Christopher A. Parsons

Visiting Associate Professor of Business Administration

Unit: Finance


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Christopher Parsons is a Visiting Associate Professor in the Finance Unit at Harvard Business School.  Parson's research is focused on corporate finance, labor economics, capital structure, real estate, urban economics and market microstructure. Prior to coming to the Harvard Business School, Parsons was an Associate Professor of Finance at the Rady School.  Before that, he was an Assistant Professor of Finance at the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill. Preceding his position at the Kenan-Flagler School, Parsons was an Assistant Professor of Finance at the Desautels Faculty of Management at McGill University, Montreal.

Parsons earned his Ph.D. in Finance at the McCombs School of Business at the University of Texas at Austin. He earned his B.S. with Highest Honors in Chemical Engineering.


    Journal Articles

    1. Empirical Capital Structure: A Review

      This survey provides a synthesis of the empirical capital structure literature. Our synthesis is divided into three parts. The first part examines the evidence that relates to the cross-sectional determinants of capital structure. This literature identifies and discusses the characteristics of firms that tend to be associated with different debt ratios. In the second part, we review the literature that examines changes in capital structure. The papers in this literature explore factors that move firms away from their target capital structures as well as the extent to which future financing choices move firms back toward their targets. Finally, we complete our review with a set of studies that explore the consequences of leverage, rather than its determinants. These studies are concerned with feedback from financing to real decisions. For example, we explore how a firm's financing choices influence its incentive to invest in its workers, price its products, form relationships with suppliers, or compete aggressively with competitors.

      Keywords: Capital Structure; Corporate Finance;


      Parsons, Christopher, and Sheridan Titman. "Empirical Capital Structure: A Review." Foundations and Trends in Finance 3, no. 1 (2009): 1–93.
    2. Is a Higher Calling Enough? Incentives Effects in the Church

      We study the compensation and productivity of more than 2,000 Methodist ministers in a 43‐year panel data set. The church appears to use pay‐for‐performance incentives for its clergy, as their compensation follows a sharing rule by which pastors receive approximately 3% of the incremental revenue from membership increases. Ministers receive the strongest rewards for attracting new parishioners who switch from other congregations within their denomination. Monetary incentives are weaker in settings where ministers have less control over their measured performance.

      Keywords: Motivation and Incentives; Organizations; Religion; Performance Evaluation; Compensation and Benefits;


      Parsons, Christopher, J. Hartzell, and D. Yermack. "Is a Higher Calling Enough? Incentives Effects in the Church." Journal of Labor Economics 28, no. 3 (July 2010): 509–538.
    3. Incentive Compensation and the Likelihood of Termination: Theory and Evidence from Real Estate Organizations

      We analyze two managerial compensation incentive devices: the threat of termination and pay for performance. We first develop a simple model predicting that these devices are substitutes: when termination incentives are low, optimal contracts provide stronger pay-for-performance incentives. We then use data from real estate organizations to provide two independent tests of the model's central prediction. First, we use the fact that chief executive officers of Real Estate Investment Trusts (REITs) and general partners of Real Estate Limited Partnerships (RELPs) perform similar tasks, yet organizational features of RELPs ensure that the latter are much harder to terminate. Consistent with the model, we find that pay-for-performance sensitivity is much higher for general partners of RELPs, where the termination threat is less credible. Second, we use a recent cross-section of REITs to show that in property types where it is expected to be more costly to replace managers, those managers have stronger pay-for-performance incentives.

      Keywords: Motivation and Incentives; Resignation and Termination; Compensation and Benefits; Real Estate Industry;


      Parsons, Christopher, G. Hallman, and J. Hartzell. "Incentive Compensation and the Likelihood of Termination: Theory and Evidence from Real Estate Organizations." Real Estate Economics 39, no. 3 (Fall 2011): 507–546.
    4. The Causal Impact of Media in Financial Markets

      Disentangling the causal impact of media reporting from the impact of the events being reported is challenging. We solve this problem by comparing the behaviors of investors with access to different media coverage of the same information event. We use zip codes to identify 19 mutually exclusive trading regions corresponding with large U.S. cities. For all earnings announcements of S&P 500 Index firms, we find that local media coverage strongly predicts local trading, after controlling for earnings, investor, and newspaper characteristics. Moreover, local trading is strongly related to the timing of local reporting, a particular challenge to nonmedia explanations.

