The Sustainable Investment Research Initiative (SIRI) Library is a searchable database of academic studies. Learn about the impact of sustainability factors on risk and return for long-term investors like CalPERS. Narrow your results by using the search box or filtering by Category.

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2003 Governance
  • The Quality Effect: Does Financial Liberalization Improve the Allocation of Capital?
  • Author: Abiad, A., N. Oomes and K. Ueda
  • Journal: Journal of Development Economics
  • This paper documents evidence of a "quality effect" of financial liberalization on allocative efficiency, as measured by dispersion in Tobin's Q across firms. The authors predict that financial liberalization, by equalizing access to credit, is associated with reduced variation in expected marginal returns. They find robust evidence that financial liberalization, rather than financial deepening, is associated with improved allocative efficiency.
2008 Governance
  • The Effect of Wage Bargains on the Stock-Market Value of the Firm
  • Author: Abowd, J.
  • Journal: American Economic Review
  • The author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs. Using bargaining unit wage data and NYSE stock returns, the author finds a dollar-for-dollar tradeoff between bargained labor costs and stock returns. This paper also finds support for the hypothesis that collective bargains maximize the sum of shareholders' and union members' wealth.
1989 Social
  • Unbundling Institutions
  • Author: Acemoglu, D. and S. Johnson
  • Journal: Journal of Political Economy
  • This paper evaluates the importance of "property rights institutions," which protect citizens against expropriation by the government and powerful elites, and "contracting institutions," which enable private contracts between citizens. The authors find that property rights institutions have a first-order effect on long-run economic growth, investment, and financial development. Contracting institutions appear to matter only for the form of financial intermediation.
2005 Governance
  • Institutional Causes, Macroeconomic Symptoms: Volatility, Crises and Growth
  • Author: Acemoglu, D., S. Johnson, J. Robinson and Y. Thaicharoen
  • Journal: Journal of Monetary Economics
  • Countries that have pursued distortionary macroeconomic policies, including high inflation, large budget deficits and misaligned exchange rates, appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period. This paper documents that countries that inherited more "extractive" institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period.
2003 Governance
  • Corporate Governance Externalities
  • Author: Acharya, V. and P. Volpin
  • Journal: Review of Finance
  • The choice of governance in a firm both affects and is affected by choices of competing firms. Firms with weaker governance offer managers more generous incentive compensation. This in turn induces firms with good governance to overpay for their management. Poor governance can be employed by incumbent firms to deter entry by new firms.
2010 Governance
  • Corporate Governance and Value Creation: Evidence from Private Equity
  • Author: Acharya, V., O. Gottschalg, M. Hahn and C. Kehoe
  • Journal: Review of Financial Studies
  • The authors use deal-level data from transactions initiated by large private equity houses, and find that the abnormal performance of deals is positive on average, after controlling for leverage and sector returns. General partners who are ex-consultants or ex-industry managers are associated with outperforming deals focused on internal value-creation programs, and ex-bankers or ex-accountants with outperforming deals involving significant mergers and acquisitions.
2013 Governance
  • The Internal Governance of Firms
  • Author: Acharya, V., S. Myers and R. Rajan
  • Journal: Journal of Finance
  • This paper creates a theoretical model demonstrating that subordinate employees in a firm create an internal governance structure. Internal governance and external governance from financiers complement each other and improve efficiency.
2011 Governance
2010 Governance
  • Women in the Boardroom and Their Impact on Governance and Performance
  • Author: Adams, R. and D. Ferreira
  • Journal: Journal of Financial Economics
  • The authors find that female directors have better attendance records than male directors, male directors have fewer attendance problems the more gender-diverse the board is, and women are more likely to join monitoring committees. They also find that chief executive officer turnover is more sensitive to stock performance and directors receive more equity-based compensation in firms with more gender-diverse boards. However, the average effect of gender diversity on firm performance is negative. This negative effect is driven by companies with fewer takeover defenses.
2009 Governance
  • A Theory of Friendly Boards
  • Author: Adams, R. and D. Ferreira
  • Journal: Journal of Finance
  • This theoretical model exploits the dual role of Boards of Directors in providing both an advisory and a monitoring function. CEOs may be reluctant to share information with an independent board. Thus, management-friendly boards can be optimal.
2007 Governance
  • From Female Labor Force Participation to Boardroom Gender Diversity
  • Author: Adams, R. and T. Kirchmaier
  • Journal: Working paper
  • The authors examine whether low female labor force participation is the main reason few women hold seats on corporate boards using data from 22 countries over the 2001-2010 period. The authors find that labor force participation is significantly related to the representation of women on boards when part-time and unemployed workers are excluded. However, cultural norms, the presence of boardroom quotas and codes promoting gender diversity are also correlated with female representation.
2013 Social, Governance
  • The Cost of Socially Responsible Investing
  • Author: Adler, T. and M. Kritzman
  • Journal: Journal of Portfolio Management
  • The authors employ a simulation technique known as Monte Carlo simulation to measure the cost of socially responsible investing, and find that it increases with the investor's skill, cross-sectional dispersion of the investing universe, fraction of the universe that is restricted, and number of securities in the portfolio.
2008 Social, Governance
  • The "Wall Street Walk" and Shareholder Activism: Exit as a Form of Voice
  • Author: Admati, A. and P. Pfleiderer
  • Journal: Review of Financial Studies
  • This theoretical paper examines whether a large shareholder can alleviate conflicts of interest between managers and shareholders through the credible threat of exit on the basis of private information. This paper presents a model where the threat of exit often reduces agency costs, but additional private information need not enhance the effectiveness of the mechanism. The results are consistent with empirical findings on the interaction between managers and minority large shareholders and have further empirical implications.
2009 Governance
  • A History of Corporate Governance around the World: Family Business Groups to Professional Managers
  • Author: Aganin, A. and P. Volpin
  • Journal: University of Chicago Press
  • In this paper the authors use a unique data set with information on the control of all companies traded on the Milan Stock Exchange (MSE) in the twentieth century to study the evolution of the stock market, the dynamics of the ownership structure of traded firms, the birth of pyramidal groups, and the growth and decline of ownership by families in Italy.
2005 Governance
  • Does Governance Travel around the World? Evidence from Institutional Investors
  • Author: Aggarwal, R., I. Erel, M. Ferreira and P. Matos
  • Journal: Journal of Financial Economics
  • The authors find that firm-level governance is positively associated with international institutional investment. Changes in institutional ownership over time positively affect subsequent changes in firm-level governance, but the opposite is not true. Firms with higher institutional ownership are more likely to terminate poorly performing Chief Executive Officers (CEOs) and exhibit improvements in valuation over time.
2011 Governance
  • Differences in Governance Practices between U.S. And Foreign Firms: Measurement, Causes, and Consequences
  • Author: Aggarwal, R., I. Erel, R. Stulz and R. Williamson
  • Journal: Review of Financial Studies
  • Researchers construct a firm-level governance index that reflects minority shareholder protection. Results suggest that lower country-level investor protection and other country characteristics make it suboptimal for foreign firms to invest as much in governance as U.S. firms do. Overall, minority shareholders benefit from governance improvements and do so partly at the expense of controlling shareholders.
2009 Governance
  • The Role of Institutional Investors in Voting: Evidence from the Securities Lending Market
  • Author: Aggarwal, R., P. Saffi and A. Sturgess
  • Journal: AFA 2013 San Diego
  • The authors find that institutional investors restrict or call back their loaned shares prior to the record date in order to exercise their voting right. The authors find higher recall for firms with weaker corporate governance, weaker performance, higher institutional ownership, and when antitakeover or compensation proposals are on the ballot. The influence of proxy advisory firm ISS is also evident in voting outcome. If ISS opposes management then the authors find the higher recall to be associated with less FOR votes for the proposal.
2013 Governance
  • Ensuring Validity in the Measurement of Corporate Social Performance: Lessons from Corporate United Way and PAC Campaigns
  • Author: Agle, B. and P. Kelley
  • Journal: Journal of Business Ethics
  • This paper argues for the necessity of incorporating all three portions of Wood's (1991) theoretical model of corporate social performance (CSP) into its measurement. It begins by describing the two studies of an organizational phenomenon not commonly studied - internal fund drives to employees. Insights from these studies of corporate PAC and United Way campaigns are then used to illustrate how important it is to incorporate all three portions of Wood's model into the measurement of CSP to prevent drawing faulty conclusions.
2001 Governance
  • Institutional Monitoring through Shareholder Litigation
  • Author: Agnes Cheng, C., H. He Huang, Y. Li and G. Lobo
  • Journal: Journal of Financial Economics
  • This paper investigates the effectiveness of using securities class action lawsuits in monitoring defendant firms by institutional lead plaintiffs from two aspects: (1) immediate litigation outcomes, including the probability of surviving the motion to dismiss and the settlement amount, and (2) subsequent governance improvement such as changes in board independence. The authors show that securities class actions with institutional owners as lead plaintiffs are less likely to be dismissed and have larger monetary settlements than securities class actions with individual lead plaintiffs. They also find that, after the lawsuit filings, defendant firms with institutional lead plaintiffs experience greater improvement in their board independence than defendant firms with individual lead plaintiffs.
2010 Governance
2013 Social
  • Corporate Governance Objectives of Labor Union Shareholders: Evidence from Proxy Voting
  • Author: Agrawal, A.
  • Journal: Review of Financial Studies
  • Labor union pension funds have become increasingly vocal in governance matters. The author examines the proxy votes of AFL-CIO union funds around an exogenous change in union representation. AFL-CIO-affiliated shareholders become significantly less opposed to directors once the labor organization no longer represents a firm's workers. Other institutional investors, including mutual funds and public pension funds, do not exhibit similar voting behavior. Union opposition is also associated with negative valuation effects.
2012 Social
  • Codes of Good Governance Worldwide: What Is the Trigger?
  • Author: Aguilera, R. and A. Cuervo-Cazurra
  • Journal: Organization Studies
  • Efficiency needs and legitimation pressure leads firms in 49 countries to adopt good governance 'best practice' codes. In addition, the study finds that countries with strong shareholder protection rights embedded in their legal system tend to develop codes.
2004 Governance
  • Codes of Good Governance
  • Author: Aguilera, R. and A. Cuervo-Cazurra
  • Journal: Corporate Governance
  • This paper provides a review of the rapid spread of literature on codes of good governance. Codes of good governance appear to have generally improved the governance of countries that have adopted them. The authors also propose a multi-level framework to discuss three main topics that have emerged within the codes literature: the motivations behind the diffusion of codes across countries and its implications for convergence of corporate governance practices; the content of the codes and their "comply or explain" dimension; and the relationship between code compliance and firm performance.
2009 Governance
  • The Cross-National Diversity of Corporate Governance: Dimensions and Determinants
  • Author: Aguilera, R. and G. Jackson
  • Journal: Academy of Management Review
  • The authors develop a theoretical model to describe and explain variation in corporate governance among advanced capitalist economies, identifying the social relations and institutional arrangements that shape who controls corporations, what interests corporations serve, and the allocation of rights and responsibilities among corporate stakeholders. This paper's "actor-centered" institutional approach explains firm-level corporate governance practices in terms of institutional factors that shape how actors' interests are defined ("socially constructed") and represented.
2003 Governance
  • Corporate Governance and Social Responsibility: A Comparative Analysis of the UK and the U.S.
  • Author: Aguilera, R., C. Williams, J. Conley and D. Rupp
  • Journal: Corporate Governance
  • Key differences between the U.K. and the U.S. in the importance ascribed to a company's CSR reflect differences in the corporate governance arrangements in these two countries. The authors draw on a model of instrumental, relational and moral motives to explore why institutional investors are becoming concerned with firms' social and environmental actions.
2006 Governance
  • The Changing of the Boards: The Impact on Firm Valuation of Mandated Female Board Representation
  • Author: Ahern, K. and A. Dittmar
  • Journal: Quarterly Journal of Economics
  • In 2003, a new law required that 40% of Norwegian firms' directors be women- at the time only 9% of directors were women. They find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin's Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and acquisitions, and deterioration in operating performance.
2012 Social, Governance
  • The Association between Outside Directors, Institutional Investors and the Properties of Management Earnings Forecasts
  • Author: Ajinkya, B., S. Bhojraj and P. Sengupta
  • Journal: Journal of Accounting Research
  • The authors investigate the relation of the board of directors and institutional ownership with the properties of management earnings forecasts. They find that firms with more outside directors and greater institutional ownership are more likely to issue a forecast and are inclined to forecast more frequently. In addition, these forecasts tend to be more specific, accurate and less optimistically biased.
2005 Governance
  • Labor Contracts as Partial Gift Exchange
  • Author: Akerlof, G.
  • Journal: Quarterly Journal of Economics
  • This paper explains involuntary unemployment in terms of the response of firms to workers' group behavior. In a norm-gift-exchange model of the microeconomics of the labor market, workers put forth effort in excess of the minimum standard and firms give wages in excess of the current rate. The sizeable nature of the gift component of labor input and wages is endogenously determined.
1982 Social
  • Do Financial Markets Care about SRI? Evidence from Mergers and Acquisitions
  • Author: Aktas, N., E. De Bodt and J. Cousin
  • Journal: Journal of Banking & Finance
  • Acquirer gains in M&A deals relate positively to the target's ability to cope with social and environmental risks and more synergistic deals occur with targets that exhibit better environmental performance. The authors also document that the environmental and social performance of the acquirer increases following the acquisition of a SRI aware target.
2011 Environmental, Social, Governance
  • Agency Conflicts, Investment, and Asset Pricing
  • Author: Albuquerque, R. and N. Wang
  • Journal: Journal of Finance
  • This paper develops an analytically tractable dynamic stochastic general equilibrium model to study asset pricing and welfare implications of imperfect investor protection. Consistent with empirical evidence, the model predicts that countries with weaker investor protection have more incentives to overinvest, lower Tobin's Q, higher return volatility, larger risk premium, and higher interest rate. Calibrating the model to the Korean economy reveals that perfecting investor protection increases the stock market's value by 22%, a gain for which outside shareholders are willing to pay 11% of their capital stock.
2008 Governance
  • Corporate Social Responsibility and Firm Risk: Theory and Empirical Evidence
  • Author: Albuquerque, R., A. Durnev and Y. Koskinen
  • Journal: Working paper
  • This paper presents an industry equilibrium model of corporate social responsibility (CSR) and its asset pricing effects. The authors model CSR activities as an investment in higher customer loyalty. This paper tests the model predictions empirically and finds evidence consistent with the following: CSR firms exhibit lower systematic risk and expected returns, systematic risk of CSR firms has increased over time, the ratio of CSR profits to non-CSR profits is countercyclical, and, increased industry CSR adoption lowers systematic risk for non-adopters.
2013 Environmental, Social, Governance
  • Green Management Matters Regardless
  • Author: Alfred, A. and R. Adam
  • Journal: Academy of Management Perspectives
  • Green management matters for many reasons, but fundamentally it matters because people expect managers to use resources wisely and responsibly; protect the environment; minimize the amounts of air, water, energy, minerals, and other materials found in the final goods people consume; recycle and reuse these goods to the extent possible rather than drawing on nature to replenish them; respect nature's calm, tranquility, and beauty; and eliminate toxins that harm people in the workplace and communities. From a moral or normative perspective the obligation for green management is absolute, and whether it "pays" to be green is only partly relevant.
2009 Environmental
  • The Use of Foreign Currency Derivatives, Corporate Governance, and Firm Value around the World
  • Author: Allayannis, G., U. Lel and D. Miller
  • Journal: Journal of International Economics
  • Currency derivatives can be used for a manager's self-interest, for hedging, or for speculative purposes. This study finds that the use of currency derivatives for firms that have strong internal firm-level or external country-level governance is associated with a firm value premium.
2011 Governance
  • Stakeholder Capitalism, Corporate Governance and Firm Value
  • Author: Allen, F., E. Carletti and R. Marquez
  • Journal: Working paper
  • This paper analyzes the advantages and disadvantages of stakeholder-oriented firms that are concerned with employees and suppliers compared to shareholder-oriented firms in a model of imperfect competition. Stakeholder firms are more (less) valuable than shareholder firms when marginal cost uncertainty is greater (less) than demand uncertainty. The authors identify the circumstances where stakeholder firms are more valuable than shareholder firms, and compare these mixed equilibria with the pure equilibria with stakeholder and shareholder firms only.
2009 Governance
  • Active Institutional Shareholders and Costs of Monitoring: Evidence from Executive Compensation
  • Author: Almazan, A., J. Hartzell and L. Starks
  • Journal: Financial Management
  • Although evidence suggests that institutional investors play a role in monitoring management, not all institutions are equally willing or able to serve this function. The authors present a stylized model that examines the effects of institutional monitoring on executive compensation. The model predicts that institutions' influence on managers ' pay-for-performance sensitivity and level of compensation is enhanced when institutions have lower implied costs of monitoring, but that these effects are attenuated when the firm-specific cost of monitoring is high.
2005 Governance
  • A Theory of Pyramidal Ownership and Family Business Groups
  • Author: Almeida, H. and D. Wolfenzon
  • Journal: Journal of Finance
  • This theoretical paper provides a new rationale for pyramidal ownership in family business groups. The model is consistent with recent evidence of a small separation between ownership and control in some pyramids, and can differentiate between pyramids and dual-class shares, even when either method can achieve the same deviation from one share-one vote. Other predictions of the model are consistent with both systematic and anecdotal evidence.
2006 Governance
  • Environmental Policies and Firm Value
  • Author: Al-Najjar, B. and A. Anfimiadou
  • Journal: Business Strategy and the Environment
  • This paper uses three definitions of Eco-Efficiency to demonstrate a strong positive relationship between firm value and Eco-Efficiency. The authors apply Ohlson's (1995) model and adopt a modified version of the methodology of Sinkin et al (2008). The main outcome indicates a strong positive relationship between the market price and the Eco-Efficiency variable. Companies that have ISO 14001 certification and publish a CSR report show greater value than firms that participate in two Eco-Efficiency indices for a minimum of 5 years.
2012 Environmental
2004 Environmental
2011 Governance
  • Does It Pay to Be Green? A Systematic Overview
  • Author: Ambec, S. and P. Lanoie
  • Journal: Academy of Management Perspectives
  • The aim of this paper is to review empirical evidence of improvement in both environmental and economic or financial performance. The authors systematically analyze the mechanism involved in each of the following channels of potential revenue increase or cost reduction owing to better environmental practices: (a) better access to certain markets; (b) differentiating products; (c) selling pollution-control technology; (d) risk management and relations with external stakeholders; (e) cost of material, energy, and services; (f) cost of capital; and (g) cost of labor.
2008 Environmental
  • Socially Responsible Investment Performance in France
  • Author: Amenc, N. and V. Le Sourd
  • Journal: EDHEC Risk and Asset Management Research Centre
  • Using the Fama-French three-factor model to compute alpha, the paper did not identify alpha values both positive and statistically significant for SRI funds. For most SRI funds, the paper obtained negative, but not statistically significant alpha, indicating that SRI security selection in itself does not lead to outperformance. The results show that SRI fund performance is accounted for instead by style biases and market cycles.
2008 Environmental
  • Corporate Governance and Firm Value: International Evidence
  • Author: Ammann, M., D. Oesch and M. Schmid
  • Journal: Journal of Empirical Finance
  • In this paper, the authors investigate the relation between firm-level corporate governance and firm value and find a strong and positive relation between firm-level corporate governance and firm valuation. In addition, they investigate the value relevance of governance attributes that document the companies' social behavior. Regardless of whether these attributes are considered individually or aggregated into indices, and even when "standard" corporate governance attributes are controlled for, they exhibit a positive and significant effect on firm value.
2011 Governance
  • Corporate Governance and the Environment: Evidence from Clean Innovations
  • Author: Amore, M. and M. Bennedsen
  • Journal: Working paper
  • This paper presents causal evidence on the importance of corporate governance for the environmental performance of firms. The authors show that worse governed firms patent fewer clean innovations relative to their total innovation effort. They also find that worse governed firms patent more non-green innovations, suggesting that the governance shock affects the composition of innovative activities by inducing a substitution from green to dirty projects.
2013 Environmental, Governance
  • Founders, Heirs, and Corporate Opacity in the United States
  • Author: Anderson, R., A. Duru and D. Reeb
  • Journal: Journal of Financial Economics
  • The authors create an opacity index that ranks the relative transparency of the two thousand largest industrial U.S. firms. Large publicly traded companies with significant founder or heir ownership are significantly less transparent than firms with diffuse shareholders. Founder and heir-controlled firms exhibit a negative relation to performance in all but the most transparent firms.
2009 Governance
  • Board Characteristics, Accounting Report Integrity, and the Cost of Debt
  • Author: Anderson, R., S. Mansi and D. Reeb
  • Journal: Journal of Accounting and Economics
  • This paper finds that the cost of debt is inversely related to board independence and board size. The authors also find that fully independent audit committees are associated with a significantly lower cost of debt financing. Similarly, yield spreads are also negatively related to audit committee size and meeting frequency.
2004 Governance
  • Pension Fund Asset Allocation and Liability Discount Rates: Camouflage and Reckless Risk Taking by U.S. Public Plans?
  • Author: Andonov, A., R. Bauer and K. Cremers
  • Journal: Working paper
  • The authors document that U.S. public funds exploit the opaque incentives provided by their distinct regulatory environment and behave very differently from U.S. corporate funds and both public and non-public pension funds in Canada and Europe. In the past two decades, U.S. public funds uniquely increased their allocation to riskier investment strategies in order to maintain high discount rates and present lower liabilities, especially if their proportion of retired members increased more.
2013 Governance
  • A Survey of Recent Developments in the Literature of Finance and Growth
  • Author: Ang, J.
  • Journal: Journal of Economic Surveys
  • This paper provides a survey of the recent progress in the literature of financial development and economic growth. The survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables.
2008 Governance
  • The Impact of Voluntary Environmental Protection Instruments on Company Environmental Performance
  • Author: Annandale, D., A. Morrison-Saunders and G. Bouma
  • Journal: Business Strategy and the Environment
  • This paper uses a survey of 40 companies operating in Western Australia to determine the extent to which the implementation of voluntary environmental protection tools such as corporate environmental reporting (CER) and environmental management systems (EMS) has influenced company environmental performance. The influence of these voluntary instruments was not as strong in practice as the existing literature suggests it should be. While EMS are perceived as having a more significant impact on environmental performance than CER, both rank low on the list of 'drivers' that influence environmental performance.
2004 Environmental
  • Research Notes. Strategic Proactivity and Firm Approach to the Natural Environment
  • Author: Aragon-Correa, J.
  • Journal: Academy of Management Journal
  • A relationship was found between strategic proactivity and approaches to the natural environment. The firms with the most proactive business strategies ("prospectors") employed both traditional corrective and modern preventive approaches to natural environment issues. Firm size had a major impact on the amount of training related to the natural environment in the sample firms and on their corrective approaches but made no difference to their preventive approaches.
1998 Environmental
  • A Contingent Resource-Based View of Proactive Corporate Environmental Strategy
  • Author: Aragon-Correa, J. and S. Sharma
  • Journal: Academy of Management Review
  • This paper integrates perspectives from the literature on contingency, dynamic capabilities, and the natural resource-based view of the firm to propose a generic theory of how dimensions of the general competitive environment of a business will influence the development of a dynamic, proactive corporate strategy for managing the business-natural environment interface. The authors explain how certain characteristics of the general business environment- uncertainty, complexity, and munificence- moderate the relationship between the dynamic capability of a proactive environmental strategy and competitive advantage.
2003 Environmental
  • Environmental Strategy and Performance in Small Firms: A Resource-Based Perspective
  • Author: Aragon-Correa, J., N. Hurtado-Torres, S. Sharma and V. Garcia-Morales
  • Journal: Journal of Environmental Management
  • Contrary to conventional wisdom in the extant literature, even small and medium sized enterprises (SMEs) can adopt proactive environmental practices and these practices can lead to superior financial performance via specific capabilities based on the unique strategic characteristics of SMEs. The authors research also contributes to the resource-based view by showing that this perspective is relevant for SMEs' competitive strategies generally.
2008 Environmental
2011 Governance
  • The Effects of Board Independence in Controlled Firms: Evidence from Turkey
  • Author: Ararat, M., H. Orbay and B. Yurtoglu
  • Journal: Working paper
  • This paper analyzes the relationship between board structure and firm performance. Classifying the board members as independent and affiliated directors, the authors report three main results: (i) Board independence is unrelated to equity issues, (ii) Independent directors are unlikely to curb the extent of related party transactions, and (iii) The presence of independent board members and firm performance are negatively related or uncorrelated
2010 Governance
  • Too Much Finance
  • Author: Arcand, J., E. Berkes and U. Panizza
  • Journal: Internationl Monetary Fund
  • This paper examines whether there is a threshold above which financial development no longer has a positive effect on economic growth. The results suggest that finance starts having a negative effect on output growth when credit to the private sector reaches 100% of GDP.
2012 Governance
  • Investing in Mutual Funds: Does It Pay to Be a Sinner or a Saint in Times of Crisis
  • Author: Areal, N., M. Cortez and F. Silva
  • Journal: Working paper
  • This paper investigates the performance of U.S. socially responsible funds that employ different stock selection criteria: religious, social and 'irresponsible' criteria. The 'irresponsible' fund outperforms in low volatility regimes, but underperforms in high volatility regimes. Furthermore, the risk of the 'irresponsible' fund is higher in low volatility regimes and lower in high volatility regimes. Socially responsible funds do not adjust risk according to market conditions.
2010 Governance
2009 Governance
  • Executive Stock Options, Differential Risk-Taking Incentives, and Firm Value
  • Author: Armstrong, C. and R. Vashishtha
  • Journal: Journal of Financial Economics
  • The authors show that the sensitivity of stock options' payoff to return volatility, or vega, provides risk-averse CEOs with an incentive to increase their firms' risk more by increasing systematic rather than idiosyncratic risk. This effect manifests because any increase in the firm's systematic risk can be hedged by a CEO who can trade the market portfolio. Consistent with this prediction, the authors find that vega gives CEOs incentives to increase their firms' total risk by increasing systematic risk but not idiosyncratic risk.
2012 Governance
  • Share Price Reactions to Work-Family Initiatives: An Institutional Perspective
  • Author: Arthur, M.
  • Journal: Academy of Management Journal
  • This study of 130 announcements in the Wall Street Journal illustrated a significant, positive relationship between work-family human resource initiatives and share price. As hypothesized, the work-family initiative and shareholder return relationship was higher in high-tech industries and, to a lesser extent, in industries with higher proportions of female employees.
2003 Social
  • Conflicts of Interest and Mutual Fund Proxy Voting: Evidence from Shareholder Proposals on Executive Compensation
  • Author: Ashraf, R., N. Jayaraman and H. Ryan, Jr.
  • Journal: Working paper
  • This paper examines the relation between mutual fund votes on shareholder executive compensation proposals and pension-related business ties between the mutual fund and the firm. Mutual funds with business ties are less likely to support shareholder proposals. Among mutual funds with business ties, support for shareholder proposals varies inversely with the fees that the fund family receives from the firm.
2009 Governance
  • Ethical Investment and the Incentives for Corporate Environmental Protection and Social Responsibility
  • Author: Aslaksen, I. and T. Synnestvedt
  • Journal: Corporate Social Responsibility and Environmental Management
  • Considering ethical screening as a kind of segmentation of the equity market, it is shown with a theoretical model that screening can create incentives for changes in firms' behavior. The strength of this incentive depends on the relative share of screened portfolios, which in turn partially depends on the financial performance of the screened portfolios. While some theoretical arguments suggest that screening imposes a handicap compared with conventional portfolios, the existing empirical evidence does not indicate that screened portfolios systematically underperform conventional portfolios.
2003 Environmental
  • Strategic Ownership Structure and the Cost of Debt
  • Author: Aslan, H. and P. Kumar
  • Journal: Review of Financial Studies
  • The authors theoretically and empirically address the endogeneity of corporate ownership structure and the cost of debt, with a novel emphasis on the role of control concentration in post-default firm restructuring. Control concentration raises agency costs of debt, and dominant shareholders trade off private benefits of control against higher borrowing costs in choosing their ownership stakes. This paper presents new evidence on the firm- and macro-level determinants of corporate control concentration and the cost of debt.
2012 Governance
  • How Does Law Affect Finance? An Examination of Equity Tunneling in Bulgaria
  • Author: Atanasov, V., B. Black, C. Ciccotello and S. Gyoshev
  • Journal: Journal of Financial Economics
  • This paper examines 2002 Bulgaria securities law changes which limit two forms of equity tunneling - dilutive equity offerings and freezeouts. Following the changes, minority shareholders participate equally in secondary equity offers, where before they suffered severe dilution; freezeout offer price/sales ratios quadruple; and Tobin's q rises sharply for firms at high risk of tunneling, relative to lower risk firms. At the same time, return on assets declines for high-equity-tunneling-risk firms.
2010 Governance
  • Labor and Corporate Governance: International Evidence from Restructuring Decisions
  • Author: Atanassov, J. and E. Kim
  • Journal: Journal of Finance
  • The authors find that strong union laws protect not only workers but also underperforming managers. Weak investor protection combined with strong union laws are conducive to worker-management alliances, wherein poorly performing firms sell assets to prevent large-scale layoffs, garnering worker support to retain management. Asset sales in weak investor protection countries lead to further deteriorating performance, whereas in strong investor protection countries they improve performance and lead to more layoffs. Strong union laws are less effective in preventing layoffs when financial leverage is high.
2009 Governance
  • Mentoring and Diversity
  • Author: Athey, S., C. Avery and P. Zemsky
  • Journal: National Bureau of Economic Research
  • The authors study how diversity evolves at a firm with entry-level and upper-level employees who vary in ability and type" (gender or ethnicity). Using a theoretical model, they characterize possible steady states, including a "glass ceiling," where the upper level remains less diverse than the entry level, and temporary affirmative-action policies have a long-run impact.
1998 Social
  • Multiple Large Shareholders, Control Contests, and Implied Cost of Equity
  • Author: Attig, N., O. Guedhami and D. Mishra
  • Journal: Journal of Corporate Finance
  • This paper examines whether the presence of multiple large shareholders alleviates firm's agency costs and information asymmetry embedded in ultimate ownership structures. The authors find evidence that the implied cost of equity decreases in the presence of large shareholders beyond the controlling owner. They also find that the voting rights, the relative voting size (vis-a-vis the first largest shareholder) and the number of blockholders reduces firm's cost of equity. The study uncovers that the presence of multiple controlling shareholders with comparable voting power lowers firm's cost of equity.
2008 Governance
  • Corporate Legitimacy and Investment-Cash Flow Sensitivity
  • Author: Attig, N., S. Cleary and A. Ghoul
  • Journal: Journal of Business Ethics
  • The authors find that CSR performance leads to a decrease in investment-cash flow sensitivity (ICFS). They further find that ICFS decreases (increases) when CSR strengths (concerns) increase. They find that the effect of CSR on ICFS is driven by the areas Community, Diversity, and Human Rights.
