Scott B. Guernsey
Scott Guernsey is an Assistant Professor of Finance at the University of Tennessee's Haslam College of Business. He is also an advisory editor for the Review of Financial Studies. Professor Guernsey’s research interests focus on empirical corporate finance, corporate governance, innovation, competition, capital structure, mergers and acquisitions, and law and finance. His research has been on several high-quality conference programs including the Adam Smith Corporate Finance Workshop, the American Finance Association (AFA) Annual Meeting, the NBER Law and Economics Meeting, and the North American SFS Cavalcade. Professor Guernsey’s papers have won awards at conferences and have been listed in SSRN's eJournal Top Ten download lists; he is in the top 10% of authors on SSRN by total new downloads within the last 12 months. Professor Guernsey completed his Ph.D. in Finance from the University of Oklahoma's Price College of Business and he was previously a Postdoctoral Research Associate at the University of Cambridge's Judge Business School.
University of Tennessee
Assistant Professor of Finance
June 2020 - Present
Haslam College of Business
University of Cambridge
Postdoctoral Research Associate
July 2018 - May 2020
Judge Business School
Cambridge Endowment for Research in Finance (CERF)
University of Oklahoma
PH.D. in Finance
August 2014 - May 2018
Price College of Business
University of New Mexico
B.S. Applied Mathematics
August 2012 - May 2014
Magna Cum Laude
University of New Mexico
M.B.A. Finance Concentration
January 2011 - July 2012
Anderson School of Management
University of New Mexico
B.A. Economics and Communication
August 2006 - December 2010
Summa Cum Laude
Competition, Non-Patented Innovation, and Firm Value
Job Market Paper
Reject and Resubmit, Journal of Financial Economics
This paper studies how competition impacts non-patented corporate innovation and firm value by exploiting adoptions of state anti-plug molding laws – laws that prohibit “unscrupulous” reverse engineering by competitors – and their subsequent invalidation by the U.S. Supreme Court. Firms decrease patenting activity following the laws’ adoptions while also showing increasing investment spending, profitability, and value. Value gains are larger for firms at greater risk of imitation, and that are more innovative. After the laws are overturned, firms reinitiate patenting whereas prior investment spending, profitability, and value gains dissipate. These results suggest that more intense product market competition disincentivizes value-enhancing corporate innovation.
Shadow Pills, Pill Policy, and Firm Value
with Martijn Cremers, Lubomir Litov, and Simone Sepe
Revise and Resubmit, Review of Financial Studies
European Corporate Governance Institute (ECGI) - Finance Working Paper (519/2019)
Awarded "Best paper of the Conference" by the AEFIN (Spanish Finance Association)
We analyze the impact of the right to adopt a poison pill – a “shadow pill” – on pill policy and firm value by exploiting the quasi-natural experiment provided by U.S. states’ staggered adoption of poison pill laws that validate the pill. We document that a strengthened shadow pill promotes the use of actual poison pills and increases firm value – especially for more innovative firms or firms with stronger stakeholder relationships, and for hostile acquisition targets. Our findings suggest shadow pills create value for some firms by reducing their contracting costs with stakeholders and increasing their bargaining power in takeovers.
Keeping Secrets from Creditors: Evidence from The Uniform Trade Secrets Act
with Kose John and Lubomir Litov
Conditionally Accepted, Journal of Financial and Quantitative Analysis
This paper examines the impact of trade secrecy on corporate financing decisions, exploiting U.S. states’ adoption of the Uniform Trade Secrets Act (UTSA) as a positive “shock” in incentives to use trade secrets. We find that firms reduce debt levels following the laws’ passage, especially for firms more ex-ante secrecy reliant. As an explanation, we show that the UTSA increases firm-level investments in intangibles, and overall intangibility, magnifying contracting problems with creditors and resulting in higher debt costs and more equity issuances. Our evidence suggests that the UTSA renders debt a less prominent source of funding for trade secrets-intangible firms.
Stakeholder Orientation and Firm Value
with Martijn Cremers and Simone Sepe
Best Paper Award in Corporate Finance/Financial Institutions at the 2019 FMA European Conference
We analyze the relation between enhanced director discretion to consider stakeholder interests (“stakeholder orientation”) and firm value by exploiting the adoption of directors’ duties laws (DDLs) as a quasi-natural experiment. We find that DDLs result in significant increases in shareholder value, especially in more innovative firms and those with stronger stakeholder relationships. DDLs also improve employees’ job security, financial soundness and innovation. These benefits, however, are offset in firms with more severe agency problems. Our results suggest that stakeholder orientation improves the commitment toward stakeholders and reduces contracting costs in many firms, but one size does not fit all.
Banking on the Lawyers
with Saura Masconale, Simone Sepe and Charles Whitehead
Cornell Legal Studies Research Paper No. 20-13
This Article is the first to analyze an unexplored but critical change in how modern banks are governed: the rise of lawyers as bank directors. That rise has been precipitous, raising the question of why lawyer-directors now sit on most bank boards.
Using novel empirical evidence, we show that lawyer-directors at banks are associated with efficient changes in risk management and significant increases in bank value. In particular, banks with lawyer-directors assume more risk in ordinary (non-crisis) circumstances and less risk when a crisis arises, in each case in a way that makes banks more valuable. Lawyer-directors do this by drawing on advocacy skills to critically analyze opposing points of view, an essential quality in managing the risks banks face today. They are also more likely to make complex information, sourced from multiple experts, more accessible to a bank’s board as part of its decision-making process. Finally, lawyer-directors are skilled at assessing litigation and regulatory risks, which have grown significantly in recent years.
Risk management failures were a primary cause of the 2008 financial crisis, prompting two principal regulatory responses: stricter capital requirements and enhanced governance. Their effectiveness remains hotly debated. Our findings have two important implications. First, we challenge the notion that stricter regulation is sufficient for efficient risk management. Rather, to manage a bank, directors must have the skills to think critically about risk. Second, we underscore the value of director expertise, showing that more is needed than simply the director’s independence now mandated by law.