is strongest when they bet that the total points scored by both teams will be under the betting line set by bookmakers, especially when the under bet won 60% or more of the games in the previous 1, 2, and 3 weeks. Momentum trading by betting the score will be over the betting line loses money, while trading in the under makes a profit.
Applied Economics Letters (2023)
In this paper, I examine the joint role of the previous game’s outcome with and without the spread on wagers’ preferences and outcomes in the NFL gambling market. The results show that gamblers are more likely to wager on the home team if they covered the spread in their previous game, while they are less likely to bet on the home team if the visiting team won their last game (not considering the spread). Further results show that teams are more likely to cover the spread if they covered the spread but lost their previous game. Profitable betting strategies are then put forward based on this information.
Information Asymmetry in the NFL Gambling Market: Inside Information Versus Informed Bettors
Journal of Behavioral and Experimental Finance (2022)
I employ a unique NFL gambling dataset to disentangle information asymmetry between bettors and sportsbooks. In contrast to expectations, I find no evidence that sportsbooks hold more information than the bettors. In fact, the results show that in instances where sportsbooks behave as if they are informed, the market is inefficient and gamblers are earning a profit. One explanation for these results is that gamblers are more informed than the sportsbooks.
Manager See Manager do: The Impact of Geographic Spillover on Corporate Social Responsibility with John Nofsinger and Fernando Patterson
International Journal of Managerial Finance (2022)
This paper examines the geographic herding behavior of Corporate Social Responsibility (CSR). We find a comovement between local firms' CSR scores operating in the same industry after controlling for known regional determinants. Furthermore, our results are most robust for firms headquartered in concentration areas, suggesting that local firms set similar CSR policies to attract top local talent. Overall, these results show that location significantly impacts firm CSR behavior.
Behavioral Biases in the NFL Gambling Market: Overreaction to News and the Recency Bias with Robert Durand and Fernando Patterson
Journal of Behavioral and Experimental Finance (2021)
This paper examines the recency bias and overreaction in the NFL betting market from 2003 to 2017. Consistent with the recency bias, bettors are more likely to bet on teams who have won previous outcomes. We add to the literature and find that the magnitude of prior wins and losses in the previous weeks' plays a greater importance than the sole outcome of wins and losses in betting behavior. Additionally, our results show that bettors wager 2.1% less on the home team when their first-string quarterback does not play, and 3.1% more on the home team when the visitor's first-string quarterback does not play, which is consistent with overreaction. Finally, our results show that bookmakers earn "over the odds" thanks to bettors' quasi-rational behavior as they commit the recency bias.
On The Physiology of Investment Biases: The Role of Testosterone and Cortisol with John Nofsinger and Fernando Patterson
Journal of Behavioral Finance (2020)
The underlying physiological mechanisms of biases are not well understood. As such, we examine the impact of testosterone and cortisol levels on several commonplace investment biases using realistic trading simulations. Cortisol, the biological marker of stress, is positively related to the disposition effect and portfolio turnover, which is consistent with the relation between judgment errors and stress in social settings. Testosterone, the male hormone, is also positively related to portfolio turnover, which is consistent with androgen-driven behaviors. Overall, the results show that the endocrine system plays a significant role during financial decision-making, that has important consequences for the financial industry.
The Relationship between Psychopathy and Financial Risk and Time Preferences with Brice Dupoyet, Robert Durand, and Fernando Patterson
Studies in Economics and Finance (2020)
We examine the relationship between Psychopathy and its underlying components and financial risk and time preferences in a sample of business majors. We find that overall score on Psychopathy is positively related to the linearity of the cumulative prospective utility function. A breakdown of Psychopathy into its main components shows a more complex relation. For example, one component of Psychopathy, Self-Centered Impulsivity, is statistically significant in models of financial risk preference determinants under Cumulative Prospect Theory. Additionally, we find that two components of Psychopathy - Self-Centered Impulsivity and Stress Immunity - are related to a higher time-preference discount rate under quasi-hyperbolic time preferences.
DEEP Sleep: The Impact of Sleep on Financial Risk Taking with John Nofsinger
Review of Financial Economics (2019)
Received a Wiley Top Download Award for the journal from January 1, 2018, to December 31, 2019
In this paper, we examine the relationship between sleep and financial risk taking. The results indicate that individuals who have better sleep display less distortion of probability, are less susceptible to the present bias, and have a lower discounting rate. Specifically, individuals with better self-reported sleep quality have less distortion of probability, a more curved utility function, and are less loss averse, while those with fewer sleep disturbances display less probability distortion and have more curvature in their utility function. Overall, the results show that there are cognitive deficits in financial decision making by having poor sleep habits that can have important consequences.
NFL Betting Market Efficiency, Divisional Rivals, and Profitable Strategies
Studies in Economics and Finance (2019)
In this paper, I examine market inefficiencies in the NFL betting market from the 2003 season through the 2016 season. I examine the impact that division rivals and previously known determinants of inefficiencies have on the current NFL gambling market. The results show that games against division rivals have a lower chance of the home team covering the spread and the chance the game will result in an over. This result demonstrates that the sportsbooks underestimate the familiarity that teams have with each other’s players, coaches, and tendencies from playing each other twice per year. Moreover, using this result in conjunction with previously known inefficiencies, I put forth a model to test out of sample predictions. The results from these tests show profitable strategies in the point spread and totals market with a win rate of nearly 57%. Overall, this paper demonstrates inefficiencies in the NFL betting market that future bettors may be able to take advantage of.
