Al-Habbyel Yusoph

I study how firms adjust internal monitoring when executives face less personal liability for their corporate decisions. Lower liability may encourage riskier projects, making outcomes noisier signals of decision quality and increasing the value of information produced by internal monitors. I exploit Delaware’s 2022 officer exculpation reform, which allowed firms to reduce executives’ expected personal legal exposure. Using 31.6 million job postings in a triple difference design, I find that Delaware firms increase recruiting for accountants and auditors relative to other corporate and technical occupations. The response is stronger among firms with higher R&D intensity and operating uncertainty, where information about project selection and implementation is more valuable. It is weaker among firms with greater federal litigation exposure, consistent with remaining legal downside limiting the reform’s effect on risk-taking incentives. Together, the findings suggest that internal monitoring becomes more valuable when executives have stronger incentives to take risks.

We examine whether firms incorporate anticipated climate transition costs into product market prices before regulation imposes direct compliance costs. We study U.S. airlines around the EPA's June 2015 proposed aircraft Endangerment Finding, which increased the credibility of future carbon standards without immediately changing operating costs. Using carrier-route-quarter ticket data and a difference-in-differences design, we compare carriers with different transition risk exposure within the same route and quarter. Following the Endangerment Finding, a one-standard-deviation increase in fleet-age exposure is associated with 2.6 percent higher fares, or about $6 at the sample mean. The response is larger for carriers with greater residual-value risk through owned and capital-leased aircraft. Effects are stronger under tighter financial constraints and when competitive pressure leaves greater room to raise fares. In addition, subsequent declines in cash holdings and owned-fleet age are consistent with financing and fleet adjustments to transition exposure. Together, our findings show that expectations about climate regulation affect product-market decisions before compliance costs materialize and that asset ownership and lease classifications help identify where transition exposure resides.

How does the allocation of performance metrics across executives shape corporate risk-taking? We argue that common metrics trade function-specific accountability for coordination, expanding firms' capacity to implement uncertain internal projects. Using S&P 1500 annual bonus grants, we document that the share of teams with fully homogeneous metrics rose from 60 percent in 2007 to 85 percent in 2022. We find that greater homogeneity predicts more R&D and patenting and higher idiosyncratic risk, but not greater total investment or systematic risk. The relation weakens when firms have alternative coordination mechanisms.