Previous literature demonstrates that interlocking director networks are significant in various financial areas. However, the distinction between network selection and behavioral influence effects is not considered. Few studies in the finance discipline have sufficiently considered social networks in a statistically robust way. This inattention may cause bias similar to omitted variable bias, resulting in incorrect conclusions being reached from the reported results. We employ recent advances in statistical modeling to investigate the effect of the interlocking director network on executive compensation, capital structure and mergers and acquisitions. Results show selection and influence effects are strongly significant. Firms select directors from firms with a similar proportion of fixed executive compensation (such as salary) and a similar level of acquisitiveness. Firms are influenced via the interlocking director network to become more similar with respect to executive compensation practices and capital structure choice, and more dissimilar for the number of acquisitions undertaken. That firms become more dissimilar in level of acquisitiveness may be attributed to negative feedback on acquiring because prior research shows that acquisitions are generally value destructive for the acquirer. The results suggest that the interlocking director network is a potent mechanism for the spread of firm practices. Common dependent variables from prior literature are less significant in explaining observed outcomes when the network is taken into account. For executive compensation, the profitability of a firm is no longer significant for the model including the interlocking director network but is significant when the same data are used in a standard linear regression. A similar occurrence happens for asset tangibility in the capital structure models. Tobin’s q and free cash flow are significant for the same data in a Poisson regression model for count data, and not significant for interlocking director network mergers and acquisitions models.

I present three essays in international macro-finance. The first is a selective survey of crises and contagion that identifies the competing explanations for the transmission of shocks through and across economies. The second essay tests several fundamental and financial transmission links within a Global Vector Autoregression (GVAR) and finds strong evidence that financial links best explain the spread of shocks. Finally, I revisit the international intertemporal Capital Asset Pricing Model (CAPM), which puts restrictions on acceptable factors. I find the theoretical model's prescribed factors, based on exchange rate and inflation risks, outperform the Fama French Four Factor model on country return portfolios.

This paper proposes an intuitive rationale for late bidding in online venues. The expected surplus from bidding on subsequent auctions for equivalent items creates an option value to losing the current auction. This option is dynamic due to the stochastic arrival of new auctions and early bids on later-closing auctions. We demonstrate that late bidding can be optimal given the decentralised and heterogeneous nature of online auctions, in which the option value is exogenous to an individual bidder’s actions. Late bidding precludes the bidder from being locked into a suboptimal bid as her opportunity set evolves.

CEOs (chief executive officers) are paid more if they outperform other firms in their blockholders’ portfolios. For every percentage point by which their own firm's return exceeds the return of the largest blockholder's basket of investments in a year, their compensation increases by over $9,800. Once we benchmark to this portfolio, industry returns and own firm returns are of little importance. When the firm is a larger portion of the blockholder's portfolio and when the blockholder is experienced, the reward for outperforming the blockholder's portfolio is greater. Our results are robust to alternate industry classifications and definitions of blockholders.

We use meta-analysis to review studies on announcement effects associated with seasoned equity offerings. Our sample includes 199 studies from 38 leading finance journals and Social Sciences Research Network working papers. The studies cover different countries, but the US is particularly well-represented with 131 studies. We find a statistically significant mean cumulative abnormal return of -0.98%. Abnormal returns are more negative for equity issues by US companies and for non-US rights issues and are less negative for private placements. In addition, wealth effects are more negative when the proceeds are used for debt reduction, when the SEO is issued shortly after IPO, and for issues by nondividend-paying companies and industrial companies. We identify important avenues for future research.

Preferences can change as a consequence of making a hard decision whereby the value of chosen options increases and the value of rejected options decreases. Such choice-induced preference changes have been associated with brain areas detecting choice conflict (anterior cingulate cortex, ACC), updating stimulus value (dorsolateral prefrontal cortex, dlPFC) and supporting memory of stimulus value (hippocampus and ventromedial prefrontal cortex, vmPFC). Here we investigated whether resting-state neuronal activity within these regions is associated with the magnitude of individuals' preference updates. We fitted a dynamic causal model (DCM) to resting-state neuronal activity in the spectral domain (spDCM) and estimated the causal connectivity among core regions involved in preference formation following hard choices. The extent of individuals' choice-induced preference changes were found to be associated with a diminished resting-state excitation between the left dlPFC and the vmPFC, whereas preference consistency was related to a higher resting-state excitation from the ACC to the left hippocampus and vmPFC. Our results point to a model of preference formation during which the dynamic network configurations between left dlPFC, ACC, vmPFC and left hippocampus at rest are linked to preference change or stability.

In a dynamic world, accurate beliefs about the environment are vital for survival, and individuals should therefore regularly seek out new information with which to update their beliefs. This aspect of behaviour is not well captured by standard theories of decision making, and the neural mechanisms of information seeking remain unclear. One recent theory posits that valuation of information results from representation of informative stimuli within canonical neural reward-processing circuits, even if that information lacks instrumental use. We investigated this question by recording EEG from twenty-three human participants performing a non-instrumental information-seeking task. In this task, participants could pay a monetary cost to receive advance information about the likelihood of receiving reward in a lottery at the end of each trial. Behavioural results showed that participants were willing to incur considerable monetary costs to acquire early but non-instrumental information. Analysis of the event-related potential elicited by informative cues revealed that the feedback-related negativity independently encoded both an information prediction error and a reward prediction error. These findings are consistent with the hypothesis that information seeking results from processing of information within neural reward circuits, and suggests that information may represent a distinct dimension of valuation in decision making under uncertainty.

Temporal persistence refers to an individual's capacity to wait for future rewards, while forgoing possible alternatives. This requires a trade-off between the potential value of delayed rewards and opportunity costs, and is relevant to many real-world decisions, such as dieting. Theoretical models have previously suggested that high monetary reward rates, or positive energy balance, may result in decreased temporal persistence. In our study, 50 fasted participants engaged in a temporal persistence task, incentivised with monetary rewards. In alternating blocks of this task, rewards were delivered at delays drawn randomly from distributions with either a lower or higher maximum reward rate. During some blocks participants received either a caloric drink or water. We used survival analysis to estimate participants' probability of quitting conditional on the delay distribution and the consumed liquid. Participants had a higher probability of quitting in blocks with the higher reward rate. Furthermore, participants who consumed the caloric drink had a higher probability of quitting than those who consumed water. Our results support the predictions from the theoretical models, and importantly, suggest that both higher monetary reward rates and physiologically relevant rewards can decrease temporal persistence, which is a crucial determinant for survival in many species.

Modern theories of decision-making typically model uncertainty about decision options using the tools of probability theory. This is exemplified by the Savage framework, the most popular framework in decision-making research. There, decision-makers are assumed to choose from among available decision options as if they maximized subjective expected utility, which is given by the utilities of outcomes in different states weighted with subjective beliefs about the occurrence of those states. Beliefs are captured by probabilities and new information is incorporated using Bayes’ Law. The primary concern of the Savage framework is to ensure that decision-makers’ choices are rational. Here, we use concepts from computational complexity theory to expose two major weaknesses of the framework. Firstly, we argue that in most situations, subjective utility maximization is computationally intractable, which means that the Savage axioms are implausible. We discuss empirical evidence supporting this claim. Secondly, we argue that there exist many decision situations in which the nature of uncertainty is such that (random) sampling in combination with Bayes’ Law is an ineffective strategy to reduce uncertainty. We discuss several implications of these weaknesses from both an empirical and a normative perspective.