Alma Cohen

Professor of Empirical Practice

Griswold 305

617-496-7353

Assistant: Marina Apostol / 617-496-1670

Alma Cohen & Charles C.Y. Yang, How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment, 110 J. Fin. Econ. 627 (2013).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Finance
,
Shareholders
,
Corporate Governance
Type: Article
Abstract
The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms' greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings ― separated by several weeks and going in opposite directions ― that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by presenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.
Alma Cohen & Liran Einav, Estimating Risk Preferences from Deductible Choice, 93 Am. Econ. Rev. 745 (2007).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Insurance Law
,
Empirical Legal Studies
Type: Article
Abstract
We develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts. We account for adverse selection by modeling unobserved heterogeneity in both risk (claim rate) and risk aversion. We find large and skewed heterogeneity in risk attitudes. In addition, women are more risk averse than men, risk aversion exhibits a U-shape with respect to age, and proxies for income and wealth are positively associated with absolute risk aversion. Finally, unobserved heterogeneity in risk aversion is greater than that of risk, and, as we illustrate, has important implications for insurance pricing.
Alma Cohen & Rajeev H. Dehejia, The Effect of Automobile Insurance and Accident Liability Laws on Traffic Fatalities, 47 J.L. & Econ. 357 (2004).
Categories:
Corporate Law & Securities
,
Disciplinary Perspectives & Law
Sub-Categories:
Insurance Law
,
Empirical Legal Studies
Type: Article
Abstract
This paper investigates the incentive effects of automobile insurance, compulsory insurance laws, and no-fault liability laws on driver behavior and traffic fatalities. We analyze a panel of 50 U.S. states and the District of Columbia from 1970-1998, a period in which many states adopted compulsory insurance regulations and/or no-fault laws. Using an instrumental variables approach, we find evidence that automobile insurance has moral hazard costs, leading to an increase in traffic fatalities. We also find that reductions in accident liability produced by no-fault liability laws have led to an increase in traffic fatalities (estimated to be on the order of 6%). Overall, our results indicate that, whatever other benefits they might produce, increases in the incidence of automobile insurance and moves to no-fault liability systems have significant negative effects on traffic fatalities.
Alma Cohen, Alon Klement & Zvika Neeman, Judicial Decision Making: A Dynamic Reputation Approach, 44 J. Legal Stud. S133 (2015).
Categories:
Government & Politics
,
Disciplinary Perspectives & Law
Sub-Categories:
Empirical Legal Studies
,
Judges & Jurisprudence
Type: Article
Abstract
We seek to contribute to an understanding of how judicial elections affect the incentives and decisions of judges. We develop a theoretical model suggesting that judges who are concerned about their reputation will tend to decide against their prior decisions as they approach elections. That is, judges who imposed a large number of severe sentences in the past and are thus perceived to be strict will tend to impose less severe sentences prior to elections. Conversely, judges who imposed a large number of light sentences in the past and are thus perceived to be lenient will tend to impose more severe sentences prior to elections. Using data from the Pennsylvania Commission on Sentencing, we test, and find evidence consistent with, the predictions of our model.
Alma Cohen, Rajeev H. Dehejia & Dmitri Romanov, Financial Incentives and Fertility, 95 Rev. Econ. & Stat. 1 (2013).
Categories:
Family Law
,
Banking & Finance
,
Disciplinary Perspectives & Law
Sub-Categories:
Economics
,
Empirical Legal Studies
,
Law & Economics
,
Reproduction
Type: Article
Abstract
Using panel data on over 300,000 Israeli women from 1999 to 2005, we exploit variation in Israel's child subsidy to identify the impact of changes in the price of a marginal child on fertility. We find a positive, statistically significant, and economically meaningful price effect on overall fertility and, consistent with Becker (1960) and Becker and Tomes (1976), a small effect of income on fertility, which is negative at low and positive at high income levels. We also find a price effect on fertility among older women, suggesting that part of the overall effect is due to a reduction in total fertility.
Alma Cohen & Peter Siegelman, Testing for Adverse Selection in Insurance Markets, 77 J. Risk & Ins. 39 (2010).