2013 Governance
  • Corporate Social Responsibility and Credit Ratings
  • Author: Attig, N., S. Ghoul and A. Guedhami
  • Journal: Journal of Business Ethics
  • This study provides evidence on the relationship between corporate social responsibility (CSR) and firms' credit ratings. The authors find that credit rating agencies tend to award relatively high ratings to firms with good social performance. They also find that CSR strengths and concerns influence credit ratings, and that the individual components of CSR that relate to primary stakeholder management (i.e., community relations, diversity, employee relations, environmental performance, and product characteristics) matter most in explaining firms' creditworthiness.
2013 Environmental, Social
  • Bid-Ask Spread, Asymmetric Information and Ultimate Ownership
  • Author: Attig, N., Y. Gadhoum and H. Lang
  • Journal: Internationl Monetary Fund
  • This paper examines the relationship between stock liquidity and ultimate ownership structure. The results suggest that the presence of family ownership increases the bid-ask spread. In addition, the magnitude of the deviation between ultimate ownership and ultimate control at the presence of families is important in determining the bid-ask spread.
2003 Governance
  • Creditor Rights, Enforcement, and Bank Loans
  • Author: Bae, K.-H. and V. Goyal
  • Journal: Journal of Finance
  • This paper examines whether differences in legal protection affect the size, maturity, and interest rate spread on loans to borrowers in 48 countries. Results show that banks respond to poor enforceability of contracts by reducing loan amounts, shortening loan maturities, and increasing loan spreads.
2009 Governance
  • Do Controlling Shareholders' Expropriation Incentives Imply a Link between Corporate Governance and Firm Value? Theory and Evidence
  • Author: Bae, K.-H., J. Baek, J.-K. Kang and W. Liu
  • Journal: Journal of Financial Economics
  • This paper develops and tests a model that investigates how controlling shareholders' expropriation incentives affect firm values during crisis and subsequent recovery periods. The authors find that during the 1997 Asian financial crisis, Asian firms with weaker corporate governance experienced a larger drop in their share values, but during the post-crisis recovery period, such firms experienced a larger rebound in their share values.
2012 Governance
  • Employee Treatment and Firm Leverage: A Test of the Stakeholder Theory of Capital Structure
  • Author: Bae, K.-H., J.-K. Kang and J. Wang
  • Journal: Journal of Financial Economics
  • This paper investigates the stakeholder theory of capital structure from the perspective of a firm's relations with its employees. The authors find that firms that treat their employees fairly maintain low debt ratios. This result is robust to two measures of fair employee treatment- namely, high employee friendly ratings or inclusion in Fortune's "100 Best Companies to Work For."
2011 Social
  • Corporate Governance and Conditional Skewness in the World's Stock Markets
  • Author: Bae, K.-H., K. Wei and C.-W. Lim
  • Journal: Working paper
  • This paper investigates why stock returns in emerging markets tend to be more positively skewed than those in developed markets. The authors find that positive skewness is most profound in stocks from markets that have poor corporate governance. Analogous results are also obtained from aggregate stock market returns.
2003 Governance
  • Culture, Corporate Governance, and Dividend Policy: International Evidence
  • Author: Bae, S., K. Chang and E. Kang
  • Journal: Journal of Financial Research
  • This paper finds that two Hofstede's cultural dimensions, uncertainty avoidance and long-term orientation, remain significant in the determination of dividend policy even after controlling for governance and firm-specific factors. When uncertainty avoidance is high, only firms in countries with stronger investor protection pay more dividends as investors' desire of having a sure dividend dominates managers' desire of retaining more cash. Similarly, when a society's long-term orientation is strong, firms tend to pay less dividends.
2012 Governance
  • Business Groups and Tunneling: Evidence from Private Securities Offerings by Korean Chaebols
  • Author: Baek, J.-S., J.-K. Kang and I. Lee
  • Journal: Journal of Finance
  • The authors examine whether equity-linked private securities offerings are used as a mechanism for tunneling among firms that belong to a Korean chaebol. They find that chaebol issuers involved in intragroup deals set the offering prices to benefit their controlling shareholders. They also find that chaebol issuers (member acquirers) realize an 8.8% (5.8%) higher (lower) announcement return than do other types of issuers (acquirers) if they sell private securities at a premium to other member firms, and if the controlling shareholders receive positive net gains from equity ownership in issuers and acquirers.
2006 Governance
  • The Road to Recovery
  • Author: Bank, W.
  • Journal: World Bank
  • This paper offers an in depth analysis of the East Asia financial crisis and a plan for restoring growth. This report focuses on a three-pronged strategy: reactivating growth, protecting the poor, and mobilizing capital.
1998 Governance
  • Monitoring the Monitor: Evaluating CalPERS' Activism
  • Author: Barber, B.
  • Journal: Journal of Investing
  • This paper reviews the theory and empirical evidence underlying the motivation for institutional activism and finds that CalPERS has pursued shareholder activism (i.e. reforms at focus list companies that would increase shareholder rights) as well as social activism (e.g., the divestment of tobacco stocks). The author estimates the total wealth creation from the former to be $3.1 billion between 1992 and 2005. The author argues that institutional activism should be limited and that it should pursue the interests of investors.
2007 Governance
  • Corporate Social Responsibility as a Conflict between Shareholders
  • Author: Barnea, A. and A. Rubin
  • Journal: Journal of Business Ethics
  • This paper argues that insiders (managers and large blockholders) who are affiliated with the firm may want to over-invest in CSR for their private benefit since it improves their reputation as being good global citizens. The authors find that insiders' ownership and leverage are negatively related to the social rating of firms, while institutional ownership is uncorrelated with it.
2010 Environmental, Social, Governance
  • Green Investors and Corporate Investment
  • Author: Barnea, A., R. Heinkel and A. Kraus
  • Journal: Structural Change and Economic Dynamics
  • This paper presents a theoretical equilibrium model that explores the effects of ethical screening on the investment decisions of firms that fail the screen ('polluting' firms) and on their decisions to reform so as to pass the screen. The authors find that green investors can induce polluting firms to reform and that SRI results in under-investing by polluting firms, which leads to lower total investment in the economy. In intermediate cases when reforming costs are positive but not so high that firms never reform, no fraction of green investors strictly between 0 and 1 generates as much investment as all or none. For 10-12% green investors, as estimated to be the fraction of total managed funds which are subject to SRI strategies, increasing the fraction of green investors lowers total investment.
2005 Environmental
  • Stakeholder Influence Capacity and the Variability of Financial Returns to Corporate Social Responsibility
  • Author: Barnett, M.
  • Journal: Academy of Management Review
  • This theoretical paper argues that research on the business case for corporate social responsibility must account for the path-dependent nature of firm-stakeholder relations, and develops the construct of stakeholder influence capacity to fill this void. This construct helps explain why the effects of corporate social responsibility on corporate financial performance vary across firms and time.
2007 Governance
  • Does It Pay to Be Really Good? Addressing the Shape of the Relationship between Social and Financial Performance
  • Author: Barnett, M. and R. Salomon
  • Journal: Strategic Management Journal
  • The authors bring together contrasting literatures on the relationship between corporate social performance (CSP) and corporate financial performance (CFP) to hypothesize that the CSP-CFP relationship is U-shaped. Their results support this hypothesis. The authors find that firms with low CSP have higher CFP than firms with moderate CSP, but firms with high CSP have the highest CFP.
2012 Environmental, Social, Governance
2006 Environmental, Social
  • The Economics and Politics of Corporate Social Performance
  • Author: Baron, D., M. Agus Harjoto and H. Jo
  • Journal: Business and Politics
  • This paper provides an empirical test of a theory that relates corporate financial performance (CFP), corporate social performance (CSP), and social pressure from government and social activists for improved social performance. CFP is increasing in CSP and decreasing in social pressure. CSP is increasing in social pressure. CSP is also increasing in CFP. Social pressure is decreasing in CFP and increasing in CSP. Thus, overall mixed results.
2009 Social
  • Estimation and Market Valuation of Environmental Liabilities Relating to Superfund Sites
  • Author: Barth, M. and M. McNichols
  • Journal: Journal of Accounting Research
  • The authors investigate whether characteristics known at various points in a Federal Superfund site's regulatory history explain cleanup cost estimates. The cleanup cost analysis indicates that several site characteristics provide explanatory power in explaining cost estimates, including the type of site, the hazard score assigned by the EPA, the identified remediation technology, and the number of cubic yards of contaminated soil. This papers evidence also indicates that market participants assess an environmental liability in excess of that recognized by the sample firms, averaging 28.6% of the market value of equity.
1994 Environmental
  • The Impact of U.S. Firms' Investments in Human Capital on Stock Prices
  • Author: Bassi, L., P. Harrison, J. Ludwig and D. McMurrer
  • Journal: Working paper
  • The authors hypothesis is that firms that make unusually large investments in employee development subsequently enjoy higher stock prices than comparable firms that make smaller investments in employee development. The premise is that the current accounting treatment and reporting requirements cause "high investment" firms to be under-priced in the short run. Consistent with this, they find that firms' stock prices exhibit "super-normal" returns to human capital, measured as formal employee education and training expenditures in the previous year.
2004 Social
  • Board Classification and Managerial Entrenchment: Evidence from the Market for Corporate Control
  • Author: Bates, T., D. Becher and M. Lemmon
  • Journal: Journal of Financial Economics
  • This paper considers the relation between board classification, takeover activity, and transaction outcomes. Target board classification does not change the likelihood that a firm, once targeted, is ultimately acquired. Moreover, shareholders of targets with a classified board realize bid returns that are equivalent to those of targets with a single class of directors, but receive a higher proportion of total bid surplus. Board classification does reduce the likelihood of receiving a takeover bid, however, the economic effect of bid deterrence on the value of the firm is quite small.
2008 Governance
  • Corporate Environmental Management and Credit Risk
  • Author: Bauer, R. and D. Hann
  • Journal: Working paper
  • This study analyzes corporate environmental management and its implications for bond investors. The authors provide support for the view that the credit standing of borrowing firms is influenced by legal, reputational, and regulatory risks associated with environmental incidents. The authors document that (i) environmental concerns are associated with a higher cost of debt financing and lower credit ratings, and (ii) proactive environmental practices are associated with a lower cost of debt.
2010 Environmental
  • Corporate Governance and Cross-Listing: Evidence from European Companies
  • Author: Bauer, R., D. Wojcik and G. Clark
  • Journal: Working paper
  • This paper documents the relationship between cross-listing and corporate governance of the largest European companies. Companies with a U.S. cross-listing, and particularly those listed on a U.S. stock exchange had higher corporate governance ratings than companies without a U.S. cross-listing. The U.S. cross-listed firms had higher ratings not only in terms of disclosure but also in terms of board structure and functioning. In contrast to the importance of cross-listing in the U.S., there is no significant relationship between corporate governance and cross-listing within Europe. Implications are drawn for the debate on bonding and the future of European stock markets.
2004 Governance
  • Employee Relations and Credit Risk
  • Author: Bauer, R., J. Derwall and D. Hann
  • Journal: Working paper
  • Consistent with the theory that human capital management influences organizational performance and risk, the authors find that employee relations explain the cross-sectional variation in credit risk. They construct an aggregate measure for the quality of employee relations based on the firm's engagement in employment practices and policies, and document that firms with stronger employee relations enjoy a statistically and economically lower cost of debt financing, higher credit ratings, and lower firm-specific risk.
2009 Social
  • International Evidence on Ethical Mutual Fund Performance and Investment Style
  • Author: Bauer, R., K. Koedijk and R. Otten
  • Journal: Journal of Banking & Finance
  • This paper reviews and extends previous research on ethical mutual fund performance. The authors find no significant difference between the returns of ethical and conventional funds. Results also suggest that ethical mutual funds underwent a catching up phase, before delivering financial returns similar to those of conventional mutual funds.
2005 Social
  • Empirical Evidence on Corporate Governance in Europe. The Effect on Stock Returns, Firm Value and Performance
  • Author: Bauer, R., N. Guenster and R. Otten
  • Journal: Journal of Asset Management
  • The study builds portfolios consisting of well-governed and poorly governed companies and compares their performance. The results show a positive relationship between these variables and corporate governance. This relationship weakens substantially after adjusting for country differences. The authors find a negative relationship between governance standards and earnings based performance ratios.
2004 Governance
  • Corporate Governance and Performance: The REIT Effect
  • Author: Bauer, R., P. Eichholtz and N. Kok
  • Journal: Real Estate Economics
  • The authors document for a sample including governance ratings of more than 220 REITs that firm value is significantly related to firm-level governance for REITs with low payout ratios only. Repeating the analysis with the complete database that includes more than 5,000 companies and a control sample of firms with high corporate real estate ratios, they find a strong and significantly positive relation between the governance index and several performance variables, indicating that the partial lack of a relation between governance and performance in the real estate sector might be explained by a REIT effect.
2010 Governance
  • Industry Competition, Ownership Structure and Shareholder Activism
  • Author: Bauer, R., R. Braun and M. Viehs
  • Journal: Working paper
  • The authors study shareholder activism through proxy proposals in the United States. They investigate the determinants for being targeted and the corresponding voting results. The authors hypothesize that a lack of industry competition in combination with higher managerial entrenchment increases the likelihood of being targeted. The empirical results support this hypothesis.
2010 Governance
  • Ethical Investing in Australia: Is There a Financial Penalty?
  • Author: Bauer, R., R. Otten and A. Rad
  • Journal: Pacific-Basin Finance Journal
  • The authors observe no evidence of significant differences in risk-adjusted returns between ethical and conventional funds during 1992-2003. This result however is sensitive to the chosen time period. During 1992-1996 domestic ethical funds under-performed their conventional counterparts significantly, whereas during 1996-2003 ethical funds matched the performance of conventional funds more closely.
2006 Governance
  • The Law and Economics of Blockholder Disclosure
  • Author: Bebchuk and R. Jackson, L., Jr.
  • Journal: Harvard Business Law Review
  • The authors argue that the proposed changes to the SEC's rules in the Williams Act, which regulates the disclosure of large blocks of stock in public companies, should similarly be examined in the larger context of the optimal balance of power between incumbent directors and these blockholders. They discuss the beneficial and documented role that outside blockholders play in corporate governance and the adverse effect that any tightening of the Williams Act's disclosure thresholds can be expected to have on such blockholders.
2011 Governance
  • Executive Pensions
  • Author: Bebchuk and R. Jackson, L., Jr.
  • Journal: Journal of Corporation Law
  • This paper presents evidence that omitting the value of pension benefits significantly undermines the accuracy of existing estimates of executive pay, its variability, and its sensitivity to performance companies. The authors find that the CEOs' plans had a median actuarial value of $15 million; that the ratio of the executives' pension value to the executives' total compensation (including both equity and non-equity pay) during their service as CEO had a median value of 34%; and that including pension values increased the median percentage of the executives' total compensation composed of salary-like payments during and after their service as CEO from 15% to 39%.
2005 Governance
  • Why Firms Adopt Antitakeover Arrangements
  • Author: Bebchuk, L.
  • Journal: University of Pennsylvania Law Review
  • This paper identifies possible explanations for the increasing prevalence of antitakeover provisions in IPO charters. Specifically, the author analyzes explanations based on (1) the role of antitakeover arrangements in encouraging founders to break up their initial control blocks, (2) efficient private benefits of control, (3) agency problems among pre-IPO shareholders, (4) agency problems between pre-IPO shareholders and their IPO lawyers, (5) asymmetric information between founders and public investors about the firm's future growth prospects, and (6) bounded attention and imperfect pricing at the IPO stage.
2003 Governance
  • The Case for Increasing Shareholder Power
  • Author: Bebchuk, L.
  • Journal: Harvard Law Review
  • This article reconsiders the basic allocation of power between boards and shareholders in publicly traded companies with dispersed ownership. Professor Bebchuk's analysis and his empirical evidence indicate that shareholders' existing power to replace directors is insufficient to secure the adoption of value-increasing governance arrangements that management disfavors. He puts forward an alternative regime that would allow shareholders to initiate and adopt rules-of-the-game decisions to change the company's charter or state of incorporation.
2003 Governance
  • The Costs of Entrenched Boards
  • Author: Bebchuk, L. and A. Cohen
  • Journal: Journal of Financial Economics
  • This paper investigates empirically how the value of publicly traded firms is affected by arrangements that protect management from removal. The authors find that staggered boards are associated with an economically meaningful reduction in firm value (as measured by Tobin's Q). They also provide suggestive evidence that staggered boards bring about, and not merely reflect, a reduced firm value. This paper shows that the correlation with reduced firm value is stronger for staggered boards that are established in the corporate charter (which shareholders cannot amend) than for staggered boards established in the company's bylaws (which shareholders can amend).
2005 Governance
  • The Elusive Quest for Global Governance Standards
  • Author: Bebchuk, L. and A. Hamdani
  • Journal: University of Pennsylvania Law Review
  • Because of this fundamental difference between companies with and without a controlling shareholder, any governance-rating methodology that applies a single metric to companies or countries worldwide is bound to produce an inaccurate or even distorted picture.
2008 Governance
  • Bundling and Entrenchment
  • Author: Bebchuk, L. and E. Kamar
  • Journal: Harvard Law Review
  • This article provides the first systematic evidence that managements have been using bundling to introduce antitakeover defenses that shareholders would likely reject if they were to vote on them separately. The authors study a hand-collected dataset of public mergers and find that while shareholders were strongly opposed to staggered boards during this period and generally unwilling to approve charter amendments introducing a staggered board on a stand-alone basis, the deal planners often bundled the mergers studied with a move to a staggered-board structure. In mergers in which the combined firm was one of the parties, a party's odds of being chosen to survive as the combined firm were significantly higher if it had a staggered board and the other party did not.
2009 Governance
  • Pay without Performance: Overview of the Issues
  • Author: Bebchuk, L. and J. Fried
  • Journal: Academy of Management Perspectives
  • In this paper, the authors outline some of the main elements of their critique of contemporary executive compensation and corporate governance arrangements, as well as their proposals and suggested reforms. The authors show that managerial influence can explain many features of the compensation landscape, and explain how this influence has led to opaque and distorted pay arrangements. This paper concludes with a discussion of proposals for making pay more transparent, improving the design of pay arrangements, and increasing board accountability.
2006 Governance
  • Executive Compensation as an Agency Problem
  • Author: Bebchuk, L. and J. Fried
  • Journal: Journal of Economic Perspectives
  • This paper provides an overview of the main theoretical elements and empirical underpinnings of a "managerial power" approach to executive compensation. Under this approach, the design of executive compensation is viewed not only as an instrument for addressing the agency problem between managers and shareholders but also as part of the agency problem itself. Boards of publicly traded companies with dispersed ownership, the authors argue, cannot be expected to bargain at arm's length with managers. As a result, managers wield substantial influence over their own pay arrangements, and they have an interest in reducing the saliency of the amount of their pay and the extent to which that pay is de-coupled from managers' performance.
2003 Governance
  • A Theory of Path Dependence in Corporate Governance and Ownership
  • Author: Bebchuk, L. and M. Roe
  • Journal: Stanford Law Review
  • This theoretical paper develops a theory of path dependence of corporate structure. Two sources of path dependence- structure driven and rule driven- are identified and analyzed. The authors' theory of path dependence sheds light on why the advanced economies, despite pressures to converge, vary in their ownership structures.
1999 Governance
  • The State of Corporate Governance Research
  • Author: Bebchuk, L. and M. Weisbach
  • Journal: Review of Financial Studies
  • This review on the state of corporate government research features seven papers on corporate governance that were presented in a meeting of the NBER's corporate governance project. For each of these areas, the authors discuss the importance of the area and the questions it focuses on, and how the paper in the special issue makes a significant contribution to this area.
2009 Governance
  • What Matters in Corporate Governance?
  • Author: Bebchuk, L., A. Cohen and A. Ferrell
  • Journal: Review of Financial Studies
  • The authors put forward an entrenchment index based on staggered boards, limits to shareholder bylaw amendments, poison pills, golden parachutes, and supermajority requirements for mergers and charter amendments. Increases in the index level are monotonically associated with economically significant reductions in firm valuation.
2009 Governance
  • Learning and the Disappearing Association between Governance and Returns
  • Author: Bebchuk, L., A. Cohen and C. Wang
  • Journal: Journal of Financial Economics
  • During the period 1991-1999, stock returns were correlated with the G-Index based on twenty-four governance provisions (Gompers, Ishii, and Metrick (2003)) and the E-Index based on the six provisions that matter most (Bebchuk, Cohen, and Ferrell (2009)). This correlation, however, did not persist during the subsequent period 2000-2008. The authors provide evidence that both the identified correlation and its subsequent disappearance were due to market participants' gradually learning to appreciate the difference between firms scoring well and poorly on the governance indices.
2013 Governance
  • Staggered Boards and the Wealth of Shareholders: Evidence from Two Natural Experiments
  • Author: Bebchuk, L., A. Cohen and C. Wang
  • Journal: Working paper
  • While staggered boards have been documented to be negatively correlated with firm valuation, such association might be due to staggered boards either bringing about lower firm value or merely reflecting the tendency of low-value firms to have staggered boards. In this paper, the authors use two natural experiments to shed light on the causality question. The findings are consistent with the market's viewing staggered boards as bringing about a reduction in firm value. The findings are thus consistent with leading institutional investors' policies in favor of board de-staggering, and with the view that the ongoing process of board de-staggering in public firms can be expected to enhance shareholder value.
2011 Governance
  • Golden Parachutes and the Wealth of Shareholders
  • Author: Bebchuk, L., A. Cohen and C. Wang
  • Journal: Working paper
  • The authors analyze the relationship that golden parachutes have with expected acquisition premia and with firm value. They find that golden parachutes are associated with higher expected acquisition premia, and that this association is at least partly due to the effect of golden parachutes on incentives. They also find that firms that adopt a golden parachute experience a reduction in their industry-adjusted Tobin's Q, as well as negative abnormal stock returns both during the inter- volume period of adoption and subsequently.
2010 Governance
  • The Powerful Antitakeover Force of Staggered Boards: Further Findings and a Reply to Symposium Participants
  • Author: Bebchuk, L., J. Coates IV and G. Subramanian
  • Journal: Stanford Law Review
  • This reply develops and defends The authors earlier analysis of the powerful antitakeover force of staggered boards. The authors find that having a majority of independent directors does not address the concern that defensive tactics might be abused. They also find that "effective" staggered boards do not appear to have a significant beneficial effect on premiums in negotiated transactions.
2002 Governance
  • The CEO Pay Slice
  • Author: Bebchuk, L., K. Cremers and U. Peyer
  • Journal: Journal of Financial Economics
  • The authors investigate the relationship between the CEO Pay Slice (CPS) - the fraction of the aggregate compensation of the top-five executive team captured by the CEO - and the value, performance, and behavior of public firms. The authors find that CPS is correlated with (i) lower (industry-adjusted) accounting profitability, (ii) lower stock returns accompanying acquisitions announced by the firm and higher likelihood of a negative stock return accompanying such announcements, (iii) higher odds of the CEO receiving a lucky option grant at the lowest price of the month, (iv) lower performance sensitivity of CEO turnover, and (v) lower stock market returns accompanying the filing of proxy statements for periods where CPS increases.
2011 Governance
  • Lucky CEOs and Lucky Directors
  • Author: Bebchuk, L., Y. Grinstein and U. Peyer
  • Journal: Journal of Finance
  • This paper studies the relation between opportunistic timing of option grants and corporate governance, focusing on at-the-money "lucky" grants awarded at the lowest price of the grant month. The authors find that lucky grants to CEOs and directors are associated with higher CEO compensation from other sources, and are correlated with a lack of majority of independent directors on the board, no independent compensation committee with an outside blockholder, or a long-serving CEO. For any given firm, the odds of a lucky grant increased when the payoffs from luck were high and when a preceding grant was lucky.
2010 Governance
  • Corporate Social Responsibility and Shareholder's Value: An Event Study Analysis
  • Author: Becchetti, L., R. Ciciretti and I. Hasan
  • Journal: Bank of Finland Research Discussion Paper
  • Deletion from an established SR index (Domini index) results in significantly negative abnormal returns. However in a period of 11 to 24 days, the gap between deletion and addition events tends to be bridged. These findings suggest that penalty for exit from SR index might depend more from the reaction of ethically screened funds, than from an expected negative shock on shareholder value.
2009 Environmental, Social, Governance
  • Returns to Shareholder Activism: Evidence from a Clinical Study of the Hermes UK Focus Fund
  • Author: Becht, M., J. Franks, C. Mayer and S. Rossi
  • Journal: Review of Financial Studies
  • This article reports a unique analysis of private engagements by a pension activist fund. In contrast with most previous studies of activism, The authors report that the fund executes shareholder activism predominantly through private interventions that would be unobservable in studies purely relying on public information. The fund substantially outperforms benchmarks and The authors estimate that abnormal returns are largely associated with engagements rather than stock picking.
2009 Governance
  • Legal Institutions and Financial Development
  • Author: Beck, T. and R. Levine
  • Journal: Handbook of New Institutional Economics
  • This paper provides a concise, selective review of research on the role of legal institutions in shaping the operation of financial systems. While a burgeoning literature finds that financial development exerts a first-order impact on economic growth, the law and finance literature seeks to understand the role of legal institutions in explaining international differences in financial systems.
2005 Governance
  • Stock Markets, Banks, and Growth: Panel Evidence
  • Author: Beck, T. and R. Levine
  • Journal: Journal of Banking & Finance
  • This paper investigates the impact of stock markets and banks on economic growth applying recent GMM techniques developed for dynamic panels. On balance, The authors find that stock markets and banks positively influence economic growth and these findings are not due to potential biases induced by simultaneity, omitted variables or unobserved country-specific effects.
2004 Governance
  • Law and Finance: Why Does Legal Origin Matter?
  • Author: Beck, T., A. Demirguc-Kunt and R. Levine
  • Journal: Journal of Comparative Economics
  • A growing body of work suggests that cross-country differences in legal origin help explain differences in financial development. This paper empirically assesses two theories of why legal origin influences financial development. The authors use historical comparisons and cross-country regressions to assess the role of these two channels.
2003 Governance
  • Financial and Legal Constraints to Growth: Does Firm Size Matter?
  • Author: Beck, T., A. Demirguc-Kunt and V. Maksimovic
  • Journal: Journal of Finance
  • Financial and institutional development weakens the constraining effects of financial, legal, and corruption obstacles and it is the small firms that benefit the most. There is only a weak relation between firms' perception of the quality of the courts in their country and firm growth. The authors also provide evidence that the corruption of bank officials constrains firm growth.
2005 Governance
  • Finance and the Sources of Growth
  • Author: Beck, T., R. Levine and N. Loayza
  • Journal: Journal of Financial Economics
  • This paper evaluates the empirical relation between the level of financial intermediary development and (i) economic growth, (ii) total factor productivity growth, (iii) physical capital accumulation, and (iv) private savings rates. The authors find that (1) financial intermediaries exert a large, positive impact on total factor productivity growth, which feeds through to overall GDP growth and (2) the long-run links between financial intermediary development and both physical capital growth and private savings rates are tenuous.
2000 Governance
  • The Impact of Strikes on Shareholder Equity
  • Author: Becker, B. and C. Olson
  • Journal: Industrial and Labor Relations Review
  • The authors find that strikes substantially affect shareholder equity. Over a twenty-year period, the average strike involving 1,000 or more workers resulted in a 4.1 percent drop in shareholder equity, representing a decline of $72-87 million in 1980 dollars. Costs varied widely across industries. Capital markets are usually able to anticipate whether an impending contract deadline will result in a strike or settlement.
1986 Social
  • Human Resources Strategies, Complementarities, and Firm Performance
  • Author: Becker, B. and M. Huselid
  • Journal: Working paper
  • Using survey data, the authors find that high performance Human Resource Management (HRM) systems have an economically and statistically positive effect on firm performance. Both an integrated system and a compensation-focused strategy are associated with significantly higher firm performance than is a traditional "personnel" strategy.
1998 Social
  • HR as a Source of Shareholder Value: Research and Recommendations
  • Author: Becker, B., M. Huselid, P. Pickus and M. Spratt
  • Journal: Human Resource Management
  • The authors argue that the traditional practice of HRM does not create value for the organization. They suggest that HRM can have an economically significant effect on firm performance through a shared perspective of the HRM system as a source of strategy implementation and a means to achieve important business priorities.
1997 Social
  • Socially Responsible Investing and Portfolio Diversification
  • Author: Bello, Z.
  • Journal: Journal of Financial Research
  • This paper finds that socially responsible funds do not differ significantly from conventional funds in attributes such as characteristics of assets held, and portfolio diversification. Moreover, the effect of diversification on investment performance is not different between the two groups. Both groups underperform the Domini 400 Social Index and S&P 500 during the study period.
2005 Environmental, Social, Governance
  • The Nontradable Share Reform in the Chinese Stock Market: The Role of Fundamentals
  • Author: Beltratti, A. and B. Bortolotti
  • Journal: International Research Conference on Corporate Governance in Emerging Markets
  • This paper evaluates the stock price effects of Chinese financial reforms trying to relate expected returns to changes in fundamentals. The results show that Nontradable shares (NTS) reform was beneficial for the market as a whole, and especially for those companies with lower disclosure standards.
2007 Governance
  • The Credit Crisis around the Globe: Why Did Some Banks Perform Better
  • Author: Beltratti, A. and R. Stulz
  • Journal: Journal of Financial Economics
  • This paper evaluates the importance of factors that have been put forth as having contributed to the poor performance of banks during the credit crisis. The evidence is supportive of theories that emphasize the fragility of banks financed with short-term capital market funding. The better-performing banks had less leverage and lower returns immediately before the crisis. Differences in banking regulations across countries are generally uncorrelated with the performance of banks during the crisis, except that large banks from countries with more restrictions on bank activities performed better and decreased loans less.
2012 Governance
2012 Environmental, Social, Governance
2008 Environmental, Social, Governance
  • Do Socially Responsible Fund Managers Really Invest Differently?
  • Author: Benson, K., T. Brailsford and J. Humphrey
  • Journal: Journal of Business Ethics
  • This paper finds no statistically significant difference between SRI funds and conventional fund returns. However returns of SRI funds are generated through different industry exposures when compared to conventional funds.
2006 Environmental, Social, Governance
  • Enforcement and Good Corporate Governance in Developing Countries and Transition Economies
  • Author: Berglof, E. and S. Claessens
  • Journal: World Bank Research Observer
  • This theoretical paper presents a framework to help explain enforcement, the impact on corporate governance when rules are not enforced, and what can be done to improve corporate governance in weak enforcement environments. The limited empirical evidence suggests that private enforcement tools are often more effective than public tools. Concentrated ownership aligns incentives and encourages monitoring, but it weakens other corporate governance mechanisms and can impose significant costs.
2006 Governance
  • Investor Protection and the Coasian View
  • Author: Bergman, N. and D. Nicolaievsky
  • Journal: Journal of Financial Economics
  • The corporate charters of a sample of Mexican firms show that private firms often significantly enhance the legal protection offered to investors, but public firms rarely do so. The authors construct a model that endogenizes the degree of investor protection that firms provide, using as a springboard the assumption that legal regimes differ in their ability to enforce precisely filtering contracts that provide protection only in those cases where expropriation can occur. Their model generates predictions about the types of contracts that would be employed and the levels of investor protection that would prevail across different legal regimes in both private and public firms.