      Keywords: Media; Financial Markets;


      Parsons, Christopher, and J. Engelberg. "The Causal Impact of Media in Financial Markets." Journal of Finance 66, no. 1 (February 2011): 67–97.
    5. Strike Three: Discrimination, Incentives, and Evaluation

      Major League Baseball umpires express their racial/ethnic preferences when they evaluate pitchers. Strikes are called less often if the umpire and pitcher do not match race/ethnicity, but mainly where there is little scrutiny of umpires. Pitchers understand the incentives and throw pitches that allow umpires less subjective judgment (e.g., fastballs over home plate) when they anticipate bias. These direct and indirect effects bias performance measures of minorities downward. The results suggest how discrimination alters discriminated groups' behavior generally. They imply that biases in measured productivity must be accounted for in generating measures of wage discrimination.

      Keywords: Wages; Motivation and Incentives; Prejudice and Bias; Ethnicity Characteristics; Race Characteristics; Performance Productivity; Sports; Sports Industry;


      Parsons, Christopher, J. Sulaeman, M. Yates, and D. Hamermesh. "Strike Three: Discrimination, Incentives, and Evaluation." American Economic Review 101, no. 4 (June 2011): 1410–1435.
    6. Friends with Money

      When banks and firms are connected through interpersonal linkages—such as their respective management having attended college or previously worked together—interest rates are markedly reduced, comparable with single shifts in credit ratings. These rate concessions do not appear to reflect sweetheart deals. Subsequent firm performance, such as future credit ratings or stock returns, improves following a connected deal, suggesting that social networks lead to either better information flow or better monitoring.

      Keywords: Social and Collaborative Networks; Interest Rates; Banking Industry;


      Parsons, Christopher, J. Engelberg, and P. Gao. "Friends with Money." Journal of Financial Economics 103, no. 1 (January 2012): 169–188.
    7. Journalists and the Stock Market

      We use exogenous scheduling of Wall Street Journal columnists to identify a causal relation between financial reporting and stock market performance. To measure the media's unconditional effect, we add columnist fixed effects to a daily regression of excess Dow Jones Industrial Average returns. Relative to standard control variables, these fixed effects increase the R2 by about 35%, indicating each columnist's average persistent "bullishness" or "bearishness." To measure the media's conditional effect, we interact columnist fixed effects with lagged returns. This increases explanatory power by yet another one-third, and identifies amplification or attenuation of prevailing sentiment as a tool used by financial journalists.

      Keywords: Media; Financial Reporting; Financial Markets;


      Parsons, Christopher, C. Dougal, J. Engelberg, and D. Garcia. "Journalists and the Stock Market." Review of Financial Studies 25, no. 3 (March 2012): 639–679.
    8. The Cost and Timing of Financial Distress

      Assessments of the trade-off theory have typically compared the present value of tax benefits to the present value of bankruptcy costs. We verify that this comparison overwhelmingly favors tax benefits, suggesting that firms are under-leveraged. However, when we allow firms to experience even modest (e.g., 1–2% annualized) financial distress costs prior to bankruptcy, the cumulative present value of such costs can easily offset the tax benefits.

      Keywords: Taxation; Insolvency and Bankruptcy;


      Parsons, Christopher. "The Cost and Timing of Financial Distress." Journal of Financial Economics 105, no. 1 (July 2012): 62–81.
    9. The Price of a CEO's Rolodex

      CEOs with large networks earn more than those with small networks. An additional connection to an executive or director outside the firm increases compensation by about $17,000 on average, more so for "important" members, such as CEOs of big firms. Pay-for-connectivity is unrelated to several measures of corporate governance, evidence in favor of an efficient contracting explanation for CEO pay.

