Imperial College London

Dr Claudia Custodio

Business School

Associate Professor of Finance
 
 
 
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Contact

 

+44 (0)20 7594 9249c.custodio Website CV

 
 
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Location

 

4.0953 Prince's GateSouth Kensington Campus

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Summary

 

Publications

Publication Type
Year
to

14 results found

Custodio C, Albuquerque A, Cvijanovic D, Bennett Bet al., 2023, CEO Compensation and real estate prices: pay for luck or pay for action?, Review of Accounting Studies, Vol: 28, Pages: 2401-2447, ISSN: 1380-6653

This paper uses variation in real estate prices to study Chief Executive Officer (CEO) pay for luck. We distinguish between pay for luck and pay for responding to luck (action) by exploiting US GAAP accounting rules, which mandate that real estate used in the firm’s operations is not marked-to-market. This setting allows us to empirically disentangle pay for luck from pay for action, as a change in the value of real estate is only accounted for when the CEO responds to changes in property value. We show that CEO compensation is associated with the following two managerial responses to changes in real estate values: (i) real estate sales and (ii) debt issuance. Overall, we show that CEOs are rewarded for taking value-enhancing actions in response to luck.

Journal article

Custodio C, A Ferreira M, Garcia-Appendini E, 2023, Indirect costs of financial distress, Review of Finance, Vol: 27, Pages: 2233-2270, ISSN: 1382-6662

We estimate the indirect costs of financial distress due to lost sales by exploiting real estate (RE) shocks and cross-supplier variation in RE assets and leverage. We show that for the same client buying from different suppliers, the client’s purchases from distressed suppliers decline by an additional 13% following a drop in local RE prices. The effect is more pronounced in more competitive industries, manufacturing, durable goods, less-specific goods, and when the costs of switching suppliers are low. Our results suggest that clients reduce their exposure to suppliers in financial distress.

Journal article

Carvalho BP, Custódio C, Geys B, Mendes D, Peralta Set al., 2023, Information, perceptions, and electoral behaviour of young voters: A randomised controlled experiment, Electoral Studies, Vol: 84, Pages: 1-13, ISSN: 0261-3794

The way people absorb and process politically relevant information is central to their subsequent political behaviour (in terms of turnout and vote choice). Nonetheless, little is known about how young voters – who might be more impressionable than more experienced voters – respond to the provision of such information. In this article, we design a between-subject randomised controlled trial that exposes a sample of university students to positive, neutral or negative information about central government performance before the 2017 Portuguese local elections. We find that young voters update their perceptions more when exposed to negative news. This negativity bias is stronger for first-time voters. We also find that negative information significantly affects turnout of initially undecided young voters. Our results imply that sensitivity to information is heterogeneous and that some young voters may be prone to manipulation through the provision of negative news.

Journal article

Custodio C, Bonfim D, Raposo C, 2023, Supporting small firms through recessions and recoveries, Journal of Financial Economics, Vol: 147, Pages: 658-688, ISSN: 0304-405X

We use variation in the access to a government credit certification program to estimate the financial and real effects of supporting small firms. This program was first implemented during the global financial crisis, but has remained active ever since, allowing us to analyze its effects both during recessions and recoveries. Eligible firms have access to government loan guarantees and a credit quality certification. We estimate real effects using a multidimensional regression discontinuity design. We find that eligible firms borrow more and at lower rates than non-eligible firms, allowing them to increase investment and employment during crises. Industry-level analysis shows reduced productivity heterogeneity in more exposed industries, which is consistent with improved credit allocation. However, when the economy is recovering the effects of the program are less pronounced and centered on the certification component. The cost-per-job in the recovery period is half of the one estimated for the crisis period (5784€ and 11,788€, respectively).

Journal article

Albuquerque AM, Bennett B, Custodio C, Cvijanovic Det al., 2022, CEO compensation and real estate prices: pay for luck or pay for action?, Publisher: Elsevier BV

This paper uses variation in real estate prices to study CEO pay for luck. We distinguish between pay for luck and pay for responding to luck (action) by exploiting US GAAP accounting rules, which mandate that real estate used in the firm's operations is not marked-to-market. This setting allows us to empirically disentangle pay for luck from pay for action, as a change in the value of real estate is only accounted for when the CEO responds to changes in property value. We show that CEO compensation is associated with the following two managerial responses to changes in real estate values: (i) real estate sales and (ii) debt issuance. Overall, we show that CEOs are rewarded for taking value enhancing actions in response to luck.