2007 Governance
  • Human Capital, Bankruptcy, and Capital Structure
  • Author: Berk, J., R. Stanton and J. Zechner
  • Journal: Journal of Finance
  • The authors derive the optimal labor contract for a levered firm in an economy with perfectly competitive capital and labor markets. Employees become entrenched under this contract and so face large human costs of bankruptcy. The firm's optimal capital structure therefore depends on the trade-off between these human costs and the tax benefits of debt. Optimal debt levels consistent with those observed in practice emerge without relying on frictions such as moral hazard or asymmetric information.
2010 Social
  • Does Stakeholder Orientation Matter? The Relationship between Stakeholder Management Models and Firm Financial Performance
  • Author: Berman, S., A. Wicks, S. Kotha and T. Jones
  • Journal: Academy of Management Journal
  • In this study, the authors contributed to stakeholder theory development by (1) deriving two distinct stakeholder management models from extant research, (2) testing the descriptive accuracy of these models, and (3) including important variables from the strategy literature in the tested models. The results provide support for a strategic stakeholder management model but no support for an intrinsic stakeholder commitment model. Implications of these findings for management practice and future research are discussed.
1999 Social
2009 Environmental
  • Ferreting out Tunneling: An Application to Indian Business Groups
  • Author: Bertrand, M., P. Mehta and S. Mullainathan
  • Journal: Quarterly Journal of Economics
  • This paper proposes a general methodology to measure the extent of tunneling activities. The methodology rests on isolating and then testing the distinctive implications of the tunneling hypothesis for the propagation of earnings shocks across firms within a group. When applying the methodology to data on Indian business groups, the authors find a significant amount of tunneling, much of it occurring via nonoperating components of profit.
2002 Governance
  • Smart Beta Strategies: The Socially Responsible Investment Case
  • Author: Bertrand, P. and V. Lapointe
  • Journal: Working paper
  • In this article the authors propose to extend the streams of research about smart beta strategies and about Socially Responsible Investment (SRI) by studying the impact of using an SRI universe on the properties of smart beta portfolios and by studying the impact of using smart beta strategies on the performance of SRI portfolios.
2013 Governance
  • Can Labor Regulation Hinder Economic Performance? Evidence from India
  • Author: Besley, T. and R. Burgess
  • Journal: Quarterly Journal of Economics
  • The authors show that Indian states that amended the Industrial Disputes Act in a pro-worker direction experienced lowered output, employment, investment, and productivity in registered or formal manufacturing. Regulating in a pro-worker direction was also associated with increases in urban poverty. This suggests that attempts to redress the balance of power between capital and labor can end up hurting the poor.
2004 Social
  • Labour Market Regulation and Industrial Performance in India: A Critical Review of the Empirical Evidence
  • Author: Bhattacharjea, A.
  • Journal: Indian Journal of Labour Economics
  • This paper offers a critique of recent empirical studies on the impact of labor regulation on industrial performance in India. It criticizes the widely-used index of state-level labor regulation devised by Besley and Burgess (2004), and the econometric methodology they use to establish that excessively proworker regulation led to poor performance in Indian manufacturing. This paper also reviews other evidence on the actual enforcement of labor laws, labor flexibility, and industrial employment.
2006 Social
  • Are Foreign Banks Bad for Development Even If They Are Efficient? Evidence from the Indian Banking Industry
  • Author: Bhaumik, S. and J. Piesse
  • Journal: Biennial Pacific Rim Conference of the WEAI at Taipei
  • This paper shows that while foreign banks have high credit-deposit ratios, the domestic banks of India experienced much greater improvements in technical efficiency in the context of credit. The most significant improvements in technical efficiency are registered by the domestic de novo banks. There is weak evidence that foreign banks may be bullish only with respect to blue chip borrowers.
2004 Governance
  • How Important Is Ownership in a Market with Level Playing Field?: The Indian Banking Sector Revisited
  • Author: Bhaumik, S. and R. Dimova
  • Journal: Journal of Comparative Economics
  • In India, banking sector reforms and deregulation were initiated in 1992, encouraging entry and establishing a level playing field for all banks. Evidence suggests that after the reforms, ownership was no longer a significant determinant of performance. Rather, competition induced public-sector banks to eliminate the performance gap that existed between them and both domestic and foreign private-sector banks.
2004 Governance
  • Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors*
  • Author: Bhojraj, S. and P. Sengupta
  • Journal: Journal of Business
  • This article provides evidence linking corporate governance mechanisms to higher bond ratings and lower bond yields. Governance mechanisms can reduce default risk by mitigating agency costs and monitoring managerial performance and by reducing information asymmetry between the firm and the lenders. The authors find firms that have greater institutional ownership and stronger outside control of the board enjoy lower bond yields and higher ratings on their new bond issues. However, concentrated institutional ownership has an adverse effect on yields and ratings.
2003 Governance
  • Environmental Disclosures, Regulatory Costs, and Changes in Firm Value
  • Author: Blacconiere, W. and D. Patten
  • Journal: Journal of Accounting and Economics
  • This study examines the market reaction of chemical firms to a particular environmental catastrophe, and the evidence indicates that a significant negative intra-industry reaction occurred. However, firms with more extensive environmental disclosures in their financial report prior to the chemical leak experienced a less negative reaction than firms with less extensive disclosures. This result suggests that investors interpreted such disclosures as a positive sign of the firm managing its exposure to future regulatory costs.
1994 Environmental
  • Shareholder Activism and Corporate Governance in the United States
  • Author: Black, B.
  • Journal: New Palgrave Dictionary of Economics and the Law
  • A small number of American institutional investors, mostly public pension plans, spend a trivial amount of money on overt activism efforts. They don't conduct proxy fights, and don't try to elect their own candidates to the board of directors. The currently available evidence, taken as a whole, is consistent with the proposition that the institutions achieve the effects on firm performance that one might expect from this level of effort- namely, not much.
1998 Governance
  • Can Corporate Governance Reforms Increase Firm Market Values? Event Study Evidence from India
  • Author: Black, B. and V. Khanna
  • Journal: Journal of Empirical Legal Studies
  • The May 1999 announcement by Indian securities regulators of plans to adopt corporate governance reforms is accompanied by a 4% increase in the price of large firms over a two-day event window (the announcement date plus the next trading day), relative to smaller public firms (not affected by the initial reforms); the difference grows to 7% over a five-day event window and 10% over a two-week window. Cross-listed firms gained more than other firms, suggesting that local regulation can sometimes complement, rather than substitute for, the benefits of cross-listing.
2007 Governance
  • The Effect of Board Structure on Firm Value: A Multiple Identification Strategies Approach Using Korean Data
  • Author: Black, B. and W. Kim
  • Journal: Journal of Financial Economics
  • This paper uses a 1999 Korean law as an exogenous shock to assess how board structure affects firm market value. The law mandates 50% outside directors and an audit committee for large public firms, but not smaller firms. The legal shock produces large share price increases for large firms, relative to mid-sized firms; share prices jump in 1999 when the reforms are announced.
2012 Governance
  • What Matters and for Which Firms for Corporate Governance in Emerging Markets? Evidence from Brazil (and Other BRIK Countries)
  • Author: Black, B., A. de Carvalho and E. Gorga
  • Journal: Journal of Corporate Finance
  • This paper constructs a corporate governance index, and shows that the index, as well as subindices for ownership structure, board procedure, and minority shareholder rights, predict higher lagged Tobin's q. In contrast to other studies, greater board independence predicts lower Tobin's q. Firm characteristics also matter: governance predicts market value for nonmanufacturing (but not manufacturing) firms, small (but not large) firms, and high-growth (but not low-growth) firms. The authors also find that country characteristics strongly influence both which aspects of governance predict firm market value, and at which firms that association is found.
2012 Governance
2000 Governance
  • Does Corporate Governance Predict Firms' Market Values? Evidence from Korea
  • Author: Black, B., H. Jang and W. Kim
  • Journal: Journal of Law, Economics, & Organization
  • This paper reports strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining the market value of Korean public companies. In OLS, a worst-to-best change in KCGI predicts a 0.47 increase in Tobin's Q (about a 160% increase in share price). The authors also find that Korean firms with 50% outside directors have 0.13 higher Tobin's Q (roughly 40% higher share price), after controlling for the rest of KCGI. This effect, too, is likely causal.
2006 Governance
  • Restoring Public Purpose to the Private Corporation
  • Author: Blackwell, R. and T. Kochan
  • Journal: Working paper
  • This paper argues that the era of shareholder maximizing that emerged in the 1980s and has dominated since then has produced a set of perverse economic outcomes that have limited or stopped economic progress for the majority of the workforce and holds back an economic recovery capable of closing the jobs deficit and improving living standards. Building a more sustainable economy will, therefore, require replacing this narrow conception of the purpose of the firm with a broader theory and with policy and institutional reforms that rebalance the power of investors, corporate executives, workers, and their representatives.
2013 Governance
  • Unionism and Employment Behaviour
  • Author: Blanchflower, D., N. Millward and A. Oswald
  • Journal: Economic Journal
  • This study provides evidence on the consequences of trade union activity for the level and growth of employment using a microeconomic data set of British workplaces. Trade unions depress the rate of employment growth (or increase the extent of employment decline) by about 3 percent per year.
1991 Social
  • Management Practices, Work-Life Balance, and Productivity: A Review of Some Recent Evidence
  • Author: Bloom, N. and J. Van Reenen
  • Journal: Oxford Review of Economic Policy
  • In an international survey of management practices and work-life balance (WLB) practices, the authors find that the U.S. has the best management practices and the worst work-life balance. When looking within countries, however, the authors reject the pessimistic model of 'trade-off' between WLB and productivity. WLB outcomes are significantly associated with better management, so that well-run firms are both more productive and offer better conditions for their employees.
2006 Social
  • Are Family-Friendly Workplace Practices a Valuable Firm Resource?
  • Author: Bloom, N., T. Kretschmer and J. Van Reenen
  • Journal: Strategic Management Journal
  • The authors study the determinants and consequences of family-friendly workplace practices (FFWP) using a sample of over 450 manufacturing firms in Germany, France, U.K., and U.S. They find a positive correlation between firm productivity and FFWP. This association disappears, however, once they control for a measure of the quality of management practices.
2011 Social
  • FSB Principles for Sound Compensation Practices: Implementation Standards
  • Author: Board, F.
  • Journal: Financial Stability Board
  • This report responds to the call by the G20 Finance Ministers and Governors to submit to the Pittsburgh Summit detailed specific proposals on corporate governance reforms, global standards on pay structure and greater disclosure and transparency, to strengthen adherence to the FSB Principles for Sound Compensation Practices, issued in April 2009.
2009 Governance
  • Alliances and Corporate Governance
  • Author: Bodnaruk, A., M. Massa and A. Simonov
  • Journal: Journal of Financial Economics
  • This paper studies the link between a firm's quality of governance and its alliance activity. The authors consider alliances as a commitment technology that helps a company's Chief Executive Officer overcome agency problems that relate to the inability to ex ante motivate division managers. This paper shows that well-governed firms are more likely to avail themselves of this technology to anticipate ex post commitment problems and resolve them. Governance also mitigates agency issues between alliance partners; dominant alliance partners agree to a more equal split of power with junior partners that are better governed.
2013 Governance
  • L-Shares: Rewarding Long-Term Investors
  • Author: Bolton, P. and F. Samama
  • Journal: Working paper
  • The authors argue that a fundamental reason for the short term perspective of corporate executives is the short-term orientation of shareholders and financial markets that drive the performance benchmarks of CEOs. Long-term committed shareholders can provide substantial benefits to the company they invest in and although some shareholders are prepared to take a more long-term view, they are generally not rewarded for their loyalty to the company. The authors believe that because they are a scarce resource and provide benefits to the company and other shareholders that have all the features of a public good, long-term shareholders need to receive financial incentives.
2013 Governance
  • Corporate Governance and Control
  • Author: Bolton, P., M. Becht and A. Roell
  • Journal: Handbook of the Economics of Finance
  • This paper reviews the theoretical and empirical research on the main mechanisms of corporate control, discuss the main legal and regulatory institutions in different countries, and examine the comparative corporate governance literature. A fundamental dilemma of corporate governance emerges from this overview: regulation of large shareholder intervention may provide better protection to small shareholders; but such regulations may increase managerial discretion and scope for abuse.
2003 Governance
  • The Determinants of Corporate Board Size and Composition: An Empirical Analysis
  • Author: Boone, A., L. Casares Field, J. Karpoff and C. Raheja
  • Journal: Journal of Financial Economics
  • The authors shows that: (i) board size and independence increase as firms grow in size and diversify over time; (ii) board independence is negatively related to the manager's influence and positively related to constraints on such influence; and (iii) board size reflects a trade-off between the firm-specific benefits of monitoring and the costs of such monitoring. The data do not support the view that boards are structured randomly or to facilitate managers' consumption of value-decreasing private benefits.
2007 Governance
  • Stakeholder Relations and Stock Returns: On Errors in Expectations and Learning
  • Author: Borgers, A., J. Derwall, A. Koedijk, and J. ter Horst
  • Journal: Journal of Empirical Finance
  • The authors investigate whether stakeholder information predicted risk-adjusted returns due to errors in investors' expectations and ultimately ceased to do so as attention for such information increased. The stakeholder-relations index (SI) was positively associated with long-term risk-adjusted returns, earnings announcement returns, and errors in analysts' earnings forecasts over the period 1992-2004.
2013 Governance
  • Postprivatization Corporate Governance: The Role of Ownership Structure and Investor Protection
  • Author: Boubakri, N., J. Cosset and O. Guedhami
  • Journal: Journal of Financial Economics
  • This paper investigates the role of ownership structure and investor protection in postprivatization corporate governance. The authors find that the government relinquishes control over time to the benefit of local institutions, individuals, and foreign investors, and that private ownership tends to concentrate over time. Firm size, growth, and industry affiliation, privatization method, as well as the level of institutional development and investor protection, explain the cross-firm differences in ownership concentration. The positive effect of ownership concentration on firm performance matters more in countries with weak investor protection.
2005 Governance
  • A Cross Sectional Analysis of Clean Technology Winners by Country and Industry
  • Author: Boulatoff, C. and C. Boyer
  • Journal: Working paper
  • This paper looks at the performance of clean technology firms over the last five years, utilizing a sample of companies comprised of 508 firms in 34 countries. The authors look at which countries have the highest performance based on stock returns and industry performance relative to the Russell 2000 index. Thus, the paper indicates what industries are performing well today, as well as which industries are promising tomorrow and which countries have a comparative advantage in which areas of clean technology.
2013 Environmental
  • Corporate Social Responsibility and Financial Risk
  • Author: Boutin-Dufresne, F. and P. Savaria
  • Journal: Journal of Investing
  • This paper finds that combining socially responsible stocks into portfolios could reduce diversifiable risk component. SR investing does not impair financial prospects of a portfolio.
2004 Environmental, Social, Governance
  • Corporate Governance Propagation through Overlapping Directors
  • Author: Bouwman, C.
  • Journal: Review of Financial Studies
  • This article proposes, and empirically verifies, that observed governance practices are partly the outcome of network effects among firms with common directors. While firms attempt to select directors whose other directorships are at firms with similar governance practices ("familiarity effect"), this matching of governance practices is imperfect because other factors also affect the director choice. This generates an "influence effect" as directors acquainted with different practices at other firms influence the firm's governance to move toward the practices of those other firms. These network effects cause governance practices to converge.
2011 Governance
  • The Theory of Bank Risk Taking and Competition Revisited
  • Author: Boyd, J. and G. De Nicolo
  • Journal: Journal of Finance
  • This paper reviews the empirical literature with regards to banks choosing more risky portfolios in the face of increased competition, and concludes that the evidence is best described as mixed. The authors show that existing theoretical analyses of this topic are fragile, since there exists fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to become more risky as their markets become more concentrated.
2005 Governance
  • Activist Arbitrage: A Study of Open-Ending Attempts of Closed-End Funds
  • Author: Bradley, M., A. Brav, I. Goldstein and W. Jiang
  • Journal: Journal of Financial Economics
  • This paper documents frequent attempts by activist arbitrageurs to open-end discounted closed-end funds, particularly after the 1992 proxy reform which reduced the costs of communication among shareholders. Open-ending attempts have a substantial effect on discounts, reducing them, on average, to half of their original level. The size of the discount is a major determinant of whether a fund gets attacked. Other important factors include the costs of communication among shareholders and the governance structure of the targeted fund.
2010 Governance
  • Corporate Social Performance and Stock Returns: UK Evidence from Disaggregate Measures
  • Author: Brammer, S., C. Brooks and S. Pavelin
  • Journal: Financial Management
  • Firms with higher social performance scores tend to achieve lower returns, while firms with the lowest possible CSP scores of zero outperformed the market. Various aspects of corporate social behavior must be examined separately in order to achieve an accurate picture of their impacts on returns.
2006 Environmental, Social
  • The Effect of Ethical Fund Portfolio Inclusion on Executive Compensation
  • Author: Brander, J.
  • Journal: Journal of Business Ethics
  • This paper provides evidence that CEO compensation, other executive compensation, and director compensation tend to be lower in Domini Social Index (DSI) firms than in other firms in the S&P 500. The estimated compensation discount for CEOs of DSI firms is approximately 12%.
2006 Social, Governance
  • Empty Voting and the Efficiency of Corporate Governance
  • Author: Brav, A. and R. Mathews
  • Journal: Journal of Financial Economics
  • The authors model corporate voting outcomes when an informed trader, such as a hedge fund, can establish separate positions in a firm's shares and votes (empty voting). The authors find that the trader's presence can improve efficiency overall despite the fact that it sometimes ends up selling to a net short position and then voting to decrease firm value. An efficiency improvement is likely if other shareholders' votes are not highly correlated with the correct decision or if it is relatively expensive to separate votes from shares on the record date.
2011 Governance
  • Payout Policy in the 21st Century
  • Author: Brav, A., J. Graham, C. Harvey and R. Michaely
  • Journal: Journal of Financial Economics
  • The authors find that the link between dividends and earnings has weakened. Many managers now favor repurchases because they are viewed as being more flexible than dividends and can be used in an attempt to time the equity market or to increase earnings per share. Executives believe that institutions are indifferent between dividends and repurchases and that payout policies have little impact on their investor clientele. In general, management views provide little support for agency, signaling, and clientele hypotheses of payout policy. Tax considerations play a secondary role.
2005 Governance
  • The Real Effects of Hedge Fund Activism: Productivity, Risk, and Product Market Competition
  • Author: Brav, A., W. Jiang and H. Kim
  • Journal: Working paper
  • This paper studies the long-term effect of hedge fund activism on the productivity of target firms using plant-level information from the U.S. Census Bureau. A typical target firm improves its production efficiency within two years after activism, and this improvement is concentrated in industries with a high degree of product market competition. By following plants that were sold post-intervention the authors also find that efficient capital redeployment is an important channel via which activists create value.
2011 Governance
  • Hedge Fund Activism: A Review
  • Author: Brav, A., W. Jiang and H. Kim
  • Journal: Foundations and Trends in Finance
  • This article reviews shareholder activism by hedge funds. The authors analyze possible value creation brought about by activist hedge funds, both for shareholders in the target companies and for investors in the hedge funds. The evidence generally supports the view that hedge fund activism creates value for shareholders by effectively influencing the governance, capital structure decisions, and operating performance of target firms.
2009 Governance
  • The Returns to Hedge Fund Activism
  • Author: Brav, A., W. Jiang, F. Partnoy and R. Thomas
  • Journal: Financial Analysts Journal
  • Hedge fund activism is a new form of investment strategy. The authors find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal stock return upon announcement of activism is approximately 7 percent, with no reversal during the subsequent year. Target firms experience increases in payout and operating performance and higher CEO turnover after activism. The authors find large positive abnormal return to hedge fund activists, which is higher than the return to other equity-oriented hedge funds.
2008 Governance
  • Hedge Fund Activism, Corporate Governance, and Firm Performance
  • Author: Brav, A., W. Jiang, F. Partnoy and R. Thomas
  • Journal: Journal of Finance
  • This paper finds that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two-thirds of the cases. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. The analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.
2008 Governance
  • Outside Directors and the Adoption of Poison Pills
  • Author: Brickley, J., J. Coles and R. Terry
  • Journal: Journal of Financial Economics
  • This paper finds that the average stock-market reaction to announcements of poison pills is positive when the board has a majority of outside directors and negative when it does not. The probability that a subsequent control contest is associated with an auction is also positively related to the fraction of outsiders on the board. These results are largely driven by directors who are retired executives from other companies.
1994 Governance
  • The Value of Investor Protection: Firm Evidence from Cross-Border Mergers
  • Author: Bris, A. and C. Cabolis
  • Journal: EFA 2005 Moscow Meetings Paper
  • This paper finds that the announcement effect of a cross-border merger for the target firm is higher-relative to a matching, domestic acquisition-the better the shareholder protection and the accounting standards in the country of origin of the acquirer. In addition, this result is only significant when the acquirer comes from a more protective country, which suggests that target firms avoid adopting weaker protection via private contracting.
2004 Governance
  • Investor Protection and Firm Liquidity
  • Author: Brockman, P. and D. Chung
  • Journal: Journal of Finance
  • The purpose of this study is to investigate the relation between investor protection and firm liquidity. This paper's empirical findings verify that firm liquidity is significantly affected by investor protection. Regression and matched-sample results show that Hong Kong-based equities exhibit narrower spreads and thicker depths than their China-based counterparts.
2003 Governance
  • Unionization, Incomplete Contracting, and Capital Investment
  • Author: Bronars, S. and D. Deere
  • Journal: Journal of Business
  • This article investigates empirically the hypothesis that unionization alters firm behavior. The empirical evidence is broadly consistent with the notion that unionized firms attempt to limit union appropriation of quasi rents. Higher firm-specific unionization rates are associated with less investment in physical capital, research and development, and advertising; slower employment growth; and a greater reliance on debt finance.
1993 Social
  • Corporate Governance and Firm Valuation
  • Author: Brown, L. and M. Caylor
  • Journal: Journal of Accounting and Public Policy
  • The authors create Gov-Score, a summary governance measure based on 51 firm-specific provisions representing both internal and external governance, and show that a parsimonious index based on seven provisions underlying Gov-Score fully drives the relation between Gov-Score and firm value. The authors find five of these measures to be unrelated to firm valuation. They document that only one of the seven governance provisions important for firm valuation was mandated by either the Sarbanes-Oxley Act of 2002 or the three major U.S. stock exchanges.
2006 Governance
2004 Governance
  • Corporate Governance and Regulation: Can There Be Too Much of a Good Thing?
  • Author: Bruno, V. and S. Claessens
  • Journal: World Bank Policy Research Working Paper
  • This paper finds that in any legal regime a few specific governance practices improve performance. Companies with good governance practices operating in stringent legal environments, however, show a valuation discount relative to similar companies operating in flexible legal environments. At the same time, a stronger country-level regime does not reduce the valuation discount of companies with weak governance practices.
2007 Governance
  • Profiting from Regulation: An Event Study of the EU Carbon Market
  • Author: Bushnell, J., H. Chong and E. Mansur
  • Journal: National Bureau of Economic Research
  • This paper investigates how cap-and-trade regulation affects profits. In late April 2006, the EU CO2 allowance price dropped 50%, equating to a 28 billion Euro reduction in the value of aggregate annual allowances. Despite reductions in environmental costs, the authors find that stock prices fell for firms in both carbon- and electricity-intensive industries, particularly for firms selling primarily within the EU.
2009 Environmental
  • Do Outside Directors Monitor Managers?: Evidence from Tender Offer Bids
  • Author: Byrd, J. and K. Hickman
  • Journal: Journal of Financial Economics
  • The authors categorize outside directors as either independent of or having affiliation with managers, and find that bidding firms on which independent outside directors hold at least 50% of the seats have significantly higher announcement-date abnormal returns than other bidders. However, the relationship between bidding firms' abnormal stock returns and the proportion of board seats held by independent outside directors is nonlinear, suggesting it is possible to have too many independent outside directors. All results are lost if the traditional inside-outside board classification method is used.
1992 Governance
  • The Implied Cost of Equity Capital and Corporate Governance Practices
  • Author: Byun, H., S. Kwak and L. Hwang
  • Journal: Asia-Pacific Journal of Financial Studies
  • This study finds that sound corporate governance practices are negatively related to the implied cost of equity capital estimates. Among several advantages of sound corporate governance practices, shareholder rights protection has the most significant effect on lowering the implied cost of equity capital. Board of directors and disclosure policy are also important in reducing the implied cost of equity capital.
2008 Governance
  • Doing Well by Looking Good: The Causal Impact of Media Coverage of Corporate Social Responsibility on Firm Value
  • Author: Byun, S. and J. Oh
  • Journal: Midwest Finance Association Meeting paper
  • Does the visibility of corporate social responsibility (CSR) rather than the action itself enhance firm value? Using media coverage of firm's CSR activities as a proxy for the visibility of CSR, the authors find that higher CSR media coverage is associated with higher firm value and higher excess stock returns. Moreover, the effect of visibility is stronger for firms that actively engage in CSR, highlighting the complementary role between CSR and visibility.
2013 Environmental, Social
  • Incentive Effects of Stock and Option Holdings of Target and Acquirer CEOs
  • Author: Cai, J. and A. Vijh
  • Journal: Journal of Finance
  • Acquisitions enable target chief executive officers (CEOs) to remove liquidity restrictions on stock and option holdings and diminish the illiquidity discount. The authors show that CEOs with higher holdings (illiquidity discount) are more likely to make acquisitions (get acquired). Further, target CEOs with a higher illiquidity discount accept a lower premium, offer less resistance, and more often leave after acquisition. Similarly, acquirer CEOs with higher holdings pay a higher premium, expedite the process, and make diversifying acquisitions using stock payment.
2007 Governance
  • Electing Directors
  • Author: Cai, J., J. Garner and R. Walkling
  • Journal: Journal of Finance
  • The authors document that shareholder votes are significantly related to firm performance, governance, director performance, and voting mechanisms. However, most variables, except meeting attendance and ISS recommendations, have little economic impact on shareholder votes- even poorly performing directors and firms typically receive over 90% of votes cast. Nevertheless, fewer votes lead to lower "abnormal" CEO compensation and a higher probability of removing poison pills, classified boards, and CEOs.
2009 Governance
  • Finance for Growth: Policy Choices in a Volatile World
  • Author: Caprio, G. and P. Honohan
  • Journal: World Bank Policy Research Report
  • The world bank report provides evidence to show that financial development has a strong independent role in increasing general prosperity. Countries that build a secure institutional environment for financial contracts, making it possible for banking and organized securities markets to prosper, will see these efforts bear fruit in the fight against poverty.
2001 Governance
  • The Influence of Institutions on Corporate Governance through Private Negotiations: Evidence from TIAA-CREF
  • Author: Carleton, W., J. Nelson and M. Weisbach
  • Journal: Journal of Finance
  • This paper analyzes the process of private negotiations between financial institutions and the companies they attempt to influence. It relies on a private database consisting of the correspondence between TIAA-CREF and 45 firms it contacted about governance issues between 1992 and 1996. This correspondence indicates that TIAA-CREF is able to reach agreements with targeted companies more than 95 percent of the time. In more than 70 percent of the cases, this agreement is reached without shareholders voting on the proposal. The authors verify independently that at least 87 percent of the targets subsequently took actions to comply with these agreements.
1998 Governance
2013 Governance
  • Corporate Governance, Board Diversity, and Firm Value
  • Author: Carter, D., B. Simkins and W. Simpson
  • Journal: Financial Review
  • This study examines the relationship between board diversity and firm value for Fortune 1000 firms. Board diversity is defined as the percentage of women, African Americans, Asians, and Hispanics on the board of directors. The authors find significant positive relationships between the fraction of women or minorities on the board and firm value. The authors also find that the proportion of women and minorities on boards increases with firm size and board size, but decreases as the number of insiders increases.
2003 Social, Governance
  • Investor Protection, Optimal Incentives, and Economic Growth
  • Author: Castro, R., G. Clementi and G. MacDonald
  • Journal: Quarterly Journal of Economics
  • The authors introduce investor protection into a standard overlapping generations model of capital accumulation. Better investor protection implies better risk-sharing. Because of entrepreneurs' risk aversion, this results in a larger demand for capital. This is the demand effect. A second effect (the supply effect) follows from general equilibrium restrictions. Better protection (i.e., higher demand) increases the interest rate and lowers the income of entrepreneurs, decreasing current savings and next period's supply of capital.
2004 Governance
  • Corporate Social Responsibility (CSR) in Asia: A Seven-Country Study of CSR Web Site Reporting
  • Author: Chapple, W. and J. Moon
  • Journal: Business & Society
  • This article concludes that CSR does vary considerably among Asian countries but that this variation is not explained by development but by factors in the respective national business systems. It also concludes that multinational companies are more likely to adopt CSR than those operating solely in their home country but that the profile of their CSR tends to reflect the profile of the country of operation rather than the country of origin.
2005 Governance
  • Connected Lending: Thailand before the Financial Crisis
  • Author: Charumilind, C., R. Kali and Y. Wiwattanakantang
  • Journal: Journal of Business
  • This paper found that firms with connections to banks and politicians had greater access to long-term debt than firms without such ties. Connected firms needed less collateral, obtained more long-term loans, and appeared to use fewer short-term loans than those without connections.
2006 Governance
  • Do Ownership Structure and Governance Mechanisms Have an Effect on Corporate Fraud in China's Listed Firms?
  • Author: Chen, G., M. Firth, N. Gao and O. Rui
  • Journal: Journal of Corporate Finance
  • The study examines whether ownership structure and boardroom characteristics have an effect on corporate financial fraud in China. The results show that ownership and board characteristics are important in explaining fraud. The authors find that the proportion of outside directors, the number of board meetings, and the tenure of the chairman are associated with the incidence of fraud.
2006 Governance
  • Do Nonfinancial Stakeholders Affect the Pricing of Risky Debt? Evidence from Unionized Workers
  • Author: Chen, H., M. Kacperczyk and H. Ortiz-Molina
  • Journal: Review of Finance
  • Firms in more unionized industries have statistically and economically significant lower bond yield spreads. The effect is even greater with firms that have weak financial conditions. Higher unionization is associated with lower likelihood that a firm is an acquisition target and unionization reduces bond yield spreads by more when firms takeover barriers are lower.
2012 Social
  • Breadth of Ownership and Stock Returns
  • Author: Chen, J., H. Hong and J. Stein
  • Journal: Journal of Financial Economics
  • The authors develop a stock market model with differences of opinion and short-sales constraints. When breadth is low- i.e., when few investors have long positions- this signals that the short-sales constraint is binding tightly, and that prices are high relative to fundamentals. Thus reductions in breadth should forecast lower returns. The authors find that stocks whose change in breadth in the prior quarter is in the lowest decile of the sample underperform those in the top decile by 6.38% in the twelve months after formation. Adjusting for size, book-to-market, and momentum, the figure is 4.95%.
