Hedge funds have become important investors in public companies raising equity privately. Hedge funds tend to finance companies that have poor fundamentals and pronounced information asymmetries. To compensate for these shortcomings, hedge funds protect themselves by requiring substantial discounts, negotiating repricing rights, and entering into short positions of the underlying stocks. We find that companies that obtain financing from hedge funds significantly underperform companies that obtain financing from other investors during the following two years. We argue that hedge funds are investors of last resort and provide funding for companies that are otherwise constrained from raising equity capital. (JEL G14, G23, G32)Hedge funds have recently become an important source of funding for public companies raising equity privately. Financing young companies with severe information asymmetries is an important investment strategy for some hedge funds. Since 1995, hedge funds have participated in more than 50% of the private placements of equity securities and have contributed about one-quarter of the capital raised in such equity issuances, a total investment that has exceeded the contributions of other investor classes. This paper sheds light on the role of hedge funds in such private placements.In perfect financial markets it should be irrelevant whether a firm obtains funding from hedge funds or from other investors. To investigate whether the identity of the investors matters, we use a unique dataset that

This paper examines shareholder value gains from developed-market acquisitions of emerging-market targets. On average over the 1988-2003 period, abnormal returns for developed-market acquirers show an anomalous increase of 1.18% over a three-week event window when M&A transactions in emerging markets are announced. For a sample of 390 transactions, market-adjusted returns translate to an aggregate dollar value gain of $111.5 billion for shareholders of acquiring firms. Acquirer returns triple to 4.43% when majority control of the target is acquired. Surprisingly, the median net return (acquirer's dollar value gain/transaction value) is 1.37 with the acquisition of control. We offer a possible explanation for these puzzling findings-the data suggest that improved governance (via control rights) and the transfer of intangibles such as R&D or brand value from acquirers to targets explain the revaluation in acquirer stock prices and the resulting dollar value gains in emerging market transactions.JEL Codes: G15, G34.

Firms initiating broad-based employee share ownership plans often claim employee stock ownership plans (ESOPs) increase productivity by improving employee incentives. Do they? Small ESOPs comprising less than 5% of shares, granted by firms with moderate employee size, increase the economic pie, benefiting both employees and shareholders. The effects are weaker when there are too many employees to mitigate free-riding. Although some large ESOPs increase productivity and employee compensation, the average impacts are small because they are often implemented for nonincentive purposes such as conserving cash by substituting wages with employee shares or forming a worker-management alliance to thwart takeover bids.

Young firms disproportionately employ young workers, controlling for firm size, industry, geography and time. The same positive correlation between young firms and young employees holds when we look just at new hires. On average, young employees in young firms earn higher wages than young employees in older firms. Further, young employees disproportionately join young firms with greater innovation potential and that exhibit higher growth, conditional on survival. These facts are consistent with the argument that the skills, risk tolerance, and career dynamics of young workers are contributing factors to their disproportionate share of employment in young firms. Finally, we show that an increase in the regional supply of young workers is positively related to the rate of new firm creation, especially in high tech industries, suggesting a causal link between the supply of young workers and new firm creation.

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Financial regulators and investors alike have expressed concerns about high pay inequality within firms. Using a proprietary data set of public and private firms, this paper shows that firms with higher pay inequality-relative wage differentials between top-and bottom-level jobs-are larger and have higher valuations, better operating performance, and higher equity returns. High-inequality firms also exhibit larger earnings surprises, consistent with the argument that pay inequality is not fully priced by the market. Overall, our results support the notion that high pay disparities within firms are a reflection of better managerial talent. * We thank David Autor, Xavier Gabaix, Xavier Giroud, Claudia Goldin, Johannes Stroebel, and seminar participants at MIT, NYU, and the 2015 Labor and Finance Group conference for valuable comments. We are grateful to Raymond Story at Income Data Services (IDS) for help with the data.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in February 2015 AbstractWe examine how within-firm skill premia-wage differentials associated with jobs involving different skill requirements-vary both across firms and over time.Our firm-level results mirror patterns found in aggregate wage trends, except that we find them with regard to increases in firm size. In particular, we find that wage differentials between high-and either medium-or low-skill jobs increase with firm size, while those between medium-and low-skill jobs are either invariant to firm size or, if anything, slightly decreasing. We find the same pattern within firms over time, suggesting that rising wage inequality-even nuanced patterns, such as divergent trends in upper-and lower-tail inequality-may be related to firm growth.We explore two possible channels: i) wages associated with "routine" job tasks are relatively lower in larger firms due to a higher degree of automation in these firms, and ii) larger firms pay relatively lower entry-level managerial wages in return for providing better career opportunities. Lastly, we document a strong and positive relation between within-country variation in firm growth and rising wage inequality for a broad set of developed countries. In fact, our results suggest that part of what may be perceived as a global trend toward more wage inequality may be driven by an increase in employment by the largest firms in the economy. * We thank Xavier Giroud, Claudia Goldin, and Johannes Stroebel for valuable comments and Raymond Story at Income Data Services (IDS) for help with the data.† NYU Stern School of Business, NBER, CEPR, and ECGI.

Financial regulators and investors alike have expressed concerns about high pay inequality within firms. Using a proprietary data set of public and private firms, this paper shows that firms with higher pay inequality-relative wage differentials between top-and bottom-level jobs-are larger and have higher valuations, better operating performance, and higher equity returns. High-inequality firms also exhibit larger earnings surprises, consistent with the argument that pay inequality is not fully priced by the market. Overall, our results support the notion that high pay disparities within firms are a reflection of better managerial talent. * We thank David Autor, Xavier Gabaix, Xavier Giroud, Claudia Goldin, Johannes Stroebel, and seminar participants at MIT, NYU, and the 2015 Labor and Finance Group conference for valuable comments. We are grateful to Raymond Story at Income Data Services (IDS) for help with the data.