Working paper

Custodio C, Siegel S, 2020, Are chief executive officers more likely to be first-borns?, PLoS One, Vol: 15, ISSN: 1932-6203

We investigate the link between birth order and the career outcome of becoming Chief Executive Officer (CEO) of a company. CEOs are more likely to be the first-born, i.e., oldest, child of their family relative to what one would expect if birth order did not matter for career outcomes. Both male and female CEOs are more likely to be first-born. However, the first-born advantage seems to largely reflect the absence of an older brother, but not of an older sister. These results are more pronounced for family firms, where traditionally the oldest child is appointed to run the family business, but also hold for non-family firms.

Journal article

Perdigao Dias Custodio C, Ferreira M, Matos P, 2019, Do general managerial skills spur innovation?, Management Science, Vol: 65, Pages: 459-476, ISSN: 1526-5501

We show that firms with chief executive officers (CEOs) who gain general managerial skills over their lifetime of work experience produce more patents. We address the potential endogenous CEO–firm matching bias using firm–CEO fixed effects and variation in the enforceability of noncompete agreements across states and over time during the CEO’s career. Our findings suggest that generalist CEOs spur innovation because they acquire knowledge beyond the firm’s current technological domain, and they have skills that can be applied elsewhere should innovation projects fail. We conclude that an efficient labor market for executives can promote innovation by providing a mechanism of tolerance for failure.

Journal article

Custodio C, Siegel S, 2018, Are CEOs More Likely to be First-Borns?, Publisher: CEPR

We investigate the link between birth order and the career outcome of becoming Chief Executive Officer (CEO) of a company. CEOs are more likely to be the first-born, i.e., oldest, child of their family relative to what one would expect if birth order did not matter for career outcomes. Both male and female CEOs are more likely to be first-born. However, the first-born advantage seems to largely reflect the absence of an older brother, but not of an older sister. These results are more pronounced for family firms, where traditionally the oldest child is appointed to run the family business, but also hold for non-family firms.

Working paper

Custodio C, Metzger D, 2014, Financial expert CEOs: CEO's work experience and firm's financial policies, Journal of Financial Economics, Vol: 114, Pages: 125-154, ISSN: 0304-405X

We study CEOs with a career background in finance. Firms with financial expert CEOs hold less cash, more debt, and engage in more share repurchases. Financial expert CEOs are more financially sophisticated: they are less likely to use one companywide discount rate instead of a project-specific one, they manage financial policies more actively, and their firm investments are less sensitive to cash flows. Financial expert CEOs are able to raise external funds even when credit conditions are tight, and they were more responsive to the dividend and capital gains tax cuts in 2003. Analyzing CEO-firm matching based on financial experience, we find that financial expert CEOs tend to be hired by more mature firms. Our results are consistent with employment histories of CEOs being relevant for corporate policies. However, we cannot formally rule out that our findings are partly explained by endogenous CEO-firm matching.

Journal article

Custodio C, 2014, Mergers and acquisitions accounting and the diversification discount, The Journal of Finance, Vol: 69, Pages: 219-240, ISSN: 0022-1082

q‐based measures of the diversification discount are biased upward by mergers and acquisitions and its accounting implications. Under purchase accounting, acquired assets are reported at their transaction value, which typically exceeds the target's pre‐merger book value. Thus, measured q tends to be lower for the merged firm than for the portfolio of pre‐merger entities. Because conglomerates are more acquisitive than focused firms, their q tends to be lower. To mitigate this bias, I subtract goodwill from the book value of assets and a substantial part of the diversification discount is eliminated. Market‐to‐sales‐based measures do not have this bias.

Journal article

Custodio C, Metzger D, 2013, How Do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns, REVIEW OF FINANCIAL STUDIES, Vol: 26, Pages: 2007-2047, ISSN: 0893-9454

Journal article

Custodio C, Ferreira MA, Matos P, 2013, Generalists versus specialists: Lifetime work experience and chief executive officer pay, JOURNAL OF FINANCIAL ECONOMICS, Vol: 108, Pages: 471-492, ISSN: 0304-405X

Journal article

Custodio C, Ferreira MA, Laureano L, 2013, Why are US firms using more short-term debt?, JOURNAL OF FINANCIAL ECONOMICS, Vol: 108, Pages: 182-212, ISSN: 0304-405X

Journal article

Custodio C, Ferreira MA, Garcia-Appendini E, The Economic Costs of Financial Distress, SSRN Electronic Journal

Journal article

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