      Keywords: Networks; Executive Compensation;


      Parsons, Christopher, J. Engelberg, and P. Gao. "The Price of a CEO's Rolodex." Review of Financial Studies 26, no. 1 (January, 2013).
    10. The Timing of Pay

      There exists large and persistent variation in not only how, but when employees are paid, a fact unexplained by existing theory. This paper develops a simple model of optimal pay timing for firms. When workers have self-control problems, they under-save and experience volatile consumption between paychecks. Thus, pay whose delivery matches the timing of workers' consumption needs will reduce wage costs. The model also explains why pay timing should be regulated (as it is in practice): although the worker benefits from a timing profile that smoothes her consumption, her lack of self-control induces her to attempt to undo the arrangement, either by renegotiating with her employer or by taking out payday loans. Regulation of pay timing and consumer borrowing is required to counter these efforts, helping the worker help herself.

      Keywords: Payday lending; hyperbolic discounting; Self-control problems; Pay frequency; Payday loan legislation; Paycheck frequency; Time inconsistency; Wages; Behavior; Employee Relationship Management;


      Parsons, Christopher, and E. Van Wesep. "The Timing of Pay." Journal of Financial Economics 109, no. 2 (August 2013): 373–397.
    11. Voice Pitch and the Labor Market Success of Male Chief Executive Officers

      A deep voice is evolutionarily advantageous for males, but does it confer benefit in competition for leadership positions? We study ecologically valid speech from 792 male public-company Chief Executive Officers (CEOs) and find that CEOs with deeper voices manage larger companies, and as a result, make more money. After including proxies for other CEO attributes including experience, education and formant position, we document economically significant voice pitch effects. For the median CEO of the median sample firm, an interquartile decrease in voice pitch (22.1 Hz) is associated with a $440 million increase in the size of the firm managed, and in turn, $187 thousand more in annual compensation. Deep voiced CEOs also enjoy longer tenures. Although this is a study of association, the results are consistent with recent experimental predictions suggesting a role for voice pitch in leadership selection and also suggest economically meaningful effects of voice pitch reach the upper echelons of corporate management.

      Keywords: Success; Leadership Style; Personal Characteristics; Management Teams;


      Parsons, Christopher, W. Mayew, and M. Venkatachalam. "Voice Pitch and the Labor Market Success of Male Chief Executive Officers." Evolution and Human Behavior 34, no. 4 (July 2013): 243–248.
    12. Networks and Productivity: Causal Evidence from Journal Editor Rotations

      Using detailed publication and citation data for over 50,000 articles from 30 major economics and finance journals, we investigate whether network proximity to an editor influences research productivity. During an editor's tenure, his current university colleagues publish about 100% more papers in the editor's journal, compared to years when he was not editor. In contrast to editorial nepotism, such "inside" articles have significantly higher ex-post citation counts, even when same-journal and self-cites are excluded. Our results thus suggest that despite potential conflicts of interest faced by editors, personal associations are used to improve selection decisions.

      Keywords: Networks; Performance Productivity; Education Industry; Journalism and News Industry; Publishing Industry;


      Parsons, Christopher, J. Brogaard, and J. Engelberg. "Networks and Productivity: Causal Evidence from Journal Editor Rotations." Journal of Financial Economics (forthcoming).

    Book Chapters

    1. Capital Structure and Corporate Strategy


      Parsons, Christopher, and Sheridan Titman. "Capital Structure and Corporate Strategy." Chap. 13 in Handbook of Corporate Finance: Empirical Corporate Finance, Vol. 2, edited by B. Espen Eckbo, 203–234. North-Holland Publishing Company, 2008.

      Research Summary

    1. Overview

      Keywords: corporate finance; real estate; behavioral finance; Behavioral Finance; Labor;

        Awards & Honors

      1. Christopher A. Parsons: Winner of the 2012 Michael Brennan Award for the Best Financial Research Paper Published in the Review of Financial Studies for the paper with C. Dougal, J. Engelberg, and D. Garcia, "Journalists and the Stock Market" (2012).

      2. Christopher A. Parsons: Second Place Winner of the 2012 Eugene Fama-Dimensional Fund Advisors (Fama-DFA) Prize for the Best Paper Published in the Journal of Financial Economics in the Areas of Capital Markets and Asset Pricing for the paper with J. Engelberg, and P. Gao, “Friends with Money” (2012).