2002 Governance
  • Outsourcing Mutual Fund Management: Firm Boundaries, Incentives, and Performance
  • Author: Chen, J., H. Hong, W. Jiang and J. Kubik
  • Journal: Journal of Finance
  • The authors investigate the effects of managerial outsourcing on the performance and incentives of mutual funds. Fund families outsource the management of a large fraction of their funds to advisory firms. These funds underperform those run internally by about 52 basis points per year. After instrumenting for a fund's outsourcing status, the estimated underperformance is three times larger. The authors find that outsourced funds face higher powered incentives; they are more likely to be closed after poor performance and excessive risk-taking.
2013 Governance
1980 Environmental
  • Agency Costs of Free Cash Flow and the Effect of Shareholder Rights on the Implied Cost of Equity Capital
  • Author: Chen, K., Z. Chen and K. Wei
  • Journal: Journal of Financial and Quantitative Analysis
  • This paper examines the effect of shareholder rights on reducing the cost of equity and the impact of agency problems from free cash flow on this effect. The authors find that firms with strong shareholder rights have a significantly lower implied cost of equity after controlling for risk factors, price momentum, analysts' forecast biases, and industry effects than do firms with weak shareholder rights. They also show that the effect of shareholder rights on reducing the cost of equity is significantly stronger for firms with more severe agency problems from free cash flows.
2009 Governance
  • Directors' Ownership in the U.S. Mutual Fund Industry
  • Author: Chen, Q., I. Goldstein and W. Jiang
  • Journal: Journal of Finance
  • This paper empirically investigates directors' ownership in the mutual fund industry. The results show that, contrary to anecdotal evidence, a significant portion of directors hold shares in the funds they oversee. Ownership is positively and significantly correlated with most variables that are predicted to indicate greater value from directors' monitoring. The authors also show considerable heterogeneity in ownership across fund families, suggesting family-wide policies play an important role.
2008 Governance
  • The Sensitivity of Corporate Cash Holdings to Corporate Governance
  • Author: Chen, Q., X. Chen, K. Schipper, Y. Xu and J. Xue
  • Journal: Review of Financial Studies
  • This paper shows that the average cash holdings of Chinese-listed firms decreased significantly after the split share structure reform in China, which specified a process that allowed previously nontradable shares held by controlling shareholders to be freely tradable on the exchanges. The reduction in cash holdings is greater for firms with weaker governance and firms facing more financial constraints prior to the reform. Additional analyses show that the reform affects firms' cash management policies, investment decisions, dividend payout policies, and financing choices differently in private firms than in state-owned enterprises.
2012 Governance
  • Do Managers Do Good with Other Peoples' Money?
  • Author: Cheng, I., H. Hong and K. Shue
  • Journal: Working paper
  • The authors test the hypothesis that corporate social responsibility is due to managerial agency problems using two identification strategies. They use the 2003 Dividend Tax Cut, which increased the after-tax effective firm ownership for managers. Consistent with the agency view, they find that the tax cut led to a decline in corporate goodness. Second, the authors provide evidence in which shareholder-initiated governance proposals which narrowly passed experienced significantly slower growth in corporate goodness relative to firms in which the proposals narrowly failed.
2013 Governance
  • The Contractual Nature of the Firm
  • Author: Cheung, S.
  • Journal: Journal of Law and Economics
  • This theoretical paper interprets R.H Coase's paper "The Nature of the Firm." The author examines contracts in general and the piece-rate contract in particular. The author also evaluates the influence of Coase's paper in future economic literature.
1983 Governance
1970 Governance
  • CEO Compensation and Board Structure
  • Author: Chhaochharia, V. and Y. Grinstein
  • Journal: Journal of Finance
  • In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. The authors find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking into account unobservable firm effects, time-varying industry effects, size, and performance. The decrease in compensation is particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms with low concentration of institutional investors.
2009 Governance
  • Corporate Governance and Firm Value: The Impact of the 2002 Governance Rules
  • Author: Chhaochharia, V. and Y. Grinstein
  • Journal: Journal of Finance
  • The 2001 to 2002 corporate scandals led to the Sarbanes-Oxley Act and to various amendments to the U.S. stock exchanges' regulations. The authors find that the announcement of these rules has a significant effect on firm value. Firms that are less compliant with the provisions of the rules earn positive abnormal returns compared to firms that are more compliant. They also find that large firms that are less compliant earn positive abnormal returns but small firms that are less compliant earn negative abnormal returns, suggesting that some provisions are detrimental to small firms.
2007 Governance
  • The Changing Structure of U.S. Corporate Boards: 1997-2003
  • Author: Chhaochharia, V. and Y. Grinstein
  • Journal: Corporate Governance
  • The authors find significant changes in board independence, committee independence, board size, interlocking directorships, director occupation and multiple directorships. They find weaker trends in the financial stake of independent directors and in separating CEOs from the chairman position. In 2003 many independent directors have small holdings in the firms they direct and CEOs chair around two-thirds of the boards in the sample.
2007 Governance
  • The Relationship between Corporate Governance and Firm Productivity: Evidence from Taiwan's Manufacturing Firms
  • Author: Chiang, M. and J. Lin
  • Journal: Corporate Governance
  • This study analyzes the relationship between ownership structure and board of director composition and their influences on the total factor productivity (TFP) of Taiwan's firms. The empirical results show that the curvilinear specification is better to capture the relationship between inside ownership and firm productivity. Meanwhile, the ownership structure in a firm indeed affects differences in TFP between conglomerate firms and non-conglomerate firms, high-tech firms and non-high-tech firms, and family-owned firms and non-family-owned firms.
2007 Governance
  • The Value of Outside Directors: Evidence from Corporate Governance Reform in Korea
  • Author: Choi, J., S. Park and S. Yoo
  • Journal: Journal of Financial and Quantitative Analysis
  • This paper examines the valuation impacts of outside independent directors in Korea, where a regulation requiring outside directors was instituted after the Asian financial crisis. In contrast to studies of U.S. firms, the effects of independent directors on firm performance are strongly positive. Foreigners also have positive impacts. The effects of indigenous institutions such as chaebol or family control are insignificant or negative.
2007 Governance
  • Effects of "Best Practices" of Environmental Management on Cost Advantage: The Role of Complementary Assets
  • Author: Christmann, P.
  • Journal: Academy of Management Journal
  • Drawing on the resource-based view of the firm, this study analyzes whether complementary assets are required in order to gain cost advantage from implementing environmental management best practices. Results indicate that the best practices of environmental management generally do not lead to cost advantage for all firms. Firms need to possess complementary assets in order to create cost advantage from the implementation of such practices. In particular, the capabilities for process innovation and implementation are complementary assets that moderate the relationship between best practices and cost advantage.
2000 Environmental
  • Is Cross-Listing a Commitment Mechanism? Evidence from Cross-Listings around the World
  • Author: Chung, J., S. Korea, H. Cho and W. Kim
  • Journal: Third International Conference on Corporate Governance in Emerging Markets
  • This paper finds that firms are more likely to choose cross-listing destinations that are less strict on regulating self-dealing or exhibit higher block premiums relative to the origin country, and this tendency is more pronounced after Sarbanes-Oxley in 2002. The authors also find that firm characteristics that are positively correlated with likelihood of a U.S. cross-listing, such as high tech or high Tobin's q, are also positively correlated with likelihood of cross-listings in Germany or Switzerland both of which exhibit low investor protection.
2011 Governance
2010 Governance
  • Corporate Governance and Development
  • Author: Claessens, S.
  • Journal: World Bank Research Observer
  • The literature shows that good corporate governance generally pays- for firms, for markets, and for countries. Given the benefits of good corporate governance, firms and countries should voluntarily reform more. Resistance by entrenched owners and managers at the firm level and political economy factors at the level of markets and countries partly explain why they do not.
2001 Governance
  • Finance and Inequality: Channels and Evidence
  • Author: Claessens, S. and E. Perotti
  • Journal: Working paper
  • This theoretical paper provides a framework to interpret the recent literature on financial development and inequality. Inequality affects the distribution of political influence, so financial regulation often is easily captured by established interests in unequal countries. Captured reforms deepen rather than broaden access, as small elites obtain most of the benefits while risks are socialized.
2007 Governance
  • Corporate Governance in Asia: A Survey
  • Author: Claessens, S. and J. Fan
  • Journal: International Review of Finance
  • This paper reviews the literature on corporate governance issues in Asia to develop region-specific and general lessons. The literature confirms the limited protection of minority rights in Asia, allowing controlling shareholders to expropriate minority shareholders. The Asian financial crisis further showed that conventional and alternative corporate governance mechanisms can have limited effectiveness in systems with weak institutions and poor property rights.
2002 Governance
  • Banks and Labor as Stakeholders: Impact on Economic Performance
  • Author: Claessens, S. and K. Ueda
  • Journal: Internationl Monetary Fund
  • This paper finds that financial deregulation impacts overall state growth positively but stronger employment protection affects it ambiguously. At the state-industry level, greater employment protection hinders the growth of low-skill industries but promotes the growth of knowledge-intensive industries. The authors find that this effect stems from stronger relative bargaining powers of workers, in addition to the effects of higher absolute employment protection.
2009 Governance
  • Financial Development, Property Rights, and Growth
  • Author: Claessens, S. and L. Laeven
  • Journal: Working paper
  • This paper analyzes how property rights affect the allocation of firms' available resources among different types of assets. The authors find that improved asset allocation due to better property rights has an effect on growth in sectoral value added equal to improved access to financing arising from greater financial development.
2002 Governance
  • Political Connections and Preferential Access to Finance: The Role of Campaign Contributions
  • Author: Claessens, S., E. Feijen and L. Laeven
  • Journal: Journal of Financial Economics
  • This paper shows that Brazilian firms that provided contributions to (elected) federal deputies experienced higher stock returns around the 1998 and 2002 elections. Using a firm fixed effects framework to mitigate the risk that unobserved firm characteristics distort the results, the authors find that contributing firms substantially increased their bank leverage relative to a control group after each election, indicating that access to bank finance is an important channel through which political connections operate.
2008 Governance
  • Financial Frictions, Investment, and Institutions
  • Author: Claessens, S., K. Ueda and Y. Yafeh
  • Journal: IMF Working papers
  • This paper empirically investigates the effects of institutions on financial frictions. The authors find that improved corporate governance (e.g., less informational problems) and enhanced contractual enforcement reduce financial frictions, while stronger creditor rights (e.g., lower collateral constraints) are less important.
2010 Governance
  • The Separation of Ownership and Control in East Asian Corporations
  • Author: Claessens, S., S. Djankov and L. Lang
  • Journal: Journal of Financial Economics
  • This paper examines the separation of ownership and control in nine East Asian countries. In all countries, voting rights frequently exceed cash flow rights via pyramid structures and cross-holdings. The separation of ownership and control is most pronounced among family-controlled firms and small firms. Significant corporate wealth in East Asia is concentrated among a few families.
2000 Governance
  • Disentangling the Incentive and Entrenchment Effects of Large Shareholdings
  • Author: Claessens, S., S. Djankov, J. Fan and L. Lang
  • Journal: Journal of Finance
  • This article disentangles the incentive and entrenchment effects of large ownership. The authors find that firm value increases with the cash-flow ownership of the largest shareholder, consistent with a positive incentive effect. But firm value falls when the control rights of the largest shareholder exceed its cash-flow ownership, consistent with an entrenchment effect.
2002 Governance
  • Corporate Governance and Environmental Risk Management: A Quantitative Analysis of "New Paradigm" Firms
  • Author: Clark, G. and J. Salo
  • Journal: Pensions at Work: Socially Responsible Investment of Union-Based Pension Funds, edited by J. Quwarter, I. Carmichael and S. Ryan
  • The authors' results suggest that "new paradigm" firms- those with high relative amounts of intangibles as a part of overall firm value- tend to manage corporate governance and environmental risks more aggressively than their "classical model" peers. In addition, it is found that a firm's industry is more important than its home nation in predicting the level of intangible assets for firm value and growth of investment in intangibles over time.
2008 Environmental
  • Environmental Management and Firm Performance: A Case Study
  • Author: Claver, E., M. Lopez, J. Molina and J. Tari
  • Journal: Journal of Environmental Management
  • A case study of the COATO farming cooperative showed that its environmental management, focused on prevention logic, has a positive net effect on its environmental performance. Also a positive correlation exists between the pioneering proactive strategy and firm performance.
2007 Environmental
  • Corporate Social Responsibility and Financial Performance
  • Author: Cochran, P. and R. Wood
  • Journal: Academy of Management Journal
  • The relationship between corporate social responsibility and financial performance is reexamined using a new methodology, improved technique, and industry-specific control groups. Average age of corporate assets is found to be highly correlated with social responsibility ranking. After controlling for this factor, there still is some correlation between corporate social responsibility and financial performance.
1984 Environmental
  • Do Norms Matter? A Cross-Country Evaluation
  • Author: Coffee, Jr., J.
  • Journal: University of Pennsylvania Law Review
  • This article examines the effect of nonlegal enforceable social norms in regards to corporate governance on firm market value. The author finds that when law is weak and social norms about shareholders' rights are underdeveloped, then credible signals about the corporations intentions become critical.
2001 Governance
  • Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications
  • Author: Coffee, Jr., J.
  • Journal: Northwestern University Law Review
  • The author examines three hypotheses which attempt to explain corporate structure and shareholder behavior: political constraints, liquidity preferences, and fear of minority exploitation. This article suggests that, within the U.S. context, the critical protections for the dispersed shareholder are principally found in the federal securities laws, particularly those provisions regulating corporate control transactions.
1998 Governance
  • Hiring Cheerleaders: Board Appointments of "Independent" Directors
  • Author: Cohen, L., A. Frazzini and C. Malloy
  • Journal: Management Science
  • By reviewing cases of sell-side analysts who are subsequently appointed to the boards of companies they previously covered, the authors provide evidence that firms appoint independent directors who are overly sympathetic to management, while still technically independent according to regulatory definitions.
2012 Governance
  • The Small World of Investing: Board Connections and Mutual Fund Returns
  • Author: Cohen, L., A. Frazzini and C. Malloy
  • Journal: Journal of Political Economy
  • This paper uses social networks to identify information transfer in security markets. The authors find that portfolio managers place larger bets on connected firms and perform significantly better on these holdings relative to their nonconnected holdings. A replicating portfolio of connected stocks outperforms nonconnected stocks by up to 7.8 percent per year.
2008 Governance
  • Environmental and Financial Performance: Are They Related?
  • Author: Cohen, M., S. Fenn and J. Naimon
  • Journal: Investor Responsibility Research Center, Environmental Information Service
  • This study reports on a new dataset (Investor Responsibility Research Center) detailing the environmental performance of the Standard and Poor's 500 companies. The authors construct two industry-balanced portfolios and compare both accounting and market returns of the "high polluter" to the "low polluter" portfolio. Overall, they find either no "penalty" for investing in the "green" portfolio, or a positive return from green investing. This paper also examines the stock market reaction to new information on the environmental performance of individual firms, and provides a preliminary analysis of causality.
1995 Environmental
  • Optimal Corporate Governance in the Presence of an Activist Investor
  • Author: Cohn, J. and U. Rajan
  • Journal: Review of Financial Studies
  • The authors provide a model of governance in which a board arbitrates between an activist investor and a manager facing reputational concerns. The optimal level of internal board governance depends on both the severity of the agency conflict and the strength of external governance. Internal governance creates a certification effect, so greater intervention by the board can lead to worse managerial behavior. Internal and external governance are substitutes when external governance is weak (the board commits to an interventionist policy to induce participation from the activist) and complements when external governance is strong (the board relies to a greater extent on the activist's information).
2013 Governance
  • Structural Models and Endogeneity in Corporate Finance: The Link between Managerial Ownership and Corporate Performance
  • Author: Coles, J., M. Lemmon and J. Felix Meschke
  • Journal: Journal of Financial Economics
  • This paper presents a parsimonious, structural model that isolates primary economic determinants of the level and dispersion of managerial ownership, firm scale, and performance and the empirical associations among them. In particular, variation across firms and through time of estimated productivity parameters for physical assets and managerial input and corresponding variation in optimal compensation contract and firm size combine to deliver the well-known hump-shaped relation between Tobin's Q and managerial ownership
2012 Governance
  • The Financial Performance of the FTSE4Good Indices
  • Author: Collison, D., G. Cobb, D. Power and L. Stevenson
  • Journal: Corporate Social Responsibility and Environmental Management
  • This paper examines the financial performance of the FTSE4Good indices; the indices include companies from different geographical areas on the basis of pre-determined social responsibility criteria: currently environmental sustainability, relationships with stakeholders, attitudes to human rights, supply chain labor standards and the countering of bribery. The results indicate that these indices outperformed their relevant benchmarks. However, most of this outperformance was due to risk differences between the FTSE4Good indices and their benchmarks.
2008 Environmental, Social, Governance
  • Global Standards and Ethical Stock Indexes: The Case of the Dow Jones Sustainability Stoxx Index
  • Author: Consolandi, C., A. Jaiswal-Dale, E. Poggiani and A. Vercelli
  • Journal: Journal of Business Ethics
  • The aim of the article is twofold. First, the authors analyze the performance of the Dow Jones Sustainability Stoxx (DJSSI) compared to that of the Surrogate Complementary Index (SCI). Second, they perform an event study on the same data set to analyze whether the stock market evaluation reacts to the inclusion (deletion) in the DJSSI. In both cases, the results suggest that the evaluation of the CSR performance of a firm is a significant criterion for asset allocation activities.
2009 Environmental, Social, Governance
  • The Directors' and Officers' Insurance Premium: An Outside Assessment of the Quality of Corporate Governance
  • Author: Core, J.
  • Journal: Journal of Law, Economics, & Organization
  • This article examines the director & officer (D&O) premium as a measure of ex ante litigation risk. The author finds a significant association between D&O premiums and variables that proxy for the quality of firms' governance structures. This article provides confirmatory evidence that the D&O premium reflects the quality of the firm's corporate governance by showing that measures of weak governance implied by the D&O premium are positively related to excess CEO compensation.
2000 Governance
  • Performance Consequences of Mandatory Increases in Executive Stock Ownership
  • Author: Core, J. and D. Larcker
  • Journal: Journal of Financial Economics
  • The authors examine a sample of firms that adopt "target ownership plans," under which managers are required to own a minimum amount of stock. The authors find that prior to plan adoption, such firms exhibit low managerial equity ownership and low stock price performance. Managerial equity ownership increases significantly in the two years following plan adoption. The authors also observe that excess accounting returns and stock returns are higher after the plan is adopted.
2002 Governance
  • Corporate Governance, Chief Executive Officer Compensation, and Firm Performance
  • Author: Core, J., R. Holthausen and D. Larcker
  • Journal: Journal of Financial Economics
  • The study finds that measures of board and ownership structure explain a significant amount of cross-sectional variation in CEO compensation, after controlling for standard economic determinants of pay. The signs of the coefficients on the board and ownership structure variables suggest that CEOs earn greater compensation when governance structures are less effective. They also find that the predicted component of compensation arising from these characteristics of board and ownership structure has a statistically significant negative relation with subsequent firm operating and stock return performance.
1999 Governance
  • The Power of the Pen and Executive Compensation
  • Author: Core, J., W. Guay and D. Larcker
  • Journal: Journal of Financial Economics
  • The authors examine the press' role in monitoring and influencing executive compensation practice. Negative press coverage is more strongly related to excess annual pay than to raw annual pay, suggesting a sophisticated approach by the media in selecting CEOs to cover. However, negative coverage is also greater for CEOs with more option exercises, suggesting the press engages in some degree of "sensationalism." The authors find little evidence that firms respond to negative press coverage by decreasing excess CEO compensation or increasing CEO turnover.
2008 Governance
  • Price versus Non-Price Performance Measures in Optimal CEO Compensation Contracts
  • Author: Core, J., W. Guay and R. Verrecchia
  • Journal: Accounting Review
  • The authors empirically examine standard agency predictions about how performance measures are optimally weighted to provide CEO incentives. They document that the relative weight on price and non-price performance measures in CEO cash pay is a decreasing function of the relative variances. They document that very little of CEOs total incentives comes from cash pay. They also document that variation in the relative weight on price and non-price performance measures in CEO total compensation is an increasing function of the relative variances.
2003 Governance
2006 Governance
  • Monitoring Managers: Does It Matter?
  • Author: Cornelli, F., Z. Kominek and A. Ljungqvist
  • Journal: Journal of Finance
  • The authors study how well-incentivized boards monitor CEOs and whether monitoring improves performance. They find that gathering information helps boards learn about CEO ability. This paper shows that governance reforms increase the effectiveness of board monitoring and establish a causal link between forced CEO turnover and performance improvements.
2013 Governance
  • The Financial Crisis, Internal Corporate Governance, and the Performance of Publicly-Traded U.S. Bank Holding Companies
  • Author: Cornett, M., J. McNutt and H. Tehranian
  • Journal: Working paper
  • This paper examines internal corporate governance mechanisms and the performance of publicly-traded U.S. banks before and during the financial crisis. The authors find that the largest banks see the largest losses and experience the largest changes in corporate governance. Lastly, the authors find stronger relations between corporate governance variable changes and 2008 stock market returns for large banks than for small banks.
2010 Governance
  • Socially Responsible Investing in the Global Market: The Performance of U.S. and European Funds
  • Author: Cortez, M., F. Silva and N. Areal
  • Journal: International Journal of Finance & Economics
  • This paper investigates the style and performance of U.S. and European global socially responsible funds. Most European global socially responsible funds do not show significant performance differences in relation to both conventional and socially responsible benchmarks. U.S. funds and Austrian funds show evidence of underperformance. With respect to investment style, the authors find evidence that socially responsible funds are strongly exposed to small cap and growth stocks.
2011 Governance
  • The Performance of European Socially Responsible Funds
  • Author: Cortez, M., F. Silva and N. Areal
  • Journal: Journal of Business Ethics
  • This paper investigates performance of a sample of socially responsible mutual funds from seven European countries investing globally and/or in the European market. The results show that European socially responsible funds present, in general, neutral performance, either in relation to conventional or socially responsible benchmarks. The results also show that socially responsible funds are more exposed to conventional than to socially responsible indices.
2009 Governance
  • Do Independent Directors Enhance Target Shareholder Wealth During Tender Offers?
  • Author: Cotter, J., A. Shivdasani and M. Zenner
  • Journal: Journal of Financial Economics
  • The authors examine the role of the target firm's independent outside directors during takeover attempts by tender offer. They find that when the targets board is independent, the initial tender offer premium, the big premium revision, and the target shareholder gains over the entire tender offer period are higher, and that the presence of a poison pill and takeover resistance lead to greater premiums and shareholder gains.
1997 Governance
  • Home Bias, Foreign Mutual Fund Holdings, and the Voluntary Adoption of International Accounting Standards
  • Author: Covrig, V., M. Defond and M. Hung
  • Journal: Journal of Accounting Research
  • This paper finds that average foreign mutual fund ownership is significantly higher among International Accounting Standards (IAS) adopters. The authors also find that IAS adopters in poorer information environments and with lower visibility have higher levels of foreign investment, consistent with firms using IAS adoption to provide more information and/or information in a more familiar form to foreign investors.
2006 Governance
  • An Empirical Examination of Institutional Investor Preferences for Corporate Social Performance
  • Author: Cox, P., S. Brammer and A. Millington
  • Journal: Journal of Business Ethics
  • The study finds that long-term institutional investment is positively related to corporate social performance (CSP). Pattern of institutional investment is related to the form of CSP. Long-term investment has a stronger relationship with employee social performance than with community social performance.
2004 Environmental, Social
  • Managing Cultural Diversity: Implications for Organizational Competitiveness
  • Author: Cox, T. and S. Blake
  • Journal: Executive
  • This article reviews arguments and research data on how managing diversity can create a competitive advantage. The authors address cost, attraction of human resources, marketing success, creativity and innovation, problem-solving quality, and organizational flexibility as six dimensions of business performance directly impacted by the management of cultural diversity.
1991 Social
  • Effects of Ethnic Group Cultural Differences on Cooperative and Competitive Behavior on a Group Task
  • Author: Cox, T., S. Lobel and P. McLeod
  • Journal: Academy of Management Journal
  • This study examined whether the cultural norms of Anglo-Americans, Asians, Hispanics, and Black Americans result in different behaviors on a Prisoner's Dilemma group task. Results confirmed the hypothesis that groups composed of people from collectivist cultural traditions display more cooperative behavior than groups composed of people from individualistic cultural traditions.
1991 Social
  • Thirty Years of Shareholder Rights and Firm Valuation
  • Author: Cremers, K. and A. Ferrell
  • Journal: Working paper
  • This paper finds a robustly negative association between restrictions on shareholder rights (using the G-Index as a proxy) and Tobin's Q. The negative association between fewer shareholder rights and firm value only appears after the judicial approval of the poison pill and antitakeover defenses more generally in the landmark Delaware Supreme Court decision of Moran v. Household in 1985. This decision was an unanticipated, exogenous shock to shareholder rights, suggesting a causal impact of shareholder rights on firm valuation.
2011 Governance
  • Institutional Investors and Proxy Voting: The Impact of the 2003 Mutual Fund Voting Disclosure Regulation
  • Author: Cremers, K. and R. Romano
  • Journal: American Law and Economics Review
  • This paper examines the impact on shareholder voting of the mutual fund voting disclosure regulation adopted by the SEC in 2003. The authors focus on how voting outcomes relate to institutional ownership and the voting behavior of mutual funds. While voting support for management has decreased over time, the authors find no evidence that mutual funds' support for management declined after the rule change, as expected by advocates of disclosure. In the context of management-sponsored proposals on executive incentive compensation plans, mutual funds appear to have increased their support for management after the rule change.
2011 Governance
  • Governance Mechanisms and Equity Prices
  • Author: Cremers, K. and V. Nair
  • Journal: Journal of Finance
  • This paper investigates how the market for corporate control (external governance) and shareholder activism (internal governance) interact. A portfolio that buys firms with the highest level of takeover vulnerability and shorts firms with the lowest level of takeover vulnerability generates an annualized abnormal return of 10% to 15% only when public pension fund (blockholder) ownership is high as well. A similar portfolio created to capture the importance of internal governance generates annualized abnormal returns of 8%, though only in the presence of "high" vulnerability to takeovers.
2005 Governance
  • Does the Market for CEO Talent Explain Controversial CEO Pay Practices?
  • Author: Cremers, K. and Y. Grinstein
  • Journal: 3rd Annual Conference on Empirical Legal Studies
  • Benchmarking, pay for luck, and the large compensation packages given to CEOs in recent years are three major controversial compensation practices. The authors examine the extent to which variation in the market for CEO talent explains these practices. The authors find that CEO compensation is benchmarked against other firms only in industries where CEO talent is not firm-specific, and pay for luck is more prevalent when CEO talent is more firm-specific. They also find that CEO compensation levels do not depend on whether CEO talent is firm-specific, which seems inconsistent with the competition argument.
2011 Governance
  • Does Skin in the Game Matter? Director Incentives and Governance in the Mutual Fund Industry
  • Author: Cremers, K., J. Driessen, P. Maenhout and D. Weinbaum
  • Journal: Journal of Financial and Quantitative Analysis
  • This paper uses a unique database on ownership stakes of equity mutual fund directors to analyze whether the directors' incentive structure is related to fund performance. Ownership of both independent and nonindependent directors plays an economically and statistically significant role. Funds in which directors have low ownership, or "skin in the game," significantly underperform.
2009 Governance
  • Governance Mechanisms and Bond Prices
  • Author: Cremers, K., V. Nair and C. Wei
  • Journal: Review of Financial Studies
  • The authors investigate the effects of shareholder governance mechanisms on bondholders and document two new findings. In the presence of shareholder control, the difference in bond yields due to differences in takeover vulnerability can be as high as 66 basis points. Second, event risk covenants reduce the credit risk associated with strong shareholder governance.
2007 Governance
  • Takeover Defenses and Competition: The Role of Stakeholders
  • Author: Cremers, K., V. Nair and U. Peyer
  • Journal: Journal of Empirical Legal Studies
  • This article studies the interaction between takeover defenses and competition. The authors find that firms in more competitive industries have more takeover defenses. This suggests that product market competition can be a substitute for the market for corporate control, with more information available in competitive markets making monitoring less costly.
2008 Governance
  • Stock Duration and Misvaluation
  • Author: Cremers, M., A. Pareek and Z. Sautner
  • Journal: Working paper
  • The authors study whether the presence of short-term investors is related to a speculative component in stock prices using a new measure of holding duration. The authors document that the presence of short-term investors is strongly related to temporary price distortions, consistent with a speculative stock component in stock prices as modeled in Bolton, Scheinkman, and Xiong (2006). As short-term investors move into (out of) stocks, their prices tend to go up (down) relative to fundamentals.
2013 Governance
  • Large Shareholders and Corporate Policies
  • Author: Cronqvist, H. and R. Fahlenbrach
  • Journal: Review of Financial Studies
  • The authors analyze the effects of heterogeneity across large shareholders. The authors find statistically significant and economically important blockholder fixed effects in investment, financial, and executive compensation policies. They also find blockholder fixed effects in firm performance measures, and differences in corporate policies are systematically related to differences in firm performance.
2009 Governance
  • Environmental Economics: A Survey
  • Author: Cropper, M. and W. Oates
  • Journal: Journal of Economic Literature
  • This paper reviews the literature on the theory of environmental regulation with a focus on theoretical results regarding the choice among the key policy instruments for the control of externalities: effluent fees, subsidies, and marketable emission permits. Policy applications are discussed as well.
1992 Environmental
  • Corporate Governance and Ownership Structure in Emerging Markets: Evidence from Latin America
  • Author: Cueto, D.
  • Journal: Working paper
  • In a context of low protection for minority shareholders and large ownership concentration, the paper finds that market participants impose a discount on the value of firms in which the voting rights of dominant shareholders exceed the cash-flow rights. The evidence suggests that the stock market discount is lower when other corporations and family groups assume monitoring roles similar to that of creditors. Collusion between blockholders and dominant shareholders for the purpose of extracting private benefits of control, to the detriment of investors, is not evident.
2011 Governance
  • Corporate Social Responsibility: Domestic and International Private Equity Institutional Investment
  • Author: Cumming, D. and S. Johan
  • Journal: Working paper
  • This paper shows that socially responsible investment is more common among institutional investors with a greater international investment focus in Europe and the United States relative to domestic Dutch investment and investment in Asia. Socially responsible investment is also more common among larger institutional investors and those expecting relatively greater returns from such investments, and less common among fund-of-fund investments.
2006 Environmental, Social
  • The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value
  • Author: Cuñat, V., M. Gine and M. Guadalupe
  • Journal: Journal of Finance
  • The authors find that passing an internal corporate governance proposal leads to significant positive abnormal returns. Adopting one governance proposal increases shareholder value by 2.8%. The market reaction is larger in firms with more antitakeover provisions, higher institutional ownership, and stronger investor activism for proposals sponsored by institutions. In addition, they find that acquisitions and capital expenditures decline and long-term performance improves.