NFL Betting Biases, Profitable Strategies and the Wisdom of the Crowd
International Journal of Sports Finance (2019) (Lead Article)
This paper finds that betting biases in the NFL market go beyond preferring to bet on the favorite team and the over. The results show that as more bettors place wagers, the percentage of wagers on the favorite team increases. Additionally, bettors have a preference to bet against the line movement to receive better betting odds in the point spread market. Moreover, bettors prefer betting on the favorite when the away team has lost recent games and on the over when the home team has been covering the over in recent games. Furthermore, bettors have a nonlinear preference in the point spread betting, as they are less likely to wager on the favorite when the spread is small or large. Finally, economically profitable strategies are put forth based upon the percentage of bettors betting on the favorite or over by using a contrarian strategy when 50% to 60% of bettors place the same wager. These results have important implications as they can be used by the sportsbook to create betting lines to maximize profit.
Decision Making, Financial Risk Aversion, and Behavioral Biases: The Role of Testosterone and Stress with John Nofsinger and Fernando Patterson
Journal of Economics and Human Biology (2018) (Lead Article)
We examine the relation between testosterone, cortisol, and financial decisions in a sample of naïve investors. We find that testosterone level is positively related to excess risk-taking, whereas cortisol level is negatively related to excess risk-taking (correlation coefficient [r]: 0.75 and -0.21, respectively). Additionally, we find support for the dual-hormone hypothesis in a financial context. Specifically, the testosterone-to-cortisol ratio is significantly related to loss aversion. Individuals with a higher ratio are 3.4 times more likely to sell losing stocks (standard error [SE]: 1.63). Furthermore, we find a positive feedback loop between financial success, testosterone, and cortisol. Specifically, financial success is significantly related to higher post-trial testosterone and cortisol by a factor of 0.53 (SE: 0.14). Finally, we find that in a competitive environment, testosterone level increases significantly, leading to greater risk-taking than in noncompetitive environment. Overall, this study underscores the importance of the endocrine system on financial decision-making. Broader implications of this study include, but are not limited to, investors looking to optimize financial performance, industry human resources, market regulators, and academia.
Deconstructing the Corporate Psychopath: An Examination of Deceptive Behavior
Review of Behavioral Finance (2018)
This paper examines whether business students deceive others more often than non-business students. A cheap talk experiment and an ethics questionnaire are employed to examine the subject’s behavior. Fundamental differences, such as psychopathic personality, are used to examine their role in deceptive and unethical behavior. The results show that business students deceive others for personal gain more often than non-business students when there is the most to gain; however, business students find deception committed by others as unethical. Business students exhibit more psychopathic tendencies compared to non-business students, including being more likely to fit the prototypical psychopath profile. This fundamental difference in psychopathy can help explain why individuals deceive others and behave unethically. These results have important implications for the business industry and the design of policies. Thus, this study endeavors to advance the literature on fundamental distinctions between those who work in high levels of organizations and how this fundamental difference impacts decision making.
Oil Prices Volatility or Direction: Which Matters More to Financial Markets? with Brice Dupoyet
Journal of Financial Markets and Portfolio Management (2018)
We examine the impact of oil price uncertainty on U.S. stock returns by industry using the United States Oil Fund options implied volatility OVX index and a GJR-GARCH model. To do so, we test the effect of the implied volatility of oil on a wide array of domestic industries’ returns using daily data from 2007 to 2016, controlling for a variety of variables such as aggregate market returns, market volatility, exchange rates, interest rates, and inflation expectation. Our main finding is that the implied volatility of oil prices has a consistent and statistically significant negative impact on eight out of ten industries. Oil prices, on the other hand, yield mixed results with only three industries showing a positive and significant effect, and two industries exhibiting a negative and significant effect. These findings are an indication that the volatility of oil has now surpassed oil prices themselves in terms of their influence on financial markets. Furthermore, we show that both oil prices and their volatility have a positive and significant effect on corporate bonds credit spreads. Overall, our results indicate that oil price uncertainty increases the risk of future cash flows for goods and services, resulting in negative stock market returns and higher corporate bond credit spreads.
Is the NFL Betting Market Still Inefficient?
Journal of Economics and Finance (2018)
In this paper, I examine market efficiency in the National Football League betting market. In the point spread market, sportsbooks appear to underestimate the abilities of the home team as they are more likely to cover the spread when they are substantial underdogs and when the home team has not covered the spread in its previous games. In the totals market, games are more likely to cover the over when the closing line is small or large showing a quadratic relationship to game outcomes and when the home team has covered the over in its previous games. Overall, the results show that both the point spread and totals market are statistically inefficient.
Are US-Dollar-Hedged-ETF Investors Aggressive on Exchange Rates? A Panel VAR approach with Andre Vianna
Research in International Business and Finance (2016)
Exchange traded funds (ETFs) are a multi-trillion dollar market that epitomizes financialization due to its recent growth. This study examines the behavior of U.S. listed currency hedged ETF investors towards changes in the underlying benchmark and foreign exchange rate from July 2011 to November 2015 using a panel VAR approach. We find that investors are able to anticipate changes in future exchange rates and invest in currency hedged ETFs prior to changes. Granger-causality tests confirm that these investors proactively trade before large real exchange rate movements. These results suggest that the use of financial instruments such as ETFs to hedge against exchange rate volatility may have itself become a source of volatility, which have implications for the further financialization of the ETF industry.