Tao Chen joined Nanyang Business School (NBS) as an Assistant Professor in Finance in 2014. His research interest focuses on how financial markets participants (e.g., analysts and institutional investors) impact corporate policies, which broadly includes corporate finance and corporate governance, mergers and acquisitions, tax avoidance, and banking and financial institutions.
He has published his work in Journal of Financial Economics, Journal of Financial and Quantitative Analysis, Strategic Management Journal, Journal of Banking and Finance, and Journal of Corporate Finance.
This paper studies how conflicts between equity holders and bond holders affect the design of corporate managerial compensation. Firms with a higher ownership by institutional investors that simultaneously hold equity and bond of the firm (“dual holders”) adopt compensation policies with lower risk-taking incentives. Using financial-firm mergers that create dual holders for their portfolio companies as shocks, we identify a causal link between dual ownership and managerial compensation structure. Furthermore, dual holders vote on compensation-related managerial proposals in a way that reduces risk-taking incentives, compared with pure equity holders of the same firm.