Essay I: The Real Effect of Local Media on Corporate Social Responsibility (CSR): Evidence from Toxic Emissions

This paper explores the role of local media in disciplining firm managers’ environmental practices, a core part of CSR engagements. By exploiting staggered shocks to local media coverage due to the closure of local daily newspapers, I find that firm plants located in areas with reduced local media coverage significantly increase toxic emissions, which are associated with financial benefits such as reduced production costs. The effect is stronger when the reduction in local media coverage is more severe, when firm plants directly sell goods to end consumers or mainly serve local customers, and when firm managers exhibit greater short-termism. This effect is weaker when other p...[ Read more ]

Essay I: The Real Effect of Local Media on Corporate Social Responsibility (CSR): Evidence from Toxic Emissions

This paper explores the role of local media in disciplining firm managers’ environmental practices, a core part of CSR engagements. By exploiting staggered shocks to local media coverage due to the closure of local daily newspapers, I find that firm plants located in areas with reduced local media coverage significantly increase toxic emissions, which are associated with financial benefits such as reduced production costs. The effect is stronger when the reduction in local media coverage is more severe, when firm plants directly sell goods to end consumers or mainly serve local customers, and when firm managers exhibit greater short-termism. This effect is weaker when other pro-environmental activists monitor firm plants. Collectively the findings suggest that local media monitoring plays an important role in forcing firms to be environmentally responsible, partly by raising customers’ environmental awareness and by restricting managerial myopia.

Essay II: The Whack-A-Mole Game: The impact of Say on Pay Laws on Insider Trading Profitability

This paper examines whether mandatory adoption of say on pay increases executives’ incentives to engage in insider trading as a way to offset the regulatory-induced increase in compensation risk. My empirical design exploits the staggered adoption of say on pay laws across countries over the 2002-2015 period. I find that the adoption of say on pay laws is associated with a material increase in insider trading profitability. Cross-sectional tests suggest that the increase is higher in firms where executive pay is most affected by say on pay (e.g. firms with excess pay and weaker governance) and countries with weaker insider trading restrictions. Finally, I find that executives increase their trades’ profitability by engaging in larger, more frequent and more informative trades (in terms of future returns) - including more trades during information-sensitive periods.