1. Yihui Pan, Tracy Yue Wang, and Michael S. Weisbach find that

disinvestments are fairly common in the early years of a CEO’s tenure, and that these disinvestments decrease with tenure. Investments, on the other hand, are relatively low in the early years of a CEO’s tenure and increase over time. As a result, the firm’s assets and employment grow more slowly early in the CEO’s tenure than in later years.

Pointer from Timothy Taylor, who speculates

the analysis makes CEOs sound a bit like coaches of sports teams: they arrive to clean up the mistakes of the past regime, but over time many of them gradually drift into their own set of mistakes.

This analogy would suggest that whatever the incumbent’s excesses (too much investment, too little investment), the new CEO would do the opposite. But instead the pattern seems to be that the incumbent eventually tends to over-invest.

The authors’ preferred explanation is that the CEO wants to over-invest, and only over time does a CEO gain control of the board and carry out the over-investment. When the CEO exits, the new CEO is more subservient and understands the need to pare back.

My proposed explanation may be the least dramatic. My thinking is that major projects go through a long gestation period. A new CEO needs to get comfortable before he/she can approve major new projects, so major new projects get put on hold for a year or two. Meanwhile, existing projects wrap up, so you get a lull. My explanation would predict that you would not see a burst of investment just as a CEO is getting close to exit. Rather, you would see low investment when a CEO starts, then ramping up to a higher level that is maintained until the CEO exits.

2. Alison Jane Rauh writes,

While blacks of the second generation have equal or higher education and earnings levels than the first generation, the return on their unobservable characteristics is converging to that of native blacks…Convergence across generations is mostly driven by low-educated second generation blacks that drop out the labor force in greater numbers than low-educated first generation immigrants do. Similarly, convergence within a generation is mostly driven by low-educated blacks who immigrate when they are young dropping out of the labor force in greater numbers than those who immigrate when they are older. A social interactions model with an assimilation parameter that varies by age of immigration helps explain this phenomenon. When making their labor force participation decision, immigrant men of all races, but not women, generally place more weight on the characteristics of natives the earlier they immigrate.

Pointer from Tyler Cowen. Both he and the author embrace a “peer effect” explanation, in which black immigrants start out trying to achieve, but assimilation leads them to see achievement-orientation as acting white.

An alternative explanation is that first-generation immigrants of all races are more willing to strive and sacrifice than are their children. However, suppose that there are differences in average ability by race, and that even high-ability first-generation immigrants are hampered by lack of cultural background. As immigrants assimilate, differences in outcomes start to reflect differences in ability.

I am not saying that my alternative explanations are necessarily correct. My point is that these are both papers that strike as presenting interesting findings that might have many possible explanations.