2012 Governance
  • Ownership, Control, Valuation and Performance of Brazilian Corporations
  • Author: da Silva, A. and R. Leal
  • Journal: Corporate Ownership and Control
  • This paper analyzes the ownership and control structure of Brazilian companies and the effect of cash flow and voting rights on firm valuation and performance. The authors find evidence that non-voting shares and indirect control structures are largely used to concentrate control with reduced overall investment in the company. Moreover, firm valuation and performance are relatively higher for firms with controlling shareholders when compared to firms without controlling shareholders.
2006 Governance
  • Endogeneity of Brazilian Corporate Governance Quality Determinants
  • Author: da Silveira, A., R. Leal, A. Carvalhal-da-Silva and L. Barros
  • Journal: Corporate Governance
  • This paper investigates the determinants and the evolution of voluntarily adopted firm-level corporate governance practices in Brazil. The authors find that firm-level corporate governance practices are steadily improving but there is much room for improvement. Heterogeneity has increased. Voluntarily adhering to new stricter listing requirements is associated positively with improvements in firm-level corporate governance practices. Reducing or not using non-voting shares improves corporate governance practices.
2010 Governance
  • Rating the Ratings: How Good Are Commercial Governance Ratings?
  • Author: Daines, R., I. Gow and D. Larcker
  • Journal: Journal of Financial Economics
  • The authors examine whether commercially available corporate governance rankings provide useful information for shareholders. The results suggest that they do not. Commercial ratings do not predict governance-related outcomes with the precision or strength necessary to support the bold claims made by most of these firms. The authors find little or no relation between the governance ratings provided by RiskMetrics with either their voting recommendations or the actual votes by shareholders on proxy proposals.
2010 Governance
2006 Environmental, Social, Governance
  • Do Pills Poison Operating Performance?
  • Author: Danielson, M. and J. Karpoff
  • Journal: Journal of Corporate Finance
  • Contrary to arguments that poison pills degrade firm performance, the authors find that operating performance modestly improves during the 5-year period after pill adoption. Performance improvements are present in a wide range of firms, and are independent of adoption year and whether the firm is R&D intensive. Although recent arguments suggest that the protection offered by pills is strongest when combined with a staggered board, the performance changes also are unrelated to board structure.
2006 Governance
  • Socially Responsible Investing and Asset Allocation
  • Author: D'Antonio, L., T. Johnsen and R. Hutton
  • Journal: Journal of Investing
  • This paper compares returns on an SR portfolio of a varying percentage of debt and equity to traditional investment vehicle returns using several methods of asset allocation. The authors find that the SR portfolio outperformed the combined S&P 500/LB index across all methods.
2000 Environmental, Social, Governance
  • Pollution and Capital Markets in Developing Countries
  • Author: Dasgupta, S., B. Laplante and N. Mamingi
  • Journal: Journal of Environmental Economics and Management
  • This paper shows that capital markets in Argentina, Chile, Mexico, and the Philippines do react to announcements of environmental events, such as those of superior environmental performance or citizens' complaints. A policy implication is that environmental regulators in developing countries may explicitly harness those market forces by introducing structured programs of information release pertaining to firms' environmental performance: public disclosure mechanisms in developing countries may be a useful model to consider given limited government enforcement resources.
2001 Environmental
  • Agents without Principles? The Spread of the Poison Pill through the Intercorporate Network
  • Author: Davis, G.
  • Journal: Administrative Science Quarterly
  • This study compares the agency theory of the firm with interorganizational theory in examining the factors associated with the adoption of the poison pill-a takeover defense issued by a firm's board of directors that can dramatically increase the cost that a hostile buyer would have to pay to acquire the firm. the authors' results support a social structural perspective on the market for corporate control in which the interlock network provides a social context favoring continued managerial dominance.
1991 Governance
  • Business Ties and Proxy Voting by Mutual Funds
  • Author: Davis, G. and E. Kim
  • Journal: Journal of Financial Economics
  • The magnitude of mutual funds' business ties with their portfolio firms is documented and is linked to funds' proxy votes at specific firms and to overall voting practices. Aggregate votes at the fund family level indicate a positive relation between business ties and the propensity to vote with management. Votes at specific firms, however, reveal that funds are no more likely to vote with management of client firms than of non-clients.
2007 Governance
  • Can a Stock Exchange Improve Corporate Behavior? Evidence from Firms' Migration to Premium Listings in Brazil
  • Author: de Carvalho, A. and G. Pennacchi
  • Journal: Journal of Corporate Finance
  • This paper examines the effects of a commitment to improved corporate disclosure and governance by firms' voluntary migration to Brazil's premium listings which required more stringent shareholder protections. The authors' analysis finds that a firm's migration brings positive abnormal returns to its shareholders, particularly when its shares did not have a prior cross-listing on a U.S. exchange and also when the firm chooses a premium listing with the highest standards.
2012 Governance
2005 Governance
  • Corporate Governance Quality: Trends and Real Effects
  • Author: De Nicolo, G., L. Laeven and K. Ueda
  • Journal: Journal of Financial Intermediation
  • This paper's investigation on corporate governance across emerging and developed economies yields three main findings. First, corporate governance quality in most countries has improved overall, although in varying degrees and with a few notable exceptions. Second, the data exhibit cross-country convergence in corporate governance quality with countries that score poorly initially catching up with countries with high corporate governance scores. Third, the impact of improvements in corporate governance quality on traditional measures of real economic activity- GDP growth, productivity growth, and the ratio of investment to GDP- is positive, significant and quantitatively relevant, and the growth effect is particularly pronounced for industries that are most dependent on external finance.
2008 Governance
  • Finance and Inequality: Theory and Evidence
  • Author: Demirguc-Kunt, A. and R. Levine
  • Journal: Annual Review of Financial Economics
  • In this paper, the authors critically review the literature on finance and inequality, highlighting substantive gaps in the literature. While subject to ample qualifications, the bulk of empirical research suggests that improvements in financial contracts, markets, and intermediaries expand economic opportunities and reduce inequality. Yet, there is a shortage of theoretical and empirical research on the potentially enormous impact of formal financial sector policies, such as bank regulations and securities law, on persistent inequality.
2009 Governance
  • International Corporate Governance
  • Author: Denis, D. and J. McConnell
  • Journal: Journal of Financial and Quantitative Analysis
  • This paper surveys two generations of research on corporate governance systems around the world, concentrating on countries other than the U.S. The first generation of international corporate governance research is patterned after the U.S. research that precedes it. The second generation of international corporate governance research considers the possible impact of differing legal systems on the structure and effectiveness of corporate governance and compares systems across countries.
2003 Governance
  • Socially Responsible Fixed-Income Funds
  • Author: Derwall, J. and K. Koedijk
  • Journal: Journal of Business Finance & Accounting
  • This paper found that average SRI bond funds performed similar to conventional funds while the average SRI balanced fund outperformed its conventional peers by more than 1.3% per year.
2009 Environmental, Social
  • Corporate Governance and the Cost of Equity Capital: Evidence from GMI's Governance Rating
  • Author: Derwall, J. and P. Verwijmeren
  • Journal: European Centre for Corporate Engagement Research Note
  • This research note describes how the corporate governance attributes of publicly listed companies are received by financial markets. The authors first document that firms with better overall corporate governance enjoy a lower cost of equity capital. Second, they find that better governance is associated with lower systematic risk, as measured by a firm's beta. Third, they relate corporate governance to idiosyncratic (i.e., firm-specific) risk.
2007 Governance
  • The Eco-Efficiency Premium Puzzle
  • Author: Derwall, J., N. Guenster, R. Bauer and K. Koedijk
  • Journal: Financial Analysts Journal
  • This study focused on the concept of "eco-efficiency" which can be thought of as the economic value a company creates relative to the waste it generates. The study constructed and evaluated two equity portfolios that differed in eco-efficiency. The high-ranked portfolio provided substantially higher average returns than its lower ranked counterpart.
2005 Environmental
2009 Environmental, Social, Governance
  • Socially Responsible Investment: Is It Profitable?
  • Author: Dhrymes, P.
  • Journal: Colloquium on Socially Responsible Investing
  • The authors formulate an "analysis of variance" model to analyze the effect of social responsibility on returns. They find that social responsibility classification is not a significant determinant of a firm's rate of return.
1998 Environmental, Social, Governance
  • Are Red or Blue Companies More Likely to Go Green? Politics and Corporate Social Responsibility
  • Author: Di Giuli, A. and L. Kostovetsky
  • Journal: 29th International Conference of the French Finance Association
  • The authors find that firms score higher on CSR when they have Democratic rather than Republican founders, CEOs, and directors, and when they are headquartered in Democratic, rather than Republican-leaning states. This paper estimates that CSR costs Democratic-leaning firms approximately $20 million more in annual SG&A expenses than Republican-leaning firms ($80 million more within the sample of S&P500 firms), representing about 10% of net income.
2013 Environmental, Social
  • Institutional Investment in the EU ETS
  • Author: Diaz-Rainey, I., A. Finegan and A. Ibikunle
  • Journal: Working paper
  • This review paper explores the role of institutional investment in the EU Emissions Trading Scheme. Legislation incorporating a fiduciary obligation for institutional investors to take into account the social costs of investment as well as private returns would begin to address the climate investment gap.
2013 Environmental
  • Executive Compensation and the Role for Corporate Governance Regulation
  • Author: Dicks, D.
  • Journal: Review of Financial Studies
  • This theoretical article establishes a role for corporate governance regulation. An externality operating through executive compensation motivates regulation. Governance lowers agency costs, allowing firms to grant less incentive pay. When a firm increases governance and lowers incentive pay, other firms can also lower executive compensation. When regulation is enforced, large firms increase in value, small firms decrease in value, and all firms lower incentive pay.
2012 Governance
  • Does Social Screening Affect Portfolio Performance?
  • Author: Diltz, J.
  • Journal: Journal of Investing
  • The authors find that SRI screening has little or no effect on portfolio returns. Environmental and charitable giving screens result in enhanced portfolio performance, while a family benefits screen results in negative performance.
1995 Environmental, Social, Governance
  • The Private Cost of Socially Responsible Investing
  • Author: Diltz, J.
  • Journal: Applied Financial Economics
  • The authors examine twenty-eight common stock portfolios to determine whether ethical screening has an impact on portfolio performance. To the extent that any impacts are observed, the market appears to reward good environmental performance, charitable giving, and an absence of nuclear and defense work, and it appears to penalize firms that provide family-related benefits such as parental leave, job sharing, and dependent care assistance.
1995 Environmental, Social, Governance
  • Active Ownership
  • Author: Dimson, E., O. Karakas and X. Li
  • Journal: Working paper
  • This study analyzes the impact of environmental, social, and governance engagements between asset managers and companies. On average, successful CSR engagements give rise to a positive one-year abnormal return of 4.4%, whereas there is no market reaction to unsuccessful CSR engagements. Positive abnormal returns are most pronounced for engagements on the themes of corporate governance and climate change.
2013 Environmental, Social, Governance
  • Mutual Fund Performance and Governance Structure: The Role of Portfolio Managers and Boards of Directors
  • Author: Ding, B. and R. Wermers
  • Journal: EFA 2005 Moscow
  • The authors show that experienced large-fund portfolio managers outperform their size, book-to-market, and momentum benchmarks, but that experienced small-fund portfolio managers underperform their benchmarks- indicating the presence of managerial entrenchment in the mutual fund industry. The authors' evidence indicates that independent boards impact pre-expense performance much more significantly than their prior-documented impact on fund fees. They also find a role for internal governance: inside directors and large management company complexes appear to better monitor performance due to "hidden actions," as well as terminating underperforming inexperienced managers.
2013 Governance
  • Sticks or Carrots? Optimal CEO Compensation When Managers Are Loss Averse
  • Author: Dittmann, I., E. Maug and O. Spalt
  • Journal: Journal of Finance
  • This paper analyzes optimal executive compensation contracts when managers are loss averse. The authors derive and calibrate the general shape of the optimal contract that is increasing and convex for medium and high outcomes and that drops discontinuously to the lowest possible payout for low outcomes. They also identify the critical features of the loss-aversion model that render optimal contracts convex.
2010 Governance
  • Valuing Corporate Environmental Performance: Innovest's Evaluation of the Electric Utilities Industry
  • Author: Dixon, F. and M. Whittaker
  • Journal: Corporate Environmental Strategy
  • Deregulation of the U.S. electric power industry has few noticeable implications for environmental performance and risk. Add to that increasing regulatory pressure and public awareness, and environmental strategy emerges as a pivotal factor underlying success- or failure- in the industry. In this article, the authors show how forward-thinking companies are turning environmental threats into business opportunities, with shareholders pocketing the returns.
1999 Environmental
  • Debt Enforcement around the World
  • Author: Djankov, S., O. Hart, C. McLiesh and A. Shleifer
  • Journal: Journal of Political Economy
  • This paper asks insolvency practitioners from 88 countries to describe how debt enforcement will proceed against an identical hotel about to default on its debt. The authors use the data on time, cost, and the likely disposition of the assets (preservation as a going concern vs. piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. This measure is strongly correlated with per capita income and legal origin and predicts debt market development.
2008 Governance
  • The Law and Economics of Self-Dealing
  • Author: Djankov, S., R. La Porta, F. Lopez-de-Silanes and A. Shleifer
  • Journal: Journal of Financial Economics
  • The authors present a new measure of legal protection of minority shareholders against expropriation by corporate insiders: the anti-self-dealing index. Assembled with the help of Lex Mundi law firms, the index is calculated for 72 countries based on legal rules prevailing in 2003, and focuses on private enforcement mechanisms, such as disclosure, approval, and litigation, that govern a specific self-dealing transaction. This theoretically grounded index predicts a variety of stock market outcomes, and generally works better than the previously introduced index of anti-director rights.
2008 Governance
  • The Regulation of Labor
  • Author: Djankov, S., R. La Porta, F. Lopez-de-Silanes, A. Shleifer and J. Botero
  • Journal: National Bureau of Economic Research
  • The authors investigate the regulation of labor markets through employment laws, collective bargaining laws, and social security laws in 85 countries. They find that richer countries regulate labor less than poorer countries do, although they have more generous social security systems. Heavier regulation of labor is associated with a larger unofficial economy, lower labor force participation, and higher unemployment.
2003 Social
2010 Environmental, Social, Governance
  • Why Do Foreign Firms Leave U.S. Equity Markets?
  • Author: Doidge, C., G. Karolyi and R. Stulz
  • Journal: Journal of Finance
  • Foreign firms terminate their Securities and Exchange Commission registration in the aftermath of the Sarbanes-Oxley Act (SOX) because they no longer require outside funds to finance growth opportunities. This paper finds that foreign firms with more agency problems have worse stock-price reactions to the adoption of Rule 12h-6 in 2007, which made deregistration easier, than those firms more adversely affected by the compliance costs of SOX. Stock-price reactions to deregistration announcements are negative, but less so under Rule 12h-6, and more so for firms that raise fewer funds externally.
2010 Governance
  • Has New York Become Less Competitive Than London in Global Markets? Evaluating Foreign Listing Choices over Time
  • Author: Doidge, C., G. Karolyi and R. Stulz
  • Journal: Journal of Financial Economics
  • This paper studies the determinants and consequences of cross-listings on the New York and London stock exchanges from 1990 to 2005. The authors find that cross-listings have been falling on U.S. exchanges as well as on the Main Market in London. They show that after controlling for firm characteristics there is no deficit in cross-listing counts on U.S. exchanges related to SOX. This paper also finds that there is a significant premium for U.S. exchange listings every year, that the premium has not fallen significantly in recent years, and that it persists when allowing for time-invariant unobservable firm characteristics.
2009 Governance
  • Why Do Countries Matter So Much for Corporate Governance?
  • Author: Doidge, C., G. Karolyi and R. Stulz
  • Journal: Journal of Financial Economics
  • This paper develops and tests a model of how country characteristics, such as legal protections for minority investors and the level of economic and financial development, influence firms' costs and benefits in implementing measures to improve their own governance and transparency. The authors find that country characteristics explain much more of the variance in governance ratings (ranging from 39% to 73%) than observable firm characteristics (ranging from 4% to 22%). Further, they show that firm characteristics explain almost none of the variation in governance ratings in less-developed countries and that access to global capital markets sharpens firms' incentives for better governance.
2007 Governance
  • Why Are Foreign Firms Listed in the U.S. Worth More?
  • Author: Doidge, C., G. Karolyi and R. Stulz
  • Journal: Journal of Financial Economics
  • This paper shows that at the end of 1997, foreign companies with shares cross-listed in the U.S. had Tobin's q ratios that were 16.5% higher than the q ratios of non-cross-listed firms from the same country. The valuation difference is statistically significant and reaches 37% for those companies that list on major U.S. exchanges, even after controlling for a number of firm and country characteristics. The authors show that growth opportunities are more highly valued for firms that choose to cross-list in the U.S., particularly those from countries with poorer investor rights.
2004 Governance
  • Foreign and Domestic Ownership, Business Groups, and Firm Performance: Evidence from a Large Emerging Market
  • Author: Douma, S., R. George and R. Kabir
  • Journal: Strategic Management Journal
  • This theoretical paper shows that the previously documented positive effect of foreign ownership on firm performance is substantially attributable to foreign corporations that have, on average, larger shareholding, higher commitment, and longer-term involvement. The authors document the positive influence of corporations vis-´a-vis financial institutions with respect to domestic shareholdings as well. They also find an interesting dichotomy in the impact of these shareholders depending on the business group affiliation of firms.
2006 Governance
  • Do Corporate Global Environmental Standards Create or Destroy Market Value?
  • Author: Dowell, G., S. Hart and B. Yeung
  • Journal: Management Science
  • This paper finds that firms adopting a single stringent global environmental standard have much higher market values, as measured by Tobin's q, than firms defaulting to less stringent, or poorly enforced host country standards. Results also suggest that externalities are incorporated to a significant extent in firm valuation.
2000 Environmental
  • Sovereign Bonds and Socially Responsible Investment
  • Author: Drut, B.
  • Journal: Journal of Business Ethics
  • This paper shows that for a global rating of socially responsible performances, it is possible to build portfolios with an increased average rating without significantly harming the risk/return relationship. This result differs when considering sub-ratings related to the environment, social concerns, and public governance.
2010 Environmental, Social, Governance
  • When Are Outside Directors Effective?
  • Author: Duchin, R., J. Matsusaka and O. Ozbas
  • Journal: Journal of Financial Economics
  • This paper uses recent regulations that have required some companies to increase the number of outside directors on their boards to generate estimates of the effect of board independence on performance that are largely free from endogeneity problems. The main finding is that the effectiveness of outside directors depends on the cost of acquiring information about the firm: when the cost of acquiring information is low, performance increases when outsiders are added to the board, and when the cost of information is high, performance worsens when outsiders are added to the board.
2010 Governance
  • To Steal or Not to Steal: Firm Attributes, Legal Environment, and Valuation
  • Author: Durnev, A. and E. Kim
  • Journal: Journal of Finance
  • This paper investigates a simple model which identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data they find that all three firm attributes are related to the quality of governance and disclosure practices, and firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor-friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.
2005 Governance
  • Stealing from Thieves: Expropriation Risk, Firm Governance, and Performance
  • Author: Durnev, A. and L. Fauver
  • Journal: 2nd Annual Conference on Empirical Legal Studies
  • The authors examine firm governance choices and firm valuation in the presence of expropriation risk. The authors show that firms in industries that are subject to greater risks of expropriation practice worse governance, disclose less information, and manage earnings more. Furthermore, a one-standard deviation increase in expropriation risk lowers firm value by approximately 4% directly and by 3% through the deterioration in firm governance.
2013 Governance
  • Political Partisanship and Corporate Performance
  • Author: Durnev, A., J. Garfinkel and A. Molchanov
  • Journal: Working paper
  • The authors present evidence that the political orientation of the government (left vs. right) affects corporate performance. They select four policy dimensions traditionally viewed as 'leftist': stringent labor and environmental laws, higher taxes and interest rates. The authors document that industries that are more sensitive to such policies underperform when left parties are in power.
2013 Environmental, Social
  • How Pervasive Is Corporate Fraud?
  • Author: Dyck, I., A. Morse and A. Zingales
  • Journal: 2nd Annual Conference on Empirical Legal Studies
  • The authors estimate what percentage of firms engage in fraud and the economic cost of fraud. They estimate that on average corporate fraud costs investors 22 percent of enterprise value in fraud- committing firms and 3 percent of enterprise value across all firms.
2013 Governance
  • The Impact of a Corporate Culture of Sustainability on Corporate Behavior and Performance
  • Author: Eccles, R., I. Ioannou and G. Serafeim
  • Journal: National Bureau of Economic Research
  • The authors investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. The authors find that the boards of directors of High Sustainability companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. They also provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance.
2012 Environmental
  • Agency Problems in Public Firms: Evidence from Corporate Jets in Leveraged Buyouts
  • Author: Edgerton, J.
  • Journal: Journal of Finance
  • This paper uses novel data to examine the fleets of corporate jets operated by both publicly traded and privately held firms. In the cross-section, firms owned by private equity funds average 40% smaller fleets than observably similar public firms. Similar fleet reductions are observed within firms that undergo leveraged buyouts.
2012 Governance
  • Does the Stock Market Fully Value Intangibles? Employee Satisfaction and Equity Prices
  • Author: Edmans, A.
  • Journal: Journal of Financial Economics
  • This paper analyzes the relationship between employee satisfaction and long-run stock returns. A value-weighted portfolio of the "100 Best Companies to Work for in America" earned an annual four-factor alpha of 3.5% from 1984 to 2009, and exhibited significantly more positive earnings surprises and announcement returns. The implication is that employee satisfaction is positively correlated with shareholder returns.
2011 Social
  • Governance through Trading and Intervention: A Theory of Multiple Blockholders
  • Author: Edmans, A. and G. Manso
  • Journal: Review of Financial Studies
  • This article shows that, while a multiple small blockholder structure generates free-rider problems that hinder intervention, the same coordination difficulties strengthen a second governance mechanism: disciplining the manager through trading. Since multiple blockholders cannot coordinate to limit their orders and maximize combined trading profits, they trade competitively, impounding more information into prices.
2011 Governance
  • A Multiplicative Model of Optimal CEO Incentives in Market Equilibrium
  • Author: Edmans, A., X. Gabaix and A. Landier
  • Journal: Review of Financial Studies
  • This theoretical paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium, by embedding a moral hazard problem into a talent assignment model. First, both the CEO's low fractional ownership (the Jensen-Murphy incentives measure) and its negative relationship with firm size can be quantitatively reconciled with optimal contracting, and thus need not reflect rent extraction. Second, the dollar change in wealth for a percentage change in firm value, divided by annual pay, is independent of firm size, and therefore a desirable empirical measure of incentives. Third, incentive pay is effective at solving agency problems with multiplicative impacts on firm value, such as strategy choice.
2009 Governance
  • Dynamic CEO Compensation
  • Author: Edmans, A., X. Gabaix, T. Sadzik and Y. Sannikov
  • Journal: Journal of Finance
  • This theoretical paper studies optimal compensation in a dynamic framework where the CEO consumes in multiple periods, can undo the contract by privately saving, and can temporarily inflate earnings. The contract can be implemented by escrowing the CEO's pay into a "Dynamic Incentive Account" that comprises cash and the firm's equity. The account features state-dependent rebalancing to ensure its equity proportion is always sufficient to induce effort, and time-dependent vesting to deter short-termism.
2012 Governance
  • Doing Well by Doing Good? Green Office Buildings
  • Author: Eichholtz, P., N. Kok and J. Quigley
  • Journal: American Economic Review
  • This study analyzes economic value of "green buildings" derived from market transactions. It also finds that buildings with a "green rating" command rental rates that are roughly three percent higher per square foot than otherwise identical buildings. Selling prices of green buildings are higher by about 16 percent. Beyond the direct effects of energy savings, further evidence suggests that the intangible effects of the label itself also play a role in determining the value of green buildings in the marketplace.
2013 Environmental
  • External Governance and Debt Agency Costs of Family Firms
  • Author: Ellul, A., G. Levant and U. Lel
  • Journal: Federal Reserve Discussion Paper
  • The authors investigate the impact of family blockholders on the firm's debt agency costs under different investor protection environments. They find that family firms originating from low investor protection environments suffer from higher debt costs compared to non-family firms, while family firms originating from high investor protection environments benefit from lower debt costs compared to non-family firms. The authors find no impact from non-family blockholdings.
2007 Governance
  • Determinants of Cross-Border Mergers and Acquisitions
  • Author: Erel, I., R. Liao and M. Weisbach
  • Journal: Journal of Finance
  • This paper finds that geography, the quality of accounting disclosure, and bilateral trade increase the likelihood of mergers between two countries. Valuation appears to play a role in motivating mergers: firms in countries whose stock market has increased in value, whose currency has recently appreciated, and that have a relatively high market-to-book value tend to be purchasers, while firms from weaker-performing economies tend to be targets.
2012 Governance
  • Reputation Penalties for Poor Monitoring of Executive Pay: Evidence from Option Backdating
  • Author: Ertimur, Y., F. Ferri and D. Maber
  • Journal: Journal of Financial Economics
  • The authors study whether outside directors are held accountable for poor monitoring of executive compensation by examining the reputation penalties to directors of firms involved in the option backdating (BD) scandal of 2006-2007. At firms involved in BD, significant penalties accrued to compensation committee members (particularly those who served during the BD period) both in terms of votes withheld when up for election and in terms of turnover, especially in more severe cases of BD.
2012 Governance
  • Shareholder Activism and CEO Pay
  • Author: Ertimur, Y., F. Ferri and V. Muslu
  • Journal: Review of Financial Studies
  • Shareholders favor proposals related to the executive pay-setting process (e.g., subject severance pay to shareholder approval) over proposals that micromanage pay level or structure. Activists target firms with high CEO pay (whether excessive or not), voting support is higher only at firms with excess CEO pay. Firms with excess CEO pay targeted by vote-no campaigns experience a significant reduction in CEO pay ($7.3 million).
2011 Governance
  • Competition and Corporate Governance in Transition
  • Author: Estrin, S.
  • Journal: Journal of Economic Perspectives
  • This paper explores the elements of institutional development critical to the enhancement of company performance in transition economies. These elements include the initial conditions; the forms of privatization; the institutional and legal framework, especially the corporate governance structure; the relationship between the private sector and the state; and the competitiveness of product markets, including the impact of international trade.
2002 Governance
  • The Relationship between Environmental Social Governance Factors and Stock Returns
  • Author: Evans, J. and D. Peiris
  • Journal: Working paper
  • This study provides evidence of a significant positive relationship between particular ESG rating criteria and both return on assets and market to book value measures, supporting the stakeholder theory that Corporate Social Performance (CSP) is positive for Corporate Financial Performance (CFP). Analysis also shows that employment conditions are a more relevant influence than other stakeholder criteria and a company's involvement in more general non-stakeholder related social issues contributes negatively to both operating performance and stock return.
2010 Environmental, Social, Governance
  • Politically Connected Firms
  • Author: Faccio, M.
  • Journal: American Economic Review
  • This paper finds that connections are particularly common in countries with higher levels of corruption, countries imposing restrictions on foreign investments by their residents, and countries with more transparent systems. The authors also find that different relationships between business people and politicians have different value. Stock prices increase significantly when a businessperson enters politics.
2006 Governance
  • The Ultimate Ownership of Western European Corporations
  • Author: Faccio, M. and L. Lang
  • Journal: Journal of Financial Economics
  • The authors find that widely held firms are more important in the U.K. and Ireland, family controlled firms in continental Europe. Financial and large firms are more likely widely held, while non-financial and small firms are more likely family controlled. Dual class shares and pyramids enhance the control of the largest shareholders, but overall there are significant discrepancies between ownership and control in only a few countries.
2002 Governance
  • Political Connections and Corporate Bailouts
  • Author: Faccio, M., R. Masulis and J. McConnell
  • Journal: Journal of Finance
  • This paper finds that politically connected firms are significantly more likely to be bailed out than similar nonconnected firms. Additionally, politically connected firms are disproportionately more likely to be bailed out when the International Monetary Fund or the World Bank provides financial assistance to the firm's home government. Further, among bailed-out firms, those that are politically connected exhibit significantly worse financial performance than their nonconnected peers at the time of and following the bailout.
2007 Governance
  • Bank CEO Incentives and the Credit Crisis
  • Author: Fahlenbrach, R. and R. Stulz
  • Journal: Journal of Financial Economics
  • The authors investigate whether bank performance during the recent credit crisis is related to chief executive officer (CEO) incentives before the crisis. They find some evidence that banks with CEOs whose incentives were better aligned with the interests of shareholders performed worse and no evidence that they performed better. Banks with higher option compensation and a larger fraction of compensation in cash bonuses for their CEOs did not perform worse during the crisis.
2011 Governance
  • Why Do Firms Appoint CEOs as Outside Directors?
  • Author: Fahlenbrach, R., A. Low and R. Stulz
  • Journal: Journal of Financial Economics
  • Companies actively seek to appoint outside CEOs to their boards. Consistent with the authors' matching theory of outside CEO board appointments, the authors show that such appointments have a certification benefit for the appointing firm. The first outside CEO director appointment has a higher stock-price reaction than the appointment of another outside director. Except for a decrease in operating performance following the appointment of an interlocked director, CEO directors do not affect the appointing firm's operating performance, decision-making, and CEO compensation.
2010 Governance
  • Classified Boards, Firm Value, and Managerial Entrenchment
  • Author: Faleye, O.
  • Journal: Journal of Financial Economics
  • This paper shows that classified boards destroy value by entrenching management and reducing director effectiveness. The author shows that classified boards are associated with a significant reduction in firm value and that this holds even among complex firms, although such firms are often regarded as most likely to benefit from staggered board elections. Results indicate that classified boards significantly insulate management from market discipline.
2007 Governance
  • Labor-Friendly Corporate Practices: Is What Is Good for Employees Good for Shareholders?
  • Author: Faleye, O. and E. Trahan
  • Journal: Journal of Business Ethics
  • Labor-friendly firms also outperform otherwise similar firms, both in terms of long-run stock market returns and operating results. This paper's analysis of excess executive compensation suggests that top management derives no pecuniary benefits from labor-friendly practices. The authors interpret their results as consistent with a genuine concern for employees translating into higher productivity and profitability, which in turn facilitate value creation.
2011 Social
  • The Costs of Intense Board Monitoring
  • Author: Faleye, O., R. Hoitash and U. Hoitash
  • Journal: Journal of Financial Economics
  • The authors study the effects of the intensity of board monitoring on directors' effectiveness in performing their monitoring and advising duties. They find that monitoring quality improves when a majority of independent directors serve on at least two of the three principal monitoring committees. These firms exhibit greater sensitivity of CEO turnover to firm performance, lower excess executive compensation, and reduced earnings management. The improvement in monitoring quality comes at the significant cost of weaker strategic advising and greater managerial myopia.
