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In The Papers: CEOs Gaming Stocks, Soccer Stars And Fertility As Old-Age Security


Every Monday, the National Bureau of Economic Research, a nonprofit organization made up of some of North America’s most respected economists, releases its latest batch of working papers. The papers aren’t peer-reviewed, so their conclusions are preliminary (and occasionally flat-out wrong). But they offer an early peek into some of the research that will shape economic thinking in the years ahead. Here are a few of this week’s most interesting papers:


Title: “Strategic News Releases in Equity Vesting Months”

Authors: Alex Edmans, Luis Goncalves-Pinto, Yanbo Wang, Moqi Xu

What they found: CEOs release more discretionary company news during months when their stock holdings or stock options vest.

Why it matters: For many CEOs, their compensation includes stock (or “equity”) grants, but these grants do not vest, or become salable, often until many years in the future. As part of their job, these executives interact with the public by releasing company news, some of it mandatory and some at their discretion. The authors of this paper find that CEOs are strategic in unveiling discretionary company news so that it coincides with months when their stock holdings or options vest. Because these stock grants were made contractually several years prior to the vesting date, it is “exogenous” to the state of the company’s news. Yet, compared with non-vesting months, CEOs release 2 percent more discretionary news — that is, news not required by regulation, such as quarterly filings to investors — while the amount of nondiscretionary news is unchanged. The discretionary news is often positive in nature, temporarily boosting the stock price exactly when the CEO can cash in.

Key quote: “Discretionary disclosures are significantly higher in months in which equity is scheduled to vest, and significantly lower in the months before and after vesting. They are associated with favorable media coverage, suggesting that they are positive in tone. The news releases lead to temporary increases in the stock price and trading volume, consistent with an attention story. CEOs exploit these temporary effects: the median CEO sells all his vesting equity within 7 days of a discretionary news release in a vesting month.”

Data they used: Data on months when CEO equity is vested, from the Equilar data set (2006-11) and data from proxy statements and SEC Form 4 filings (1994-2005); news events from Capital IQ’s Key Developments database


Title: “Do Star Performers Produce More Stars? Peer Effects and Learning in Elite Teams”

Authors: Casey Ichniowski, Anne Preston

What they found: A professional soccer player’s performance improves faster after playing on an elite team rather than on a lower-level team.

Why it matters: There is a vast economic literature documenting how worker productivity is especially influenced by high-performing peers. To explore these “peer effects,” the authors study professional soccer players to see whether playing with other elite players accelerates their performance gains. Given that better players get invited to play on better teams, the researchers had to disentangle this selection effect to isolate their performance gains. To do this, they used two novel comparisons: 1) how players perform on their national-level teams before and after joining an elite professional team and 2) how foreign players performed after the 1995 Bosman ruling, which banned restrictions of foreign players on European club teams. Using these controls, the authors find significant and lasting effects on player performance after stints with other elite players. This analysis was bolstered by a separate study using individual player tracking data.

Key quote: “An increase of one or two players on a national team joining an elite club can lead to substantial improvement in national team play that can change the world ranking of the team by several spots.”

Data they used: A national team data set covering 101 countries, as well as data on elite professional European club teams, from 1990 to 2010; player-level data from Opta


Title: “Fertility and Financial Development: Evidence from U.S. Counties in the 19th Century”

Authors: Alberto Basso, Howard Bodenhorn, David Cuberes

What they found: The hypothesis that individuals have more children as insurance for themselves in old-age seems to be born out (zing!) in the data.

Why it matters: Economists in the 1970s proposed a theory — called the old-age security hypothesis — that individuals would have more children as a means to transfer income back to themselves later in life, the implication being that fertility levels and financial development (like banking, insurance, etc.) should be inversely correlated. Using county-level data from 1850, the authors seek to test this theory. They find that the presence of a bank in a county, after controlling for other demographic and economic variables, leads to a reduction in the child-woman ratio of about 3 percentage points.

Key quote: “We find a robust negative correlation between financial development and fertility, which strongly supporting the old-age security hypothesis. We do not argue that the old-age security motive is the main — nor even the most important — factor. … Our results are rather interpreted as highlighting the importance of financial development as a mechanism reducing parents’ incentives to have a large number of offspring.”

Data they used: County-level data from the Northeastern United States from 1850.

Andrew Flowers wrote about economics and sports for FiveThirtyEight.