Categories:
Corporate Law & Securities
Sub-Categories:
Insurance Law
Type: Article
Abstract
This article reviews and evaluates the empirical literature on adverse selection in insurance markets. We focus on empirical work that seeks to test the basic coverage-risk prediction of adverse selection theory - that is, that policyholders who purchase more insurance coverage tend to be riskier. The analysis of this body of work, we argue, indicates that whether such a correlation exists varies across insurance markets and pools of insurance policies. We discuss various reasons why a coverage-risk correlation may not be found in some pools of insurance policies. The presence of a coverage-risk correlation can be explained either by moral hazard or adverse selection, and we discuss methods for distinguishing between them. Finally, we review the evidence on learning by policyholders and insurers.
Alma Cohen, The Disadvantages of Aggregate Deductibles, 6 B.E. J. of Econ. Analysis & Pol'y 1538 (2006).
Categories:
Disciplinary Perspectives & Law
,
Banking & Finance
,
Corporate Law & Securities
Sub-Categories:
Risk Regulation
,
Insurance Law
,
Law & Economics
Type: Article
Abstract
This paper analyzes the choice of deductible in insurance contracts that insure against a risk that, as is common, might materialize more than once during the life of the policy. As was established by Arrow (1963), from the perspective of risk-bearing costs, the optimal contract is one that uses an aggregate deductible that applies to the aggregate losses incurred over the life of the policy. Aggregate deductibles, however, are uncommon in practice. This paper identifies two disadvantages that aggregate deductibles have. Aggregate deductibles are shown to produce higher expected verification costs and moral hazard costs than contracts that apply a per-loss deductible to each loss that occurs. I further show that each of these disadvantages can make an aggregate deductible contact inferior to a contract with per loss deductibles. The results of the analysis can help explain the rare use of aggregate deductibles and, in addition, might explain why umbrella policies that cover all types of losses are rarely used.
Alma Cohen, Asymmetric Information and Learning: Evidence from the Automobile Insurance Market, 87 Rev. Econ. & Stat. 197 (2005).
Categories:
Disciplinary Perspectives & Law
,
Corporate Law & Securities
Sub-Categories:
Insurance Law
,
Law & Economics
,
Empirical Legal Studies
Type: Article
Abstract
This paper tests the predictions of adverse-selection models using data from the automobile insurance market. I find that, in contrast to what recent research suggests, the evidence is consistent with the presence of informational asymmetries in this market: new customers choosing higher insurance coverage are associated with more accidents. Consistent with the possibility of policyholders' learning about their risk type, such a coverage-accidents correlation exists only for policyholders with enough years of driving experience. The informational advantage that new customers with driving experience have over the insurer appears to arise in part from customers' underreporting their past claim history: policyholders switching to new insurers are disproportionately ones with a poor claims history, and new customers tend to underreport their past claims history when joining a new insurer.
Alma Cohen & Charles C.Y. Wang, Staggered Boards and Shareholder Value: A Reply to Amihud and Stoyanov (Dec. 1, 2015).
Categories:
Corporate Law & Securities
,
Banking & Finance
Sub-Categories:
Finance
,
Corporate Governance
,
Shareholders
Type: Article
Abstract
In a paper published in the JFE in 2013, we provided evidence that market participants perceive staggered boards to be on average value-reducing. In a recent response paper, Amihud and Stoyanov (2015) “contest” our results. They advocate using alternative methods for estimating risk-adjusted returns and excluding some observations from our sample. Amihud and Stoyanov claim that making such changes renders our results not significant (though retaining their direction) and conclude that staggered boards have no significant effect on firm value. This paper examines and replies to the Amihud-Stoyanov challenge. We question their methodological claims, study the consequences of following their suggestions, and conduct additional robustness tests. Our analysis shows that the evidence is overall consistent with the results and conclusions of our JFE paper.

Education History

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Griswold 305

617-496-7353

Assistant: Marina Apostol / 617-496-1670