2011 Governance
  • When Labor Has a Voice in Corporate Governance
  • Author: Faleye, O., V. Mehrotra and R. Morck
  • Journal: Journal of Financial and Quantitative Analysis
  • The authors find that relative to other firms, labor-controlled publicly traded firms deviate more from value maximization, invest less in long-term assets, take fewer risks, grow more slowly, create fewer new jobs, and exhibit lower labor and total factor productivity. The authors propose that labor uses its corporate governance voice to maximize the combined value of its contractual and residual claims, and that this often pushes corporate policies away from, rather than toward, shareholder value maximization.
2006 Governance
  • Job Security Regulations and the Dynamic Demand for Industrial Labor in India and Zimbabwe
  • Author: Fallon, P. and R. Lucas
  • Journal: Journal of Development Economics
  • This paper derives dynamic labor demand equations from a CES cost minimization model for 64 manufacturing industries. Following enactment of job security labor laws in India and Zimbabwe, the data reveal a substantial reduction in demand for workers but no slowing in adjustment of number of employees.
1993 Social
  • Disagreement, Tastes, and Asset Prices
  • Author: Fama, E. and K. French
  • Journal: Journal of Financial Economics
  • Standard asset pricing models assume that: (i) there is complete agreement among investors about probability distributions of future payoffs on assets; and (ii) investors choose asset holdings based solely on anticipated payoffs; that is, investment assets are not also consumption goods. Both assumptions are unrealistic. The authors provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices.
2007 Social
  • Do External Auditors Perform a Corporate Governance Role in Emerging Markets? Evidence from East Asia
  • Author: Fan, J. and T. Wong
  • Journal: Journal of Accounting Research
  • This paper examines whether external independent auditors are employed as monitors or as bonding mechanisms, or both, to alleviate agency problems in emerging markets. This paper finds that firms with agency problems embedded in the ownership structures are more likely to employ Big 5 auditors. This relation is evident among firms that raise equity capital frequently. Consistently firms hiring Big 5 auditors receive smaller share price discounts associated with the agency conflicts. The authors find that Big 5 auditors take into consideration their clients' agency problems when making audit fee and audit report decisions.
2005 Governance
  • Performance of Ethical Mutual Funds in Spain: Sacrifice or Premium?
  • Author: Fernandez-Izquierdo, A. and J. Matallin-Saez
  • Journal: Journal of Business Ethics
  • The main objective of this article is to compare the financial performance of ethical investment funds to that of other funds in the Spanish retail market. Using style analysis to compare financial performance, the authors found that their financial performance is in all cases superior or similar to that achieved by the rest of the funds. In comparing ethical and non-ethical fund subsamples by homogeneous groups, no significant differences between these two types of funds have been found.
2008 Environmental, Social
  • Shareholder Empowerment and Bank Bailouts
  • Author: Ferreira, D., D. Kershaw and A. Kirchmaier
  • Journal: Working paper
  • The authors propose a management insulation index based on banks' charter and by-law provisions and on the provisions of the applicable state corporate law that make it difficult for shareholders to oust a firm's management. The authors show that management insulation is a good predictor of bank bailouts: banks in which managers are fully insulated from shareholders are roughly 19 to 26 percentage points less likely to be bailed out.
2013 Governance
  • Corporate Governance, Idiosyncratic Risk, and Information Flow
  • Author: Ferreira, M. and P. Laux
  • Journal: Journal of Finance
  • The authors study the relationship of corporate governance policy and idiosyncratic risk. Firms with fewer antitakeover provisions display higher levels of idiosyncratic risk, trading activity, private information flow, and information about future earnings in stock prices. Trading interest by institutions, especially those active in merger arbitrage, strengthens the relationship of governance to idiosyncratic risk.
2007 Governance
  • Shareholders at the Gate? Institutional Investors and Cross-Border Mergers and Acquisitions
  • Author: Ferreira, M., M. Massa and P. Matos
  • Journal: Review of Financial Studies
  • The authors study the role of institutional investors in cross-border mergers and acquisitions (M&As). They find that foreign institutional ownership is positively associated with the intensity of cross-border M&A activity worldwide. Foreign institutional ownership increases the probability that a merger deal is cross-border, successful, and the bidder takes full control of the target firm. This relation is stronger in countries with weaker legal institutions and in less developed markets.
2010 Governance
  • Shareholder Votes and Proxy Advisors: Evidence from Say on Pay
  • Author: Ferri, F.
  • Journal: 7th Annual Conference on Empirical Legal Studies
  • The authors investigate the economic role of proxy advisors (PA) in the context of mandatory "say on pay" votes, a novel and complex item requiring significant firm-specific analysis. More than half of the firms respond to the adverse shareholder vote triggered by a negative recommendation by engaging with investors and making changes to their compensation plan. However, they find no market reaction to the announcement of such changes, even when material enough to result in a favorable recommendation and vote the following year.
2013 Governance
  • Takeover Defenses of IPO Firms
  • Author: Field, L. and J. Karpoff
  • Journal: Journal of Finance
  • The presence of a takeover defense is negatively related to subsequent acquisition likelihood, yet has no impact on take-over premiums for firms that are acquired. These results suggest that managers shift the cost of takeover protection onto nonmanagerial shareholders. Thus, agency problems are important even for firms at the IPO stage.
2002 Governance
2003 Governance
  • Corporate Governance and Performance in Publicly Listed, Family-Controlled Firms: Evidence from Taiwan
  • Author: Filatotchev, I., Y. Lien and J. Piesse
  • Journal: Asia Pacific Journal of Management
  • This paper analyzes the effects of ownership structure and board characteristics on performance in large, publicly traded firms that are controlled by founding families. After taking account of possible endogeneity problems, the authors do not find that family control is associated with performance measured in terms of accounting ratios, sales per issued capital, earnings per share and market-to-book value. However, share ownership by institutional investors, and foreign financial institutions in particular, is associated with better performance.
2005 Governance
  • Fortune's Best 100 Companies to Work for in America: Do They Work for Shareholders?
  • Author: Filbeck, G. and D. Preece
  • Journal: Journal of Business Finance & Accounting
  • This paper concludes that the stock market does value corporate concern for workers, as measured by inclusion in the Fortune 100 Best Companies to Work For list. The authors find statistically significant results on the announcement day and a run-up in the two weeks prior to the announcement, although the trend appears to partially reverse itself in the weeks following the event date.
2003 Social
  • The Relationship between the Environmental and Financial Performance of Public Utilities
  • Author: Filbeck, G. and R. Gorman
  • Journal: Environmental and Resource Economics
  • The authors do not find a positive relationship between holding period returns and an industry-adjusted measure of environmental performance nor do they find that regulatory climate appears to explain returns. While there does not appear to be a clearly defined relationship between regulatory climate and a compliance based measure of environmental performance, there is evidence of a negative relationship between financial return and a more pro-active measure of environmental performance.
2004 Environmental
  • Voluntary Corporate Environmental Initiatives and Shareholder Wealth
  • Author: Fisher-Vanden, K. and K. Thorburn
  • Journal: Journal of Environmental Economics and Management
  • Companies announcing membership in Climate Leaders, a program related to climate change, experience significantly negative abnormal stock returns. The price decline is smaller in carbon-intensive industries, where regulatory actions are more likely, and for high book-to-market firms. Corporate commitments to reduce greenhouse gas emissions appear to conflict with shareholder value-maximization.
2011 Environmental
  • Estimating the Value of Political Connections
  • Author: Fisman, R.
  • Journal: American Economic Review
  • The author uses a string of rumors about former Indonesian President Suharto's health to infer value of political connections to Indonesian firms. The author finds that a large percentage of a politically well-connected firm's value may be derived from political connections.
2001 Governance
  • Lean and Green: The Move to Environmentally Conscious Manufacturing
  • Author: Florida, R.
  • Journal: California Management Review
  • The authors hypothesized that the adoption of environmentally conscious manufacturing is positively related to the adoption of advanced manufacturing systems more generally, and the results of this papers survey provide considerable support for this view. The authors findings suggest that the efforts of firms to improve manufacturing processes and increase productivity create substantial opportunities for environmental improvement.
1996 Environmental
  • A Note on Social Responsibility and Stock Valuation
  • Author: Fogler, H. and F. Nutt
  • Journal: Academy of Management Journal
  • This paper studies the investor valuations of nine paper companies after substantial publicity was released about their pollution tendencies. Cross-section valuation models were prepared for the four quarters beginning just prior to the publicity. This event study finds little or no effect on firms' stock value after being cited as a polluter.
1975 Environmental
  • The History of Corporate Ownership and Control in Germany
  • Author: Fohlin, C.
  • Journal: A History of Corporate Governance Around the World: Family Business Groups to Professional Managers, edited by R. Morck
  • This theoretical paper reviews historical and contemporary views of German corporate governance, examining both the overall evolution of ownership structures and the development of relationship banking practices. The author finds that bank involvement in corporate ownership appears to have arisen largely out of active bank involvement with securities issues, particularly of listed firms.
2005 Governance
  • The Evolution of Corporate Ownership after IPO: The Impact of Investor Protection
  • Author: Foley, C. and R. Greenwood
  • Journal: Review of Financial Studies
  • Recent research documents that ownership concentration is higher in countries with weak investor protection. However, the authors show this pattern does not hold for newly public firms, which tend to have concentrated ownership regardless of the level of investor protection. The study shows that firms in countries with strong investor protection are more likely to experience decreases in ownership concentration after listing, that these decreases appear in response to growth opportunities, and that they are associated with new share issuance.
2010 Governance
  • The Disciplinary Effects of Proxy Contests
  • Author: Fos, V.
  • Journal: Working paper
  • Using a hand-collected data set of all proxy contests during 1994-2008, this paper studies the effect of potential proxy contests on corporate policies and performance. When the likelihood of a proxy contest increases, companies experience increases in leverage, dividends, and CEO turnover. In addition, companies decrease R&D, capital expenditures, and executive compensation.
2013 Governance
  • Emissions Trading, Electricity Restructuring, and Investment in Pollution Abatement
  • Author: Fowlie, M.
  • Journal: American Economic Review
  • This paper analyzes an emissions trading program that was introduced to reduce smog-causing pollution from large stationary sources. The author finds that deregulated plants in restructured electricity markets were less likely to adopt more capital intensive environmental compliance options as compared to regulated or publicly owned plants. Second, as a consequence of heterogeneity in electricity market regulations, a larger share of the permitted pollution is being emitted in states where air quality problems tend to be more severe.
2010 Environmental
  • External Networking and Internal Firm Governance
  • Author: Fracassi, C. and G. Tate
  • Journal: Journal of Finance
  • The authors find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. They find that CEO-director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO-director ties engage in more value-destroying acquisitions.
2012 Governance
  • Classified Boards and Firm Value
  • Author: Frakes, M.
  • Journal: Delaware Journal of Corporate Law
  • Classified boards constitute one of the most potent takeover defenses for U.S. firms today. This article approaches the relationship between corporate governance and firm value while taking various measures to account for unobserved sources of heterogeneity across firms. Using the instrumental variables model developed by Hausman and Taylor, the author finds evidence of a negative and statistically significant association between classified board status and firm value.
2007 Governance
  • The Effect of State Antitakeover Laws on the Firm's Bondholders
  • Author: Francis, B., I. Hasan, K. John and M. Waisman
  • Journal: Journal of Financial Economics
  • The authors examine how state antitakeover laws affect bondholders and the cost of debt, and report four findings. First, bonds issued by firms incorporated in takeover-friendly states have significantly higher at-issue yield spreads than bonds issued by firms in states with restrictive antitakeover laws. Second, firms in takeover friendly states have significantly higher leverage than their counterparts in restrictive law states. Third, bond issues are associated with negative average stock price reactions among firms in takeover-friendly states, but positive stock price reactions among firms in restrictive law states. Fourth, existing bond values increase, on average, upon the introduction of Business Combination antitakeover law.
2010 Governance
  • Ownership: Evolution and Regulation
  • Author: Franks, J., C. Mayer and S. Rossi
  • Journal: Review of Financial Studies
  • This paper is the first study of long-run evolution of investor protection and corporate ownership in the U.K. over the 20th century. The authors assess its influence on ownership by comparing cross-sections of firms at different times in the century and the evolution of firms incorporating at different stages of the century. Investor protection had little impact on dispersion of ownership: even in the absence of investor protection, there was a high rate of dispersion of ownership, primarily associated with mergers.
2009 Governance
  • Pollution Disclosures, Pollution Performance and Economic Performance
  • Author: Freedman, M. and B. Jaggi
  • Journal: Omega
  • This study examines the association between pollution disclosures and pollution performance and between pollution disclosures and economic performance for firms in highly polluting industries. Results confirm earlier findings that there is no association between pollution disclosures and pollution performance. As far as the association between economic performance and pollution disclosures is concerned, the results show that the subgroup of large firms with poor economic performance provides the most detailed pollution information. For smaller firms there is no association between economic performance and pollution disclosures.
1982 Environmental
  • Labour Market Institutions and Economic Performance
  • Author: Freeman, R. and S. Nickell
  • Journal: Economic Policy
  • This paper explores whether labor market institutions in OECD countries could have caused the observed disparity in economic performance since 1970. It is argued that cross-country differences in output growth were much smaller than differences in employment growth. For given output growth, there is a clear negative relationship between employment growth and real wage growth across countries. Countries with very high or very low wage dispersion across industries have better employment performance.
1988 Social
  • The Value of Excess Cash and Corporate Governance: Evidence from U.S. Cross-Listings
  • Author: FrEsard, L. and C. Salva
  • Journal: Journal of Financial Economics
  • The authors examine whether and how a U.S. cross-listing mitigates the risk that insiders will turn their firm's cash holdings into private benefits. They find strong evidence that the value investors attach to excess cash reserves is substantially larger for foreign firms listed on U.S. exchanges and over-the-counter than for their domestic peers. Further, they show that this excess-cash premium stems not only from the strength of U.S. legal rules and disclosure requirements, but also from the greater informal monitoring pressure that accompanies a U.S. listing.
2010 Governance
  • Propping and Tunneling
  • Author: Friedman, E., S. Johnson and T. Mitton
  • Journal: Journal of Comparative Economics
  • In countries with weak legal systems, there is a great deal of tunneling by the entrepreneurs who control publicly traded firms. However, under some conditions entrepreneurs prop up their firms, i.e., they use their private funds to benefit minority shareholders. The authors suggest that issuing debt can credibly commit an entrepreneur to propping, even though creditors can never take possession of any underlying collateral. This helps to explain why emerging markets with weak institutions sometimes grow rapidly and why they are also subject to frequent economic and financial crises.
2003 Governance
  • Executive Compensation: A New View from a Long-Term Perspective, 1936-2005
  • Author: Frydman, C. and R. Saks
  • Journal: Review of Financial Studies
  • The authors analyze the long-run trends in executive compensation using a new dataset of top officers of large firms. The median real value of compensation was remarkably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. This historical perspective also suggests that compensation arrangements have often helped to align managerial incentives with those of shareholders because executive wealth was sensitive to firm performance for most of the sample.
2010 Governance
  • Corporate Equality and Equity Prices: Doing Well While Doing Good?
  • Author: Fu, S. and L. Shan
  • Journal: Working paper
  • This paper tests the impact on firm value of corporate equality, which quantifies how companies treat their gay, lesbian, bisexual, and transgender employees, consumers, and investors. Firms with a higher degree of corporate equality have higher stock returns, higher market valuation, larger sales, higher profit margins, higher employee productivity, and attract more employees.
2009 Social
2003 Social
  • Why Has CEO Pay Increased So Much?
  • Author: Gabaix, X. and A. Landier
  • Journal: Quarterly Journal of Economics
  • This paper develops a simple equilibrium model of CEO pay. CEOs have different talents and are matched to firms in a competitive assignment model. In market equilibrium, a CEO's pay depends on both the size of his firm and the aggregate firm size. The model determines the level of CEO pay across firms and over time, offering a benchmark for calibratable corporate finance. The authors find a very small dispersion in CEO talent, which nonetheless justifies large pay differences.
2008 Governance
  • The Stocks at Stake: Return and Risk in Socially Responsible Investment
  • Author: Galema, R., A. Plantinga and B. Scholtens
  • Journal: Journal of Banking & Finance
  • This paper finds that SRI results in lower book-to-market ratios and as a result, the alphas do not capture SRI effects. The researchers find that SRI (in particular portfolios that score positive on diversity, environment and product) have a significant impact on stock returns.
2008 Environmental, Social, Governance
  • The Cost of Socially Responsible Portfolios: Testing for Mean-Variance Spanning
  • Author: Galema, R., B. Scholtens and A. Plantinga
  • Journal: Working paper
  • Investors are no worse off by excluding assets from their portfolio that are not socially responsible in case they face a short sales restriction. However, in case short sales are allowed for, investors are worse off in terms of foregone risk reduction opportunities for most dimensions of social responsibility.
2009 Environmental, Social, Governance
  • The Costs of Shareholder Activism: Evidence from a Sequential Decision Model
  • Author: Gantchev, N.
  • Journal: Journal of Financial Economics
  • This paper provides benchmarks for monitoring costs and evaluates the net returns to shareholder activism. The author finds that the estimated monitoring costs reduce activist returns by more than two-thirds. The mean net activist return is close to zero but the top quartile of activists earns higher returns on their activist holdings than on their non-activist investments.
2013 Governance
  • Investing in Socially Responsible Mutual Funds
  • Author: Geczy, C., R. Stambaugh and D. Levin
  • Journal: Working paper
  • The authors find that the cost of SR investing depends crucially on the investor's views about asset pricing models and stock-picking skill by fund managers. To an investor who believes strongly in the CAPM and rules out managerial skill, i.e. a market-index investor, the cost of the SRI constraint is typically just a few basis points per month, measured in certainly-equivalent loss. To an investor who still disallows skill but instead believes to some degree in pricing models that associate higher returns with exposures to size, value, and momentum factors, the SRI constraint is much costlier.
2005 Environmental, Social, Governance
  • East Asian Finance: The Road to Robust Markets
  • Author: Ghosh, S.
  • Journal: World Bank Publications
  • This volume seeks to contribute to the important discussion on the agenda for financial sector development that is now underway among policymakers and market participants in East Asia. Developments since the financial crisis of 1997, as well as some of the lessons of the crisis itself, have prompted policymakers in East Asia to take a strategic look at the role that the financial sector needs to play in the region's ambitious agenda for growth and development.
2006 Governance
  • Pension Reform, Ownership Structure, and Corporate Governance: Evidence from a Natural Experiment
  • Author: Giannetti, M. and L. Laeven
  • Journal: Review of Financial Studies
  • The authors show that the effects of institutional investment on firm performance depend on the industry structure of pension funds. Firm valuation improves if public pension funds and large independent private pension funds increase their shareholdings. Additionally, controlling shareholders appear reluctant to relinquish control and the control premium increases if public pension funds acquire shares.
2009 Governance
  • Organization and Information: Firms' Governance Choices in Rational-Expectations Equilibrium
  • Author: Gibbons, R., R. Holden and M. Powell
  • Journal: Quarterly Journal of Economics
  • The authors analyze a rational-expectations model of price formation in an intermediate-good market under uncertainty. There is a continuum of firms, each consisting of a party who can reduce production cost and a party who can discover information about demand. Both parties can make specific investments at private cost, and there is a machine that either party can control. As in incomplete-contracting models, different governance structures (i.e., different allocations of control of the machine) create different incentives for the parties' investments.
2012 Governance
  • Measuring the Social, Environmental and Ethical Performance of Pension Funds
  • Author: Gifford, J.
  • Journal: Journal of Australian Political Economy
  • While there has been important progress in the reporting and rating of social, environmental and ethical (SEE) impacts of companies themselves, there has been little focus on pension funds and the responsibility they bear for the impacts of their investments. This article discusses the reporting and rating of the SEE performance of pension funds and their agents and proposes a number of ways to address the problems associated with the current reporting frameworks.
2004 Environmental
  • The Performance of Socially Responsible Mutual Funds: The Role of Fees and Management Companies
  • Author: Gil-Bazo, J., P. Ruiz-Verdu and A. Santos
  • Journal: Journal of Business Ethics
  • This paper shows that U.S. SRI funds had better before- and after-fee performance than conventional funds with similar characteristics. The differences, however, are driven exclusively by SRI funds run by management companies specialized in SRI. While these funds significantly outperform similar conventional funds, funds run by companies not specialized in SRI underperform their matched conventional funds.
2010 Environmental
  • The Evolution of Shareholder Activism in the United States
  • Author: Gillan, S. and L. Starks
  • Journal: Journal of Applied Corporate Finance
  • This is a review of the evolution of shareholder activism since the establishment of the SEC in the 1930s. This paper emphasizes three main subjects: the kinds of companies that are targeted by activists; the motives of institutional investors for activism; the effectiveness of activists in bringing about economically significant change at targeted companies.
2007 Governance
  • Corporate Governance, Corporate Ownership, and the Role of Institutional Investors: A Global Perspective
  • Author: Gillan, S. and L. Starks
  • Journal: Journal of Applied Finance
  • The authors examine the relation between corporate governance and ownership structure, focusing on the role of institutional investors. In many countries, institutional investors have become dominant players in the financial markets. The authors examine cross-country differences in ownership structures and the implications of these differences for institutional investor involvement in corporate governance. Although there may be some convergence in governance practices across countries over time, the endogenous nature of the interrelation among governance factors suggests that variation in governance structures will persist.
2003 Governance
  • Corporate Governance Proposals and Shareholder Activism: The Role of Institutional Investors
  • Author: Gillan, S. and L. Starks
  • Journal: Journal of Financial Economics
  • The authors study shareholder proposals across a period of substantial activity and find systematic differences both across sponsor identity and across time. This paper documents that sponsor identity, issue type, prior performance and time period are important influences on the voting outcome. The nature of the stock market reaction, while typically small, varies according to the issue and the sponsor identity.
2000 Governance
  • Globalizing Corporate Governance: Convergence of Form or Function
  • Author: Gilson, R.
  • Journal: American Journal of Comparative Law
  • In this article the author examines the interplay of functional adaptivity on the one hand, and institutional persistence or path dependency on the other, that will influence whether such corporate governance convergence will be formal or functional. The author finds that due to the diversity of circumstances there can be no general prediction of the mode that convergence of national corporate governance institutions may take.
2001 Governance
  • Controlling Controlling Shareholders
  • Author: Gilson, R. and J. Gordon
  • Journal: University of Pennsylvania Law Review
  • In this article, the authors examine the doctrinal limits on the private benefits of control from a particular orientation. The authors show that a controlling shareholder may extract private benefits of control in one of three ways: by taking a disproportionate amount of the corporation's ongoing earnings, by freezing out the minority, or by selling control. The authors' hypothesis is that the limits on these three methods of extraction must be determined simultaneously, or at least consistently, because they are in substantial respects substitutes.
2003 Governance
  • Corporate Governance, Product Market Competition, and Equity Prices
  • Author: Giroud, X. and H. Mueller
  • Journal: Journal of Finance
  • This paper examines whether firms in noncompetitive industries benefit more from good governance than do firms in competitive industries. The authors find that weak governance firms have lower equity returns, worse operating performance, and lower firm value, but only in noncompetitive industries. When exploring the causes of the inefficiency, the authors find that weak governance firms have lower labor productivity and higher input costs, and make more value-destroying acquisitions, but, again, only in noncompetitive industries.
2011 Governance
  • Does Corporate Governance Matter in Competitive Industries?
  • Author: Giroud, X. and H. Mueller
  • Journal: ECGI-Finance Working paper
  • This paper finds that while firms in non-competitive industries experience a significant drop in performance after the passage of a BC law, which weakens corporate governance, firms in competitive industries experience virtually no effect. The authors find that capital expenditures are unaffected by the passage of the BC laws, input costs, wages, and overhead costs all increase, and only so in non-competitive industries. The authors also conduct event studies around the dates of the first newspaper reports about the BC laws. They find that while firms in non-competitive industries experience a significant stock price decline, firms in competitive industries experience a small and insignificant price impact.
2007 Governance
  • The Relationship between Corporate Philanthropy and Shareholder Wealth: A Risk Management Perspective
  • Author: Godfrey, P.
  • Journal: Academy of Management Review
  • This paper presents a theoretical model of a simple argument: good deeds earn chits. The author proposes three core assertions of the theory: (1) corporate philanthropy can generate positive moral capital among communities and stakeholders, (2) moral capital can provide shareholders with insurance-like protection for a firm's relationship-based intangible assets, and (3) this protection contributes to shareholder wealth.
2005 Social
  • Overconfidence, CEO Selection, and Corporate Governance
  • Author: Goel, A. and A. Thakor
  • Journal: Journal of Finance
  • This theoretical paper develops a model that shows that an overconfident manager, who sometimes makes value-destroying investments, has a higher likelihood than a rational manager of being deliberately promoted to CEO under value-maximizing corporate governance. Moreover, a risk-averse CEO's overconfidence enhances firm value up to a point, but the effect is nonmonotonic and differs from that of lower risk aversion.
2008 Governance
  • Investing in Fortune's 100 Best Companies to Work for in America
  • Author: Goenner, C.
  • Journal: Journal of Economics
  • The authors investigate whether investment strategies that invest in the Fortune magazine "100 Best Companies to Work for in America" are able to outperform the market due to superior employer-employee relations. Portfolios consisting of firms on the list offer higher risk-adjusted returns than the S&P 500.
2008 Social
  • Asset Prices and Corporate Behavior with Socially Responsible Investors
  • Author: Gollier, C. and S. Pouget
  • Journal: Working paper
  • Being relatively more invested in pro-social firms, socially responsible investors have a lower risk-adjusted performance. Socially responsible investors can also engage in activism. A large activist investor can generate positive abnormal returns by investing in non-responsible companies and turning them into responsible. In some circumstances, a long-term horizon and a pro-social orientation raise the purely financial profit of the large investor.
2013 Environmental, Social
  • Extreme Governance: An Analysis of Dual-Class Firms in the United States
  • Author: Gompers, P., J. Ishii and A. Metrick
  • Journal: Review of Financial Studies
  • This paper constructs a comprehensive list of dual-class firms in the United States and uses this list to analyze the relationship between insider ownership and firm value. The authors find strong evidence that firm value is increasing in insiders' cash-flow rights and decreasing in insider voting rights.
2010 Governance
  • Corporate Governance and Equity Prices
  • Author: Gompers, P., J. Ishii and A. Metrick
  • Journal: Quarterly Journal of Economics
  • Corporate governance is strongly correlated with stock returns during the 1990s. An investment strategy that purchased shares in the lowest-G firms ("Democracy" firms with strong shareholder rights), and sold shares in the highest-G firms ("Dictatorship" firms with weak shareholder rights), earned abnormal returns of 8.5 percent per year. The results for both stock returns and firm value are economically large and are robust to many controls and other firm characteristics.
2003 Governance
  • Environmental Proactivity and Business Performance: An Empirical Analysis
  • Author: Gonzalez-Benito, J. and o. Gonzalez-Benito
  • Journal: Omega
  • This paper analyzes the relationship between environmental proactivity and business performance at 186 industrial companies in Spain using a questionnaire. Results are mixed. There is partial support for the idea that environmental management can bring about competitive opportunities for companies, but there is also evidence that some environmental practices produce negative effects. Therefore, the question of whether environmental proactivity improves business performance must be disaggregated into more specific and concrete relationships.
2005 Environmental
  • The Environmental Fiduciary
  • Author: Goodman, S., J. Kron and T. Little
  • Journal: Rose Foundation for Communities & the Environment
  • In this report, the authors show that fiduciaries who manage funds for institutional investors such as pension funds, foundations, and charitable trusts should incorporate environmental factors into their portfolio management policies. They show how a corporation's ability to profit from environmental innovations and prepare for future environmental risks and exposures can have a significant impact on corporate earnings potential, cash flow and growth opportunities. Consequently, the authors argue that fiduciaries for institutional investors should institute financially sound policies to encourage strong corporate environmental performance in the corporations held in their portfolios.
2002 Environmental
  • Executive Compensation and Corporate Governance in Financial Firms: The Case for Convertible Equity-Based Pay
  • Author: Gordon, J.
  • Journal: Working paper
  • This paper proposes a new compensation mechanism for senior managers, convertible equity-based pay. Upon certain external triggers, such as a downgrade into a high risk category by regulators or a deterioration in a key financial ratio, such stock-based compensation should convert into subordinated debt, at a valuation discount. This will give managers an incentive to curb excessive risk-taking and in particular to steer the firm away from financial distress.
2010 Governance
  • An International Relations Perspective on the Convergence of Corporate Governance: German Shareholder Capitalism and the European Union, 1990-2000
  • Author: Gordon, J.
  • Journal: Working paper
  • This article tries to move the corporate governance convergence debate towards an international relations perspective. This move has two implications. First, the pace of convergence in corporate governance is understood to depend crucially on a country's, or, perhaps more importantly, on a group of countries' commitment to a project of transnational economic and political integration. Second, this transnational project may be best advanced by the spread of diffusely-held public firms on the Anglo-American model, because such ownership structures facilitate the contestability of corporate control, which, crucially, helps curb economic nationalism.
2003 Governance
  • Just Say Never? Poison Pills, Deadhand Pills, and Shareholder Adopted Bylaws: An Essay for Warren Buffett
  • Author: Gordon, J.
  • Journal: Working paper
  • Despite increasing institutional investor activism, the realistic possibility of a hostile acquisition is a necessary ingredient to an optimal corporate governance regime for large public corporations in a stock-market centered capital system. This article argues in doctrinal terms that "just say no" is not the rule in Delaware and that, at a minimum, in the case of a firm with a staggered board the retention of a poison pill beyond the insurgent's initial electoral success is no longer reasonable.
1999 Governance
  • Pathways to Corporate Convergence? Two Steps on the Road to Shareholder Capitalism in Germany
  • Author: Gordon, J.
  • Journal: Columbia Journal of European Law
  • This paper evaluates two particular events for the impact on German corporate governance: the privatization of Deutsche Telekom and the cross-border merger between Daimler Benz and Chrysler Corp. This paper identifies several elements, including: the change in the shareholder body through a dilution of traditional German holders and the addition of U.S. institutional investors, the pioneering of a template for subsequent cross- border mergers involving German firms, the flexibility of German corporate law to shareholder initiatives, and the likely rippling impact of governance changes at DaimlerChrysler on other major German corporations.
1999 Governance
  • Takeover Defense Tactics: A Comment on Two Models
  • Author: Gordon, J. and L. Kornhauser
  • Journal: Yale Law Journal
  • The authors' analysis of the cases presented by Bradley and Rosenzweig and Macey and McChesney in favor of target stock buybacks makes them skeptical of the claim that such transactions will increase shareholder wealth. On the other hand, the deficiencies may conceivably lie in the models presented, rather than in the transactions themselves.
1986 Governance
  • Information, Ownership Structure, and Shareholder Voting: Evidence from Shareholder-Sponsored Corporate Governance Proposals
  • Author: Gordon, L. and J. Pound
  • Journal: Journal of Finance
  • This paper examines how information and ownership structure affect voting outcomes on shareholder-sponsored proposals to change corporate governance structure. The authors find that the outcomes of votes vary systematically with the governance and performance records of target firms, the identity of proposal sponsors, and the type of proposal. They also find that outcomes vary significantly as a function of ownership by insiders, institutions, outside blockholders, ESOPs, and outside directors who are blockholders.
2012 Governance
  • Class Struggle inside the Firm: A Study of German Codetermination
  • Author: Gorton, G. and F. Schmid
  • Journal: Working paper
  • Under the German corporate governance system of "codetermination," employees are legally allocated some control rights over corporate assets, in the form of board seats. This paper empirically investigates the implications of equal board representation compared with one-third employee representation and find a 26% stock market discount on firms with equal representation.
2002 Governance
  • Corporate Social Performance and Idiosyncratic Risk: A Variance Decomposition Analysis
  • Author: Goss, A.
  • Journal: Working paper
  • This paper investigates the relationship between corporate social responsibility and idiosyncratic risk, and finds that higher concerns are related to higher volatility of unexpected earnings and discount rates. Higher CSR strengths are associated with lower idiosyncratic variance. Partitioning the sample into positive and negative earnings shocks, the author finds that CSR strengths decrease the variance of negative returns, but increase the variance of positive returns, consistent with the notion that investments in social responsibility provide insurance against negative earnings shocks.
2013 Environmental, Social, Governance
  • Corporate Social Responsibility and Financial Distress
  • Author: Goss, A.
  • Journal: Meeting of the Administrative Sciences Association of Canada
  • This paper uses both multivariate regressions, simultaneous nonlinear equations and a discrete time hazard model and finds that the level of CSR in a firm is a significant determinant of financial distress. The relationship is robust to the endogeneity of CSR investments and free cash flow and suggests that there is informational value in extra financial metrics.
2009 Environmental, Social, Governance
  • The Impact of Corporate Social Responsibility on the Cost of Bank Loans
  • Author: Goss, A. and G. Roberts
  • Journal: Journal of Banking & Finance
  • This paper finds that banks with the worst social responsibility scores pay up to 20 basis points more for private debt financing than the most responsible firms. However, the authors find that for the majority of firms, the impact of CSR is not economically important. The modest premiums associated with CSR suggest that banks do not regard corporate social responsibility as significantly value enhancing or risk reducing.
2011 Social
  • The Impact of Pollution on Worker Productivity
  • Author: Graff Zivin, J. and M. Neidell
  • Journal: American Economic Review
  • In this paper, the authors use a unique panel dataset on the productivity of agricultural workers to analyze the impact of ozone pollution on productivity. They find that ozone levels well below federal air quality standards have a significant impact on productivity: a 10 parts per billion (ppb) decrease in ozone concentrations increases worker productivity by 5.5 percent.
2012 Environmental, Social
  • Corporate Governance, Debt, and Investment Policy During the Great Depression
  • Author: Graham, J., S. Hazarika and K. Narasimhan
  • Journal: Management Science
  • The authors document a relation between board characteristics and firm performance that varies in economically sensible ways: Complex firms (that would benefit more from board advice) exhibit a positive relation between board size and firm value; simple firms exhibit a negative relation.
2011 Governance
  • Effects of Race on Organizational Experience, Job Performance Evaluations, and Career Outcomes
  • Author: Greenhaus, J., S. Parasuraman and W. Wormley
  • Journal: Academy of Management Journal
  • Using questionnaire data, the authors showed that, compared to white managers, blacks felt less accepted in their organizations, perceived themselves as having less discretion on their jobs, received lower ratings from their supervisors on their job performance and promotability, were more likely to have reached career plateaus, and experienced lower levels of career satisfaction.
1990 Social
  • Investor Activism and Takeovers
  • Author: Greenwood, R. and M. Schor
  • Journal: Journal of Financial Economics
  • Recent work documents large positive abnormal returns when a hedge fund announces activist intentions regarding a publicly listed firm. The authors show that these returns are largely explained by the ability of activists to force target firms into a takeover. Announcement returns and long-term abnormal returns are high for targets that are ultimately acquired, but not detectably different from zero for firms that remain independent. Firms targeted by activists are more likely than control firms to get acquired.
2009 Governance
  • Do Markets Value Corporate Social Responsibility?
  • Author: Gregory, A., J. Whittaker and X. Yan
  • Journal: Working paper
  • This paper shows that indicators of corporate social responsibility are valued by markets. Consistent with other evidence on implied cost of capital and CSR, the authors show that there are significant differences in factor loadings between high and low CSR stocks. Also they find that CSR effects are manifested at least in part by an increased persistence in abnormal earnings.
2011 Environmental, Social, Governance
  • Cap-and-Trade Emission Allowances and U.S. Companies' Balance Sheets
  • Author: Griffin, P.
  • Journal: Sustainability Accounting and Management Policy Research
  • This study examines the impact of the "free" climate change allowances under the proposed American Clean Energy and Security Act of 2009 on the balance sheets and income statements of companies in the S&P 500, estimated by the Congressional Budget Office to be as high as $700 billion over 2010-2019. The authors analysis suggests that U.S. companies' balance sheet and profit ratios will show a modest but variable impact. Some treatments, however, will allow companies to move the liability "off balance sheet," so that the financial impact of emission allowances could be unclear to many investors; this can raise the cost of capital and hurt share prices.
2013 Environmental
  • Going Green: Market Reaction to CSR Newswire Releases
  • Author: Griffin, P. and Y. Sun
  • Journal: Journal of Accounting and Public Policy
  • Using voluntary disclosures made through the CSR newswire service, this paper finds that managers' disclosure decisions involving greenhouse gas emissions produce positive returns to shareholders. This response varies negatively with company size and public information availability. For small companies in a limited public information environment, mean-adjusted share price increases significantly by 2.32 percent over days -2 to 2 around the CSR newswire release date.
2013 Environmental
  • Strange Bedfellows? Voluntary CSR Disclosure and Politics
  • Author: Griffin, P. and Y. Sun
  • Journal: Accounting & Finance
  • This paper shows a reliable association between the CSR disclosure intensity of a company and its political interests, which the authors proxy by the contributions of company individuals to political action committees and statewide voting in presidential elections. The authors also show that a portfolio strategy of investing based on company size, CSR disclosure intensity, and company individuals' political contributions produces a significant positive mean excess stock return of 4.5 percent over three months following CSR disclosure.
2013 Environmental, Social, Governance
  • The Relevance to Investors of Greenhouse Gas Emission Disclosures
  • Author: Griffin, P., D. Lont and Y. Sun
  • Journal: UC Davis Graduate School of Management Research Paper
  • Using companies that disclose GHG emissions voluntarily through the Carbon Disclosure Project (CDP), the authors show that investors act as if they use GHG emission information to assess company value. Furthermore, an event study shows a significant stock market response when companies disclose climate change information in an 8-K filing. The results suggest that for every ton of GHG emitted by the median company in in the sample at an assumed cost of $20 per ton, the stock market recognizes about 35-50 percent of that amount as an off-balance sheet liability.
2011 Environmental
  • Corporate Governance and Audit Fees: Evidence of Countervailing Relations
  • Author: Griffin, P., D. Lont and Y. Sun
  • Journal: Journal of Contemporary Accounting & Economics
  • This study derives and tests an economic framework that explains the relation between corporate governance and the fees paid by companies for auditing. The evidence shows that auditing and governance are co-determined by two countervailing relations, namely, a fee-increasing relation because auditing services provide one means to attain better governance, and a fee-decreasing relation because auditors incorporate the benefits of better governance in pricing their services.
2008 Governance
  • CEO Compensation and Incentives: Evidence from M&A Bonuses
  • Author: Grinstein, Y. and P. Hribar
  • Journal: Journal of Financial Economics
  • This paper investigates CEO compensation for completing M&A deals. The authors find that CEOs who have more power to influence board decisions receive significantly larger bonuses. They also find a positive relation between bonus compensation and measures of effort, but not between bonus compensation and deal performance.
2004 Governance
  • Competition and Ownership Structure: Substitutes or Complements
  • Author: Grosfeld, I. and T. Tressel
  • Journal: Economics of Transition
  • The authors analyze the impact of product market competition and ownership structure on firm performance. Their results show that product market competition has a positive and significant impact on performance. Concerning the effect of ownership concentration, they find a U-shaped relationship with performance.
2002 Governance
  • Blind Investment
  • Author: Grossman, R.
  • Journal: HR Magazine
  • This note discusses the value of a firm's human capital and the lack of attention from corporate financial analysts. Five quantitative measures of a firm's human capital are presented, as well as some explanations for analysts' narrow focus.
2005 Social
  • The Economic Value of Corporate Eco-Efficiency
  • Author: Guenster, N., R. Bauer, J. Derwall and K. Koedijk
  • Journal: European Financial Management
  • Using a new database of eco-efficiency scores, the authors analyze the relation between eco-efficiency and financial performance from 1997 to 2004. They report that eco-efficiency relates positively to operating performance and firm market value. Although environmental leaders initially did not sell at a premium relative to laggards, the valuation differential increased significantly over time.
2011 Environmental
  • Is There a Cost to Being Socially Responsible in Investing?
  • Author: Guerard, J.
  • Journal: Journal of Forecasting
  • The authors find that SRI screening and unscreened portfolios do not differ significantly. Most other literature suggests that SRI may produce higher portfolio returns, but not significantly higher
1997 Environmental, Social, Governance
  • Corporate Governance and Globalization: Is there Convergence across Countries?
  • Author: Guillen, M.
  • Journal: Advances in International Comparative Management
  • In this theoretical paper, the author argues against the conventional wisdom of cross-national corporate governance convergence. The author reviews three lines of criticism against the conventional wisdom. This paper presents longitudinal evidence drawn from both advanced and newly industrialized countries showing little convergence over the last twenty years.
1999 Governance
  • Do Stock Markets Penalize Environment-Unfriendly Behavior? Evidence from India
  • Author: Gupta, S. and B. Goldar
  • Journal: Ecological Economics
  • This paper conducts an event study to examine the impact of environmental rating of large pulp and paper, auto, and chlor alkali firms on their stock prices. The authors find that the market generally penalizes environmentally unfriendly behavior in that announcement of weak environmental performance by firms leads to negative abnormal returns of up to 30%. A positive correlation is found between abnormal returns to a firm's stock and the level of its environmental performance.
2005 Environmental
  • CEO Compensation and Board Structure Revisited
  • Author: Guthrie, K., J. Sokolowsky and K. Wan
  • Journal: Journal of Finance
  • Chhaochharia and Grinstein estimate that CEO pay decreases 17% more in firms that were not compliant with the recent NYSE/Nasdaq board independence requirement than in firms that were compliant. The authors document that 74% of this magnitude is attributable to two outliers of 865 sample firms. In addition, they find that the compensation committee independence requirement increases CEO total pay, particularly in the presence of effective shareholder monitoring.
2012 Governance
  • Corporate Governance and Firm Valuation in Colombia
  • Author: Gutierrez, L. and C. Pombo
  • Journal: Working paper
  • This paper studies the separation of ownership and control, finding that voting rights are greater than cash flow rights because of indirect ownership across firms. This paper also examines the association of various ownership and control measures and separation ratios with a firm's value and performance for the sample of companies. Large blockholders were found to exert a positive influence upon a firm's valuation and performance, which validates the positive monitoring approach of large shareholders, but this relationship is not monotonic.
2007 Governance
  • The Political Economy of Finance
  • Author: Haber, S. and E. Perotti
  • Journal: Working paper
  • This survey reviews the recent literature on the political economy of financial development. The authors' goal is to highlight the impact of political institutions on financial structure, broadly defined to include not just the size of capital markets and banking systems but also the accessibility of finance, which is to say its distribution across firms and individuals.
2008 Governance
  • Sustainable Value Creation among Companies in the Manufacturing Sector
  • Author: Hahn, T., F. Figge and R. Barkemeyer
  • Journal: International Journal of Environmental Technology and Management
  • In this paper, the authors present empirical results of a study on the creation of Sustainable Value among European manufacturing companies. Some companies already meet or even exceed the target level with their use of environmental resources. Other companies fall short of measuring up to the targeted eco-efficiency, in some cases by factors of 30 and more.
2007 Environmental
  • Can Capital Markets Respond to Environmental Policy of Firms? Evidence from Greece
  • Author: Halkos, G. and A. Sepetis
  • Journal: Ecological Economics
  • The authors find that improved environmental management system and environmental performance result in a reduction in a firm's beta. Specifically, this paper's empirical estimates show evidence of volatility clustering, short- and long-run persistence of shocks to the returns of the market and asymmetry in the leverage effect between negative and positive shocks to returns. Finally, the macroeconomic factors proposed and included in the analysis have no statistical significant influence on the beta estimates in almost all cases.
2007 Environmental
  • Why Do Some Countries Produce So Much More Output Per Worker Than Others?
  • Author: Hall, R. and C. Jones
  • Journal: National Bureau of Economic Research
  • This paper explores the variability in output per worker across countries, which can be only partially explained by differences in physical capital and educational attainment, on an accounting basis. The authors document that the differences in capital accumulation, productivity, and therefore output per worker are driven by differences in institutions and government policies, which they call social infrastructure.
1999 Social
  • Institutional Investors as Minority Shareholders
  • Author: Hamdani, A. and Y. Yafeh.
  • Journal: Review of Finance
  • The study finds that: (1) Institutional investors rarely vote against insider-sponsored proposals even when the law grants them special voting power; (2) Institutional investors are more likely to vote against compensation-related proposals than against other related party transactions even when minority shareholders lack the power to influence outcomes; and (3) Institutional investors with potential ownership and business-related conflicts of interest are less likely to vote against insider-sponsored proposals than stand-alone institutional investors, both when minority shareholders have power and when they do not.
2013 Governance
  • Pollution as News: Media and Stock-Market Reactions to the Toxics Release Inventory Data
  • Author: Hamilton, J.
  • Journal: Journal of Environmental Economics and Management
  • This study finds that investors considered the pollution data released by the EPA in the June 1989 Toxics Release Inventory (TRI) to be "news." Stockholders in the firms reporting TRI pollution figures experienced negative and statistically significant abnormal returns upon the first release of information. These abnormal returns translated into an average loss of $4.1 million in stock value for TRI firms on the day the pollution figures were released.
1995 Environmental
  • Doing Well While Doing Good? The Investment Performance of Socially Responsible Mutual Funds
  • Author: Hamilton, S., H. Jo and M. Statman
  • Journal: Financial Analysts Journal
  • "Socially responsible" investors favor certain companies over others according to criteria such as production of weapons or use of alternative energy sources. The authors finds that SRI screening funds do not earn statistically significant excess returns and that the performance of such mutual funds is not statistically different from the performance of conventional mutual funds.
1993 Environmental, Social
  • Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs
  • Author: Harford, J. and K. Li
  • Journal: Journal of Finance
  • This paper explores how compensation policies following mergers affect a CEO's incentives to pursue a merger. The authors find that even in mergers where bidding shareholders are worse off, bidding CEOs are better off three quarters of the time. Following a merger, a CEO's pay and overall wealth become insensitive to negative stock performance, but a CEO's wealth rises in step with positive stock performance.
2007 Governance
2013 Governance
  • Control of Corporate Decisions: Shareholders vs. Management
  • Author: Harris, M. and A. Raviv
  • Journal: Review of Financial Studies
  • This theoretical article addresses the issue of whether shareholders would be better off with enhanced control over corporate decisions. The authors show that claims that shareholder control would reduce value because shareholders lack sufficient information to make important decisions or because they have a non-value-maximizing agenda are flawed.
2010 Governance
  • A Theory of Board Control and Size
  • Author: Harris, M. and A. Raviv
  • Journal: Review of Financial Studies
  • This theoretical article presents a model of optimal control of corporate boards of directors. The authors determine when one would expect inside versus outside directors to control the board, when the controlling party will delegate decision-making to the other party, the extent of communication between the parties, and the number of outside directors. They show that shareholders can sometimes be better off with an insider-controlled board.
2008 Governance
  • Beyond Greening
  • Author: Hart, S.
  • Journal: Environmental Management: Readings and Cases, edited by M. Russo
  • This note on environmental firm strategy argues that few executives realize that environmental opportunities can actually become a major source of revenue growth. The authors encourage companies to consider three stages of environmental strategy and develop a vision of sustainability.
2008 Environmental
  • A Natural-Resource-Based View of the Firm
  • Author: Hart, S.
  • Journal: Academy of Management Review
  • This paper introduces a theory of competitive advantage based upon the firm's relationship to the natural environment. The author explains the natural-resource-based view focusing on the connection between the environmental challenge and firm resources operationalized through three interconnected strategic capabilities: pollution prevention, product stewardship, and sustainable development. Propositions are then developed that connect these strategies to key resource requirements and sustained competitive advantage.
1995 Environmental
  • Does It Pay to Be Green? An Empirical Examination of the Relationship between Emission Reduction and Firm Performance
  • Author: Hart, S. and G. Ahuja
  • Journal: Business Strategy and the Environment
  • The relationship between emissions reduction and firm performance is examined empirically for a sample of S&P 500 firms using data drawn from the Investor Responsibility Research Center's Corporate Environmental Profile and Compustat. The results indicate that efforts to prevent pollution and reduce emissions drop to the 'bottom line' within one to two years of initiation and that those firms with the highest emission levels stand to gain the most. In particular, projects designed to reduce emissions through pollution prevention increase firm value. Operating performance (ROS, ROA) is significantly benefited in the following year, and in two years financial performance (ROE) is affected.
1996 Environmental
  • Creating Sustainable Value
  • Author: Hart, S. and M. Milstein
  • Journal: Executive
  • The authors develop a sustainable-value framework for companies to link the challenges of global sustainability to the creation of shareholder value. Specifically, they show how the global challenges associated with sustainable development, viewed through the appropriate set of business lenses, can help to identify strategies and practices that contribute to a more sustainable world while simultaneously driving shareholder value; this they define as the creation of sustainable value by the firm.
2003 Environmental
  • Institutional Investors and Executive Compensation
  • Author: Hartzell, J. and L. Starks
  • Journal: Journal of Finance
  • The authors find that institutional ownership concentration is positively related to the pay-for-performance sensitivity of executive compensation and negatively related to the level of compensation, even after controlling for firm size, industry, investment opportunities, and performance. The study finds that clientele effects exist among institutions for firms with certain compensation structures, suggesting that institutions also influence compensation structures through their preferences.
2003 Governance
  • Internal Corporate Governance, CEO Turnover, and Earnings Management
  • Author: Hazarika, S., J. Karpoff and R. Nahata
  • Journal: Journal of Financial Economics
  • The likelihood and speed of forced CEO turnover - but not voluntary turnover - are positively related to a firm's earnings management. These patterns persist in tests that consider the effects of earnings restatements, regulatory enforcement actions, and the possible endogeneity of CEO turnover and earnings management. The relation between earnings management and forced turnover occurs both in firms with good and bad performance, and when the accruals work to inflate or deflate reported earnings.
2012 Governance
  • Optimal Executive Compensation When Firm Size Follows Geometric Brownian Motion
  • Author: He, Z.
  • Journal: Review of Financial Studies
  • This theoretical paper studies a continuous-time agency model in which the agent controls the drift of the geometric Brownian motion firm size. The changing firm size generates partial incentives, analogous to awarding the agent equity shares according to her continuation payoff. The model presented in the paper generates a leverage effect on the equity returns, and implies that the agency problem is more severe for smaller firms.
2009 Governance
2005 Environmental, Social, Governance
2000 Social
  • The Effect of Green Investment on Corporate Behavior
  • Author: Heinkel, R., A. Kraus and J. Zechner
  • Journal: Journal of Financial and Quantitative Analysis
  • Investor SRI screening can lead to firms reforming (i.e a polluting firm cleaning up its activities). Study finds that more than 20% of the fraction of the firms funds must be controlled by green investors to induce any polluting firms to reform.
2001 Environmental
  • Liberalization, Moral Hazard in Banking, and Prudential Regulation: Are Capital Requirements Enough?
  • Author: Hellmann, T., K. Murdock and J. Stiglitz
  • Journal: American Economic Review
  • This theoretical paper examines moral hazard in banking. In a dynamic model of moral hazard, competition can undermine prudent bank behavior. Capital requirements reduce gambling incentives by putting bank equity at risk. However, they also have a perverse effect of harming banks' franchise values, thus encouraging gambling. Pareto-efficient outcomes can be achieved by adding deposit-rate controls as a regulatory instrument, since they facilitate prudent investment by increasing franchise values.
2000 Governance
  • Are 'Ethical' or 'Socially Responsible' Investments Socially Responsible?
  • Author: Hellsten, S. and C. Mallin
  • Journal: Journal of Business Ethics
  • This article examines corporate social responsibility from a philosophical, moral and practical point of view. The authors focus on the moral dilemma of how capitalism has changed its shape in today's world, and the growth of ethical investment funds in the U.K. today. The authors discuss whether ethical investments succeed in reducing the conflict between profit-making and social responsibility or whether they use commercial rhetoric and market mechanism to merely sell consumers their own perceived values back.
2006 Environmental, Social
  • Information Disclosure and Corporate Governance
  • Author: Hermalin, B. and M. Weisbach
  • Journal: Journal of Finance
  • This theoretical paper shows that larger firms will adopt stricter disclosure rules than smaller firms and firms with better disclosure will employ more able management. The authors show that mandated increases in disclosure could, in part, explain recent increases in both CEO compensation and CEO turnover rates.
2012 Governance
  • Shareholder Value, Stakeholder Management, and Social Issues: What's the Bottom Line?
  • Author: Hillman, A. and G. Keim
  • Journal: Strategic Management Journal
  • This paper builds a theoretical rationale to support the claim that the creation of shareholder value from corporate social responsibility may depend on the nature or scope of the socially responsible strategy/activity. The authors' theoretical development draws upon existing literature in social performance and stakeholder management as well as the resource-based view of the firm. This paper finds evidence that stakeholder management leads to improved shareholder value, while social issue participation is negatively associated with shareholder value.
2001 Environmental, Social
  • Understanding the Determinants of Managerial Ownership and the Link between Ownership and Performance
  • Author: Himmelberg, C., R. Hubbard and D. Palia
  • Journal: Journal of Financial Economics
  • This paper extends the cross-sectional results of Demsetz and Lehn (1985) (Journal of Political Economy, 93, 1155-1177) and uses panel data to show that managerial ownership is explained by key variables in the contracting environment in ways consistent with the predictions of principal-agent models. A large fraction of the cross-sectional variation in managerial ownership is explained by observed firm heterogeneity. After controlling both for observed firm characteristics and firm fixed effects, the authors cannot conclude (econometrically) that changes in managerial ownership affect firm performance.
1999 Governance
  • Investor Protection, Ownership, and the Cost of Capital
  • Author: Himmelberg, C., R. Hubbard and I. Love
  • Journal: World Bank Policy Research Working Paper
  • The authors investigate the cost of capital in a model with an agency conflict between inside managers and outside shareholders. Inside ownership reflects the classic tradeoff between incentives and risk diversification, and the severity of agency costs depends on a parameter representing investor protection. In equilibrium, the marginal cost of capital is a weighted average of terms reflecting both idiosyncratic and systematic risk, and weaker investor protection increases the weight on idiosyncratic risk.
2004 Governance
  • What Do Unions Do for Economic Performance?
  • Author: Hirsch, B.
  • Journal: Journal of Labor Research
  • This paper reviews the literature on labor unions, productivity, and profitability, since the publication of "What Do Unions Do?" (Freeman & Medoff 1984). The author finds that union productivity effects vary substantially across workplaces, and that the average union productivity effect is near zero. Unions tend to be associated with lower profitability, by capturing firm quasi-rents arising from long-term capital and firm-specific advantages. Lower profits lead to reduced investment and, subsequently, lower employment and productivity growth.
2004 Social
  • Equilibrium Price Dynamics of Emission Permits
  • Author: Hitzemann, S. and M. Uhrig-Homburg
  • Journal: Working paper
  • This paper presents a stochastic equilibrium model for emission permit prices accounting for all main regulatory rules of today's emission trading systems. The authors argue that emission permits exhibit characteristics of investment assets within the single trading periods of an emission trading system, but across different periods the very same timing option embedded in the spot asset comes into effect from storable commodities. The model makes predictions about equilibrium spot and futures price dynamics, volatility smile characteristics, and allows analyzing their dependency on important design elements and abatement measures.
2013 Environmental
  • How Much of the Diversification Discount Can Be Explained by Poor Corporate Governance?
  • Author: Hoechle, D., M. Schmid, I. Walter and D. Yermack
  • Journal: Journal of Financial Economics
  • This paper investigates whether the diversification discount occurs partly as an artifact of poor corporate governance. The authors find that the discount narrows by 16% to 21% when governance variables are added as regression controls. They also find that the diversification discount persists even with these controls for endogeneity.
2012 Governance
  • Portfolio Diversification and Environmental, Social or Governance Criteria: Must Responsible Investments Really Be Poorly Diversified?
  • Author: Hoepner, A.
  • Journal: Working paper
  • This paper develops a simple theoretical model based on the three main drivers of portfolio diversification (1) number of stocks, (2) correlation of stocks, (3) average specific risk of stocks) and recent robust evidence on the significantly negative relationship between a firm's ESG rating and its specific risk. The theory argues that while the inclusion of ESG criteria into investment processes likely worsens portfolio diversification via the first and second driver, it similarly likely improves portfolio diversification through a reduction of the average stock's specific risk.
2010 Environmental, Social, Governance
  • A Categorisation of the Responsible Investment Literature
  • Author: Hoepner, A.
  • Journal: Working paper
  • This document provides a subjective categorization of the responsible investment literature in eight main bodies of literature and twenty-three sub-literature bodies. It is based on a literature scan of twelve relevant bibliographies.
2008 Environmental, Social, Governance
  • Research on 'Responsible Investment': An Influential Literature Analysis Comprising a Rating, Characterisation, Categorisation and Investigation
  • Author: Hoepner, A. and D. McMillan
  • Journal: Working paper
  • This paper develops Influential Literature Analysis (ILA) as a four step approach, which improves upon existing methods to synthesize research areas. Applying ILA to responsible investment, the authors find responsible investment to be under-theorized and financially successful responsible investing to likely require a specific responsible investment skill. The ILA suggests to many responsible funds the need for training and advice to realize their financial potential and to researchers a multitude of routes for future influential research.
2009 Environmental, Social, Governance
  • The Dark Enemy of Responsible Mutual Funds: Does the Vice Fund Offer More Financial Virtue?
  • Author: Hoepner, A. and S. Zeume
  • Journal: Working paper
  • The authors pursue an in depth analysis of the financial attractiveness of responsible funds' opposite, the Vice Fund, which penalizes, instead of rewards, corporate environmental, social, or governance (ESG) performance. This paper finds the Vice Fund's abnormal return to be statistically indistinguishable from zero. Worse, the Vice Fund managers possess significantly value destructing directional trading and crisis management skills. The authors findings are robust to common (time varying) control factors and alternative benchmarks.
2009 Environmental, Social, Governance
2011 Environmental
  • Corporate Social Responsibility across Industries: When Can Who Do Well by Doing Good?
  • Author: Hoepner, A., P. Yu and J. Ferguson
  • Journal: Working paper
  • Theoretically, the paper argues that CSR's impacts on corporate financial performance (CFP) are moderated by five factors: CSR form, firm characteristics, time, national framework and industrial characteristics. Empirically, the authors analyze CSR's value across ten industry sectors from a corporate and investor aspect, respectively. They find that CSR has substantial value for corporations in the health care, industrials, and consumer discretionary sectors but not elsewhere. They find significantly abnormal excess returns of more than 6% and 8.5% respectively, in the former two industries.
2010 Environmental, Social, Governance
  • Myth of Diffuse Ownership in the United States
  • Author: Holderness, C.
  • Journal: Review of Financial Studies
  • This article offers evidence on the ownership concentration at a representative sample of U.S. public firms. Ninety-six percent of these firms have blockholders; these blockholders in aggregate own an average 39% of the common stock.
2009 Governance
  • The State of U.S. Corporate Governance: What's Right and What's Wrong?
  • Author: Holmstrom, B. and S. Kaplan
  • Journal: Journal of Applied Corporate Finance
  • The U.S. stock market has continued to outperform other broad indices since the Enron, WorldCom, Tyco and other scandals broke. The authors interpretation of the evidence is that while parts of the U.S. corporate governance system failed under the exceptional strain of the 1990s, the overall system, which includes oversight by the public and the government, reacted quickly to address the problems.
2003 Governance
  • Corporate Governance and Merger Activity in the U.S.: Making Sense of the 1980s and 1990s
  • Author: Holmstrom, B. and S. Kaplan
  • Journal: Journal of Economic Perspectives
  • This theoretical paper describes and considers explanations for changes in corporate governance and merger activity in the United States since 1980. Corporate governance in the 1980s was dominated by intense merger activity distinguished by the prevalence of leveraged buyouts (LBOs) and hostility. After a brief decline in the early 1990s, substantial merger activity resumed in the second half of the decade, while LBOs and hostility did not. Instead, internal corporate governance mechanisms appear to have played a larger role in the 1990s.
2001 Governance
  • Red and blue investing: Values and finance
  • Author: Hong, H. and L. Kostovetsky
  • Journal: Journal of Financial Economics
  • The authors find that mutual fund managers who make campaign donations to Democrats hold less of their portfolios (relative to non-donors or Republican donors) in companies that are deemed socially irresponsible (e.g., tobacco, guns, or defense firms or companies with bad employee relations or diversity records). Although explicit socially responsible investing (SRI) funds are more likely to be managed by Democratic managers, this result holds for non-SRI funds and after controlling for other fund and manager characteristics.
2012 Environmental, Social
  • The Price of Sin: The Effects of Social Norms on Markets
  • Author: Hong, H. and M. Kacperczyk
  • Journal: Journal of Financial Economics
  • The authors find a significant price effect on the order of 15-20% from large institutional investors shunning 'sin stocks'. 'Sin Stocks' are defined as publicly traded companies involved in producing alcohol, tobacco, and gaming.
2009 Environmental, Social
  • Financial Constraints on Corporate Goodness
  • Author: Hong, H., J. Kubik and J. Scheinkman
  • Journal: Working paper
  • This theoretical paper models the firm's optimal choice of capital and goodness subject to financial constraints. Managers and shareholders derive benefits over profits and social responsibility. Goodness is costly and its marginal benefit is finite; as a result, less-constrained firms spend more on goodness. The authors show empirical evidence that less-constrained firms do indeed have higher social responsibility scores. The empirical analysis addresses identification issues that have plagued the corporate social responsibility literature, establishing the causality of this relationship using a natural experiment.
2011 Environmental, Social, Governance
  • Groups of Diverse Problem Solvers Can Outperform Groups of High-Ability Problem Solvers
  • Author: Hong, L. and S. Page
  • Journal: Proceedings of the National Academy of Sciences of the United States of America
  • The authors provide a theoretical framework for modeling the trade-off between diversity and ability. They find that when selecting a problem-solving team from a diverse population of intelligent agents, a team of randomly selected agents outperforms a team comprised of the best-performing agents. As the initial pool of problem solvers grows, the best-performing agents become more homogeneous and their relatively greater ability is more than offset by their lack of problem-solving diversity.
2004 Social
  • The Effect of Mandatory CSR Disclosure on Information Asymmetry: Evidence from a Quasi-Natural Experiment in China
  • Author: Hung, M., J. Shi and A. Wang
  • Journal: Working paper
  • This paper examines the effect of mandatory CSR disclosure on market information asymmetry in China, where the authors estimate information asymmetry using high-frequency trade and quote data. They find that contrary to the criticism that mandatory CSR disclosure lacks credibility and relevance in emerging markets, mandatory CSR reporting firms experience a decrease in information asymmetry subsequent to the mandate. They also find that this relation is more pronounced for firms with greater political/social risk and firms with less analyst coverage.
2013 Governance
  • Internal Monitoring Mechanisms and CEO Turnover: A Long-Term Perspective
  • Author: Huson, M., R. Parrino and L. Starks
  • Journal: Journal of Finance
  • The authors report evidence on chief executive officer (CEO) turnover during the 1971 to 1994 period. The frequencies of forced CEO turnover and outside succession both increased over time. However, the relation between the likelihood of forced CEO turnover and firm performance did not change significantly from the beginning to the end of the period, despite substantial changes in internal governance mechanisms.
2001 Governance
  • Work Ethic, Employment Contracts, and Firm Value
  • Author: Ian Carlin, B. and S. Gervais
  • Journal: Journal of Finance
  • This paper analyzes how managerial work ethic impacts a firm's employment contracts, riskiness, growth potential, and organizational structure. Stable, bureaucratic firms with low growth potential are more likely to gain value from managerial diligence. The model yields several novel empirical predictions that cannot be generated by a standard agency framework.
2009 Social
2013 Environmental
2010 Environmental, Social, Governance
  • Private Equity and Executive Compensation
  • Author: Jackson, Jr., R.
  • Journal: UCLA Law Review
  • This article presents the first study of how CEO pay in companies owned by private equity firms differs from CEO pay in public companies. The study finds that directors appointed by private equity firms tie CEO pay much more closely to performance by preventing CEOs from selling, or "unloading," their holdings of the company's stock. The authors' findings suggest that public company boards should also limit unloading to strengthen the CEO pay-performance link.
2008 Governance
  • An Empirical Investigation of Environmental Performance and the Market Value of the Firm
  • Author: Jacobs, B., V. Singhal and R. Subramanian
  • Journal: Journal of Operations Management
  • This study finds no overall market reaction to firm announcement of Corporate Environmental Initiatives (CEIs) or Environmental Awards and Certifications (EACs). However, the authors do find a market reaction for sub-categories including voluntary emission reductions and ISO 14001 certification.
2010 Environmental
  • Environmental Regulation and the Competitiveness of U.S. Manufacturing: What Does the Evidence Tell Us?
  • Author: Jaffe, A., S. Peterson, P. Portney and R. Stavins
  • Journal: Journal of Economic Literature
  • This paper assembles and assesses the evidence on hypothetical linkages between environmental regulation and competitiveness, specifically the effects of environmental regulation on manufacturing firms. The authors find little evidence to support the hypothesis that environmental regulations have had a large adverse effect on competitiveness.
1995 Environmental
  • Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure
  • Author: Jensen, M. and W. Meckling
  • Journal: Journal of Financial Economics
  • This paper integrates elements from the theory of agency, the theory of property rights, and the theory of finance to develop a theory of the ownership structure of the firm. The authors define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears these costs and why, and investigate the Pareto optimality of their existence.
1976 Governance
  • Tunneling through Intercorporate Loans: The China Experience
  • Author: Jiang, G., C. Lee and H. Yue
  • Journal: Journal of Financial Economics
  • This study investigates a particularly brazen form of corporate abuse, in which controlling shareholders use intercorporate loans to siphon billions of RMB from hundreds of Chinese listed companies during the 1996-2006 period. This paper sheds light on the severity of the minority shareholder expropriation problem in China, as well as the relative efficacy of various legal and extra-legal governance mechanisms in that country.
2010 Governance
  • Stakeholder Welfare and Firm Value
  • Author: Jiao, Y.
  • Journal: Journal of Banking & Finance
  • Using KLD data, the authors construct a stakeholder welfare score measuring the extent to which firms meet the expectation of their non-shareholder stakeholders, and find it to be associated with positive valuation effects. This is driven by firms' performance on employee relations and environmental issues.
2010 Environmental, Social
  • Social Preference, Product Market Competition, and Firm Value
  • Author: Jiao, Y. and G. Shi
  • Journal: Working paper
  • The authors construct a unique score on firms' efforts to cater to the social preference of customers and find it to be positively related to firm value (measured by industry-adjusted Tobin's Q) in competitive industries, whereas no such value effects exist in noncompetitive industries. The authors also find that enhanced SP scores lead to improvements in operating and competition performance in competitive industries. Also, enhanced SP scores are associated with declining financial distress risk in presence of competition pressures.
2013 Governance
  • Socially Responsible Investment in Japanese Pensions
  • Author: Jin, H., O. Mitchell and J. Piggott
  • Journal: Pacific-Basin Finance Journal
  • SRI screening performance is largely dependent upon benchmark selection. Historical SRI in Japan offers no support for the position that Japanese pension participants would benefit from being required to invest in SRI firms. The authors conclude that SRI funds can be included as an option, albeit with some cost.
2006 Environmental
  • Capital Structure, Shareholder Rights, and Corporate Governance
  • Author: Jiraporn, P. and K. Gleason
  • Journal: Journal of Financial Research
  • The authors show how capital structure is influenced by the strength of shareholder rights. Their empirical evidence shows an inverse relation between leverage and share- holder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relation, however, is not found in regulated firms (i.e., utilities).
2007 Governance
  • Corporate Governance and Firm Profitability: Evidence from Korea before the Economic Crisis
  • Author: Joh, S.
  • Journal: Journal of Financial Economics
  • This study examines how ownership structure and conflicts of interest among shareholders under a poor corporate governance system affected firm performance before the crisis. This paper finds that firms with low ownership concentration show low firm profitability, controlling for firm and industry characteristics. Controlling shareholders expropriated firm resources even when their ownership concentration was small. Firms with a high disparity between control rights and ownership rights showed low profitability.
2003 Governance
  • Corporate Governance and Risk-Taking
  • Author: John, K., L. Litov and B. Yeung
  • Journal: Journal of Finance
  • Better investor protection could lead corporations to undertake riskier but value-enhancing investments. In better investor protection environments, stakeholders, like creditors, labor groups, and the government, are less effective in reducing corporate risk-taking for their self-interest. The authors find that corporate risk-taking and firm growth rates are positively related to the quality of investor protection.
2008 Governance
  • Corporate Governance in the Asian Financial Crisis
  • Author: Johnson, S., P. Boone, A. Breach and E. Friedman
  • Journal: Journal of Financial Economics
  • This paper examines the Asian Crisis of 1997-98. The authors find that measures of corporate governance, particularly the effectiveness of protection for minority shareholders, explain the extent of exchange rate depreciation and stock market decline better than do standard macroeconomic measures.
2000 Governance
  • The Investment Performance of Socially Responsible Investment Funds in Australia
  • Author: Jones, S., S. van der Laan, G. Frost and J. Loftus
  • Journal: Journal of Business Ethics
  • This paper investigates the returns performance of ethical funds in Australia using a multi-factor CAPM model [Fama, E.F., and K. R. French (1996)]. This paper finds that ethical funds significantly underperform the market in Australia. Risk-adjusted returns (using Jensen's alpha) indicate that average annual underperformance is around 1.52% in the 2000-2005 period for the sample and .88% over the whole sample period.
2008 Environmental, Social
  • Environmental Reporting of Global Corporations: A Content Analysis Based on Website Disclosures
  • Author: Jose, A. and S. Lee
  • Journal: Journal of Business Ethics
  • This paper investigates the environmental management policies and practices of the 200 largest corporations in the world by analyzing the content of corporate environmental disclosures with respect to seven areas. The authors find that an increased number of corporations are disclosing information about their environmental performance in response to stakeholder demands of environmental responsibility and accountability. In addition, 27% of the world's largest companies justify environmental programs based on competitive advantage reasons whereas 21% cite compliance reasons.
2007 Environmental
  • Firm Performance, Corporate Governance, and Top Executive Turnover in Japan
  • Author: K. Kang, J. and A. Shivdasani
  • Journal: Journal of Financial Economics
  • The authors examine the role of corporate governance mechanisms during top executive turnover in Japanese corporations. The likelihood of nonrouting turnover is significantly related to industry-adjusted return on assets, excess stock returns, and negative operating income, but is not related to industry performance. The sensitivity of nonrouting turnover to earning performance is higher for firms with ties to a main bank than for firms without such ties.
1995 Governance
  • Concentrating on Governance
  • Author: Kadyrzhanova, D. and M. Rhodes-Kropf
  • Journal: Journal of Finance
  • This paper develops a novel trade-off view of corporate governance. The authors identify the economic determinants of the resulting trade-offs for shareholder value. Consistent with the theory, the empirical analysis shows that provisions that allow managers to delay takeovers have significant bargaining effects and a positive relation with shareholder value in concentrated industries.
2011 Governance
  • Best Practices or Best Guesses? Assessing the Efficacy of Corporate Affirmative Action and Diversity Policies
  • Author: Kalev, A., F. Dobbin and E. Kelly
  • Journal: American Sociological Review
  • Employers have experimented with three broad approaches to promoting diversity. Some programs are designed to establish organizational responsibility for diversity, others to moderate managerial bias through training and feedback, and still others to reduce the social isolation of women and minority workers. Efforts to establish responsibility for diversity lead to the broadest increases in managerial diversity.
2006 Social
2012 Governance
  • Top Executives, Turnover, and Firm Performance in Germany
  • Author: Kaplan, S.
  • Journal: Journal of Law, Economics, & Organization
  • This paper examines executive turnover- both for management and supervisory boards- and its relation to firm performance in the largest companies in Germany in the 1980s. The management board turns over slowly- at a rate of 10% per year- implying that top executives in Germany have longer tenures than their counterparts in the U.S. and Japan. Turnover of the management board increases significantly with stock performance and particularly poor (i.e. negative) earnings, but is unrelated to sales growth and earnings growth.
1994 Governance
  • Environmental Management: Testing the Win-Win Model
  • Author: Karagozoglu, N. and M. Lindell
  • Journal: Journal of Environmental Planning and Management
  • The authors examined the role of several variables at the core of the win-win model, such as the regulatory setting, environmental strategy and environmental innovativeness. They find positive competitive and financial impact of progressive environmental strategies contingent upon the presence of favorable external and internal conditions. From a pure profitability standpoint, it is important to seek a balance between the environmental measures and market expectations. Comprehensive superiority in relative environmental performance will not necessarily lead to environmental competitive advantage.
2000 Environmental
  • Why Do Companies List Shares Abroad? A Survey of the Evidence and Its Managerial Implications
  • Author: Karolyi, G.
  • Journal: Financial Markets, Institutions & Instruments
  • This paper surveys the academic literature on the economic implications of the corporate decision to list shares on an overseas stock exchange. This paper offers evidence that share prices react favorably to cross-border listings in the first month after listing, post-listing trading volume increases, domestic market risk is significantly reduced, and that stringent disclosure requirements are the most important impediment to cross-border listings.
1998 Governance
  • A Quarter Century of Shareholder Activism: A Survey of Empirical Findings
  • Author: Karpoff, J. and V. McWilliams
  • Journal: Working paper
  • *This paper is preliminary and incomplete.* In this paper the authors survey the empirical research on shareholder activism and conclude that, despite much disagreement, several patterns appear in the data. Regarding the type of activism, most evidence indicates that shareholder proposals can prompt changes in target firms' governance structures, but they have little impact on share values and earnings. Private negotiation with the target firm's managers, which frequently occurs in concert with shareholder proposals, is more likely to prompt significant changes in governance, value, and performance.
2013 Governance
  • The Reputational Penalties for Environmental Violations: Empirical Evidence
  • Author: Karpoff, J., J. Lott and E. Wehrly
  • Journal: Journal of Law and Economics
  • This paper examines the sizes of the fines, damage awards, remediation costs, and market value losses imposed on companies that violate environmental regulations. The market value loss is related to the size of the legal penalty. Thus, environmental violations are disciplined largely through legal and regulatory penalties, not through reputational penalties.
2005 Environmental
  • Corporate Governance and Shareholder Initiatives: Empirical Evidence
  • Author: Karpoff, J., P. Malatesta and R. Walkling
  • Journal: Journal of Financial Economics
  • The authors find that firms attracting shareholder-initiated proxy proposals on corporate governance issues have poor prior performance, as measured by the market-to-book ratio, operating return, and sales growth. There is little evidence that operating returns improve after proposals. The proposals also have negligible effects on company share values and top management turnover. Even proposals that receive a majority of shareholder votes typically do not engender share price increases or discernible changes in firm policies.
1996 Governance
  • Do Firms Do Well by Doing Good When They Do It Right?
  • Author: Kecskes, A., S. Mansi and A. Nguyen
  • Journal: Working paper
  • The effect of corporate investment in stakeholder capital on shareholder value is a matter of great debate. The authors argue that long-term investors are natural monitors that can ensure that managers choose stakeholder capital investment to maximize shareholder value. They find that firms with longer investor horizons invest more in stakeholder capital, and such firms have higher stock valuations, which are not a result of higher cash flow but rather of lower cash flow risk.
2013 Environmental, Social
  • The Effect of Socially Responsible Investing on Portfolio Performance
  • Author: Kempf, A. and P. Osthoff
  • Journal: European Financial Management
  • The study implements a simple trading strategy based on socially responsible ratings from the KLD Research & Analytics: Buy stocks with high socially responsible ratings and sell stocks with low socially responsible ratings. The authors find that this strategy leads to high abnormal returns of up to 8.7% per year.
2007 Environmental, Social
  • Business Groups in Emerging Markets: Paragons or Parasites?
  • Author: Khanna, T. and Y. Yafeh
  • Journal: Working paper
  • The authors survey literature on business groups. They begin with stylized facts about groups around the world, and proceed to a critical review of the existing literature, which has focused almost entirely on groups as diversified entities and on conflicts between controlling and minority shareholders.
2005 Governance
  • Competition Boosts Corporate Governance
  • Author: Khemani, R. and C. Leechor
  • Journal: World Bank
  • The author argues that without effective competition, it is not possible to build a culture of good corporate governance. Incumbent firms under restricted competition generally lack the incentives to use financial and operational resources efficiently. Sound competition policy helps firms focus on efficiency, reduces price distortions, lowers risk of misguided investments, promotes greater accountability and transparency in business decisions and promotes better corporate governance.
2001 Governance
  • Employee Capitalism or Corporate Socialism? Broad-Based Employee Stock Ownership
  • Author: Kim, E. and P. Ouimet
  • Journal: U.S. Census Bureau Center for Economic Studies
  • This paper finds that the effect share ownership plans (ESOPs) on employee compensation and shareholder value depends upon the size of the ESOP. Small ESOPs, defined as those controlling less than 5% of outstanding shares, benefit both workers and shareholders, implying positive productivity gains. However, the effects of large ESOPs on worker compensation and shareholder value are more or less neutral, suggesting little productivity gains.
2009 Governance
  • Independence in Executive Suites and Board Independence
  • Author: Kim, E. and Y. Lu
  • Journal: Working paper
  • This paper investigate how governance in executive suites is impacted by outside governance mechanisms. The authors use the independent board requirement as an exogenous shock reducing CEO influence in the boardroom. CEOs of the treated firms may attempt to recoup the loss of influence by building a team of "less independent" executives. Data show that CEOs affected by the shock fill executive suites with more of their own appointees with pre-existing network ties.
2013 Governance
  • CEO Ownership, External Governance, and Risk-Taking
  • Author: Kim, E. and Y. Lu
  • Journal: Journal of Financial Economics
  • This paper shows the relation between CEO ownership and firm valuation hinges critically on the strength of external governance (EG). The relation is hump-shaped when EG is weak, but is insignificant when EG is strong. The authors find CEO ownership similarly exhibits a hump-shaped relation with R&D when EG is weak, but no relation when EG is strong.
2011 Governance
  • The Impact of Women Top Managers and Directors on Corporate Environmental Performance
  • Author: Kimball, A., D. Palmer and A. Marquis
  • Journal: Working paper
  • This paper contributes to theory on the impact of leader attributes on corporate behavior by exploring the relationship between gender composition in corporate leadership and environmental performance. The authors find that firms that incorporate women in their top management team and board of directors exhibit superior environmental performance, with the impact being greater for the board. Furthermore, the addition of women to a firm's top management only impacts its environmental performance if the firm also has women on its board of directors.
2013 Environmental, Social, Governance
  • Are Aliens Green? Assessing Foreign Establishments' Environmental Conduct in the United States
  • Author: King, A. and J. Shaver
  • Journal: Strategic Management Journal
  • The authors investigate how the conflicting forces specific to foreign-owned establishments shape their environmental conduct. Using data from the Environmental Protection Agency, the authors find that foreign-owned establishments generate more waste, yet also manage more waste, than U.S.-owned establishments. The authors also find evidence that both domestic and foreign-owned firms generate more waste if they operate multiple facilities across multiple jurisdictions in the United States.
2001 Environmental
2001 Environmental
  • Exploring the Locus of Profitable Pollution Reduction
  • Author: King, A. and M. Lenox
  • Journal: Management Science
  • The authors propose that managers underestimate the full value of some means of pollution reduction and so under-exploit these means. They use statistical methods to test the direction and significance of the relationship between the various means of pollution reduction and profitability. The authors find strong evidence that waste prevention leads to financial gain, but find no evidence that firms profit from reducing pollution by other means, such as onsite waste treatment. The evidence shows that the benefits of waste prevention alone are responsible for the observed association between lower emissions and profitability.
2002 Environmental
  • Industry Self-Regulation without Sanctions: The Chemical Industry's Responsible Care Program
  • Author: King, A. and M. Lenox
  • Journal: Academy of Management Journal
  • In a study of the Chemical Manufacturers Association's Responsible Care Program, the authors investigate the predictions of two contradictory perspectives on industry self-regulation. Their findings highlight the potential for opportunism to overcome the isomorphic pressures of even powerful self-regulatory institutions and suggest that effective industry self-regulation regarding environmental impact is difficult to maintain without explicit sanctions.
2000 Environmental
  • Corporate Governance Lessons from the Financial Crisis
  • Author: Kirkpatrick, G.
  • Journal: Financial Market Trends
  • The report analyzes the impact of corporate governance failures and weaknesses on the financial crisis, including risk management systems and executive salaries. It concludes that the financial crisis can be attributed to failures and weaknesses in corporate governance arrangements which did not serve their purpose to safeguard against excessive risk taking in a number of financial services companies.
2009 Governance
  • The Innovation Bottom Line
  • Author: Kiron, D., N. Kruschwitz, K. Haanaes, M. Reeves and A. Goh
  • Journal: MIT Sloan Management Review
  • This study presents the results of a corporate survey on sustainability, and it profiles companies that are changing their business models and finding success. The study finds that companies in developing countries change their business models as a result of sustainability at a far higher rate than those based in North America.
2013 Environmental
  • Corporate Governance, Investor Protection and Performance in Emerging Markets
  • Author: Klapper, L. and I. Love
  • Journal: Journal of Corporate Finance
  • The authors explore the determinants of firm-level governance and find that governance is correlated with the extent of the asymmetric information and contracting imperfections that firms face. This paper also finds that better corporate governance is highly correlated with better operating performance and market valuation. The study provides evidence that firm-level corporate governance provisions matter more in countries with weak legal environments.
2004 Governance
  • The Impact of Environmental Management on Firm Performance
  • Author: Klassen, R. and C. McLaughlin
  • Journal: Management Science
  • This paper presents a general theoretical model linking environmental management within the firm to financial performance, as measured by the stock market. The authors find significant positive returns for strong environmental management as indicated by environmental performance awards, and significant negative returns for weak environmental management as indicated by environmental crises. First-time award announcements were associated with greater increases in market valuation, although smaller increases were observed for firms in environmentally dirty industries, possibly indicative of market skepticism.
1996 Environmental
  • The Impact of Hedge Fund Activism on the Target Firm's Existing Bondholders
  • Author: Klein, A. and E. Zur
  • Journal: Review of Financial Studies
  • In contrast to previous studies documenting positive abnormal returns to target shareholders, the authors find that hedge fund activism significantly reduces bondholders' wealth. The average excess bond return is -3.9% around the initial 13D filing, and is an additional -4.5% over the remaining year. Excess bond returns are related inversely to subsequent changes in cash and assets (loss of collateral effects) and directly to changes in total debt.
2011 Governance
  • Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors
  • Author: Klein, A. and E. Zur
  • Journal: Journal of Finance
  • The authors examine recent confrontational activism campaigns by hedge funds and other private investors. The main parallels between the groups are a significantly positive market reaction for the target firm around the initial Schedule 13D filing date, significantly positive returns over the subsequent year, and the activist's high success rate in achieving its original objective. Two major differences are that hedge funds target more profitable firms than other activists, and hedge funds address cash flow agency costs whereas other private investors change the target's investment strategies.
2009 Governance
  • The Human Capital Dimensions of Sustainable Investment
  • Author: Kochan, T., E. Appelbaum, C. Leana and J. Gittell
  • Journal: Working paper
  • This paper identifies a number of questions that need to be answered if the growing interest in building investment portfolios of firms that follow socially and environmentally sustainable practices is to be successful in transforming the financial institutions and analysts from a liability to an asset in expanding the number of sustainable firms in the economy. Evidence from three decades of research on "high performance workplace practices" is reviewed that identifies what is required for firms to align human capital and financial strategies.
2013 Social
  • Capital Markets and Corporate Environmental Performance Research in the United States
  • Author: Koehler, D.
  • Journal: Managing the Business Case for Sustainability by S. Schaltegger and Wagner, M.
  • A review of empirical studies of environmental and financial performance from 1993-2001 indicates that U.S. capital markets pay attention to environmental news, but that it is a short-term reaction and will not necessarily affect long-term returns. Econometric concerns and model misspecification consistently undermine the quality of findings.
2006 Environmental
  • The Effect of Air Pollution Related Human Health Risks on Firm Financial Performance
  • Author: Koehler, D., B. Stone, D. Bennett, G. Norris and J. Spengler
  • Journal: Working paper
  • The authors assess whether there is an association between public health impacts and financial returns, using estimates of toxic chemical cancer risk and particulate matter, 1998 air emissions are associated with premature mortality per $1 million value-added. Fifteen stock portfolios are constructed at varying levels of environmental performance to assess differences in portfolio returns for stocks traded on U.S. exchanges from 1998-2002. The authors find that the level of air pollution-related public health risk has a statistically significant negative association with stock returns.
2004 Environmental
  • The Diffusion of Energy Efficiency in Building
  • Author: Kok, N., M. McGraw and J. Quigley
  • Journal: American Economic Review
  • In this paper, the authors analyze the spread of energy efficient technology in the built environment. Using a detailed panel of 48 metropolitan statistical areas (MSAs) observed annually during a 15-year period, the authors trace the diffusion of buildings certified for energy efficiency and sustainability across U.S. metropolitan areas.
2011 Environmental
  • Does the Market Value Environmental Performance?
  • Author: Konar, S. and R. Cohen
  • Journal: Review of Economics and Statistics
  • The authors study the relationship between the market value of firms in the S&P 500 and objective measures of their environmental performance. They find that bad environmental performance is negatively correlated with the intangible asset value of firms. The average "intangible liability" for firms in the sample is $380 million- approximately 9% of the replacement value of tangible assets. The authors conclude that legally emitted toxic chemicals have a significant effect on the intangible asset value of publicly traded companies. A 10% reduction in emissions of toxic chemicals results in a $34 million increase in market value.
2001 Environmental
  • Employee Ownership, Employee Attitudes, and Firm Performance
  • Author: Kruse, D. and J. Blasi
  • Journal: Handbook of Resource Management
  • This paper reviews and provides some meta-analyses on the accumulated evidence concerning the prevalence, causes, and effects of employee ownership. Attitudinal and behavioral studies tend to find higher employee commitment among employee-owners but mixed results on satisfaction, motivation, and other measures. Few studies individually find clear links between employee ownership and firm performance, meta-analyses favor an overall positive association with performance for ESOPs and for several cooperative features.
1995 Governance
  • Business Networks, Corporate Governance, and Contracting in the Mutual Fund Industry
  • Author: Kuhnen, C.
  • Journal: Journal of Finance
  • The author analyzes two effects in the mutual fund industry and finds that fund directors and advisory firms that manage the funds hire each other preferentially based on the intensity of their past interactions. The study does not find evidence that stronger board-advisor ties correspond to better or worse outcomes for fund shareholders.
2009 Governance
  • Tunneling, Propping, and Expropriation: Evidence from Connected Party Transactions in Hong Kong
  • Author: L. Cheung, Y., P. Rau and A. Stouraitis
  • Journal: Journal of Financial Economics
  • The authors examine a sample of connected transactions between Hong Kong listed companies and their controlling shareholders. They find that on average, firms announcing connected transactions earn significant negative excess returns, that are also significantly lower than firms announcing similar arm's length transactions. The authors find limited evidence that firms undertaking connected transactions trade at discounted valuations prior to the expropriation, suggesting that investors cannot predict expropriation and revalue firms only when expropriation does occur.
2006 Governance
  • Related Lending
  • Author: La Porta, R., F. Lopez-de-Silanes and G. Zamarripa
  • Journal: Quarterly Journal of Economics
  • The authors examine lending of banks to firms controlled by the bank's owners. The study finds that related loans are 33% more likely to default and, when they do, have lower recovery rates (30% less) than unrelated ones. The evidence supports the view that rather than enhance information sharing, related lending is a manifestation of looting.
2003 Governance
  • Investor Protection and Corporate Valuation
  • Author: La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. Vishny
  • Journal: Journal of Finance
  • The authors present a model of the effects of legal protection of minority shareholders and of cash-flow ownership by a controlling shareholder on the valuation of firms. Consistent with the model, the authors find evidence of higher valuation of firms in countries with better protection of minority shareholders and in firms with higher cash-flow ownership by the controlling shareholder.
2002 Governance
  • Investor Protection and Corporate Governance
  • Author: La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. Vishny
  • Journal: Journal of Financial Economics
  • Recent research has documented large differences among countries in ownership concentration of publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. The authors argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems.
2000 Governance
  • Legal Determinants of External Finance
  • Author: La Porta, R., F. Lopez-de-Silanes, A. Shleifer and R. Vishny
  • Journal: Journal of Finance
  • The authors show that countries with poorer investor protections, measured by both the character of legal rules and the quality of law enforcement, have smaller and narrower capital markets. These findings apply to both equity and debt markets. In particular, French civil law countries have both the weakest investor protections and the least developed capital markets, especially as compared to common law countries.
1997 Governance
  • Does Judicial Efficiency Lower the Cost of Credit?
  • Author: Laeven, L. and G. Majnoni
  • Journal: Journal of Banking & Finance
  • This paper investigates the effect of judicial efficiency on banks' lending spreads for a large cross-section of countries. The authors find that, after controlling for a number of other country characteristics, judicial efficiency, in addition to inflation, is the main driver of interest rate spreads across countries.
2005 Governance
  • Bank Governance, Regulation and Risk Taking
  • Author: Laeven, L. and R. Levine
  • Journal: Journal of Financial Economics
  • This paper focuses on conflicts between bank managers and owners over risk, and documents that bank risk-taking varies positively with the comparative power of shareholders within the corporate governance structure of each bank. The authors show that the relation between bank risk and capital regulations, deposit insurance policies, and restrictions on bank activities depends critically on each bank's ownership structure, such that the actual sign of the marginal effect of regulation on risk varies with ownership concentration.
2009 Governance
  • Complex Ownership Structures and Corporate Valuations
  • Author: Laeven, L. and R. Levine
  • Journal: Review of Financial Studies
  • The bulk of corporate governance theory examines the agency problems that arise from two extreme ownership structures: a number of small shareholders or one large, controlling owner combined with small shareholders. The relationship between corporate valuations and the distribution of cash-flow rights across multiple large owners is consistent with the predictions of recent theoretical models.
2008 Governance
  • The Cross-Country Incidence of the Global Crisis
  • Author: Lane, P. and G. Milesi-Ferretti
  • Journal: IMF Economic Review
  • The authors examine whether the cross-country incidence and severity of the 2008-2009 global recession is systematically related to pre-crisis macroeconomic and financial factors. They find that the pre-crisis level of development, increases in the ratio of private credit to GDP, current account deficits, and openness to trade are helpful in understanding the intensity of the crisis. International risk sharing did little to shield domestic demand from the country-specific component of output declines, while those countries with large pre-crisis current account deficits saw domestic demand fall by much more than domestic output during the crisis.
2010 Governance
  • The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004
  • Author: Lane, P. and G. Milesi-Ferretti
  • Journal: Journal of International Economics
  • The authors document for emerging markets, an increasing importance of equity financing and an improvement in their external position, as well as a differing pace of financial integration between advanced and developing economies. They also show the existence of a global discrepancy between estimated foreign assets and liabilities and identify the asset categories that account for this discrepancy.
2007 Governance
  • Can Capital Markets Create Incentives for Pollution Control?
  • Author: Lanoie, P., B. Laplante and M. Roy
  • Journal: Ecological Economics
  • In this paper, the authors analyze the role that capital markets may play to create pollution control incentives. Evidence drawn from American and Canadian studies indicates that capital markets react to the release of information, and that large polluters are affected more significantly by such release than smaller polluters. This result appears to be a function of the regulator's willingness to undertake strong enforcement actions as well as the possibility for capital markets to rank and compare firms with respect to their environmental performance.
1998 Environmental
  • The Market Reaction to Corporate Governance Regulation
  • Author: Larcker, D., G. Ormazabal and D. Taylor
  • Journal: Journal of Financial Economics
  • This paper investigates the market reaction to recent legislative and regulatory actions pertaining to corporate governance. The authors find that the abnormal returns to recent events relating to corporate governance regulations are, on average, decreasing in CEO pay, decreasing in the number of large blockholders, decreasing in the ease by which small institutional investors can access the proxy process, and decreasing in the presence of a staggered board.
2011 Governance
  • A Win-Win Paradigm for Quality of Work Life and Business Performance
  • Author: Lau, R. and B. May
  • Journal: Human Resource Development Quarterly
  • This study develops and tests hypotheses to examine empirically how the perceived image of a company's quality of work life will affect its market and financial performances (sales growth, asset growth, return on equity, and return on assets). Empirical results suggest that companies with high quality of work life can also enjoy exceptional growth and profitability.
1998 Social
  • Market-Value-Maximizing Ownership Structure When Investor Protection Is Weak
  • Author: Lauterbach, B. and E. Tolkowsky
  • Journal: Working paper
  • This paper finds that in a country with lax corporate governance rules, Tobin's Q is maximized when controlholders' vote reaches 67%. This evidence is strong when ownership structure is treated as exogenous and weak when it is considered endogenous.
2005 Governance
2011 Environmental, Social, Governance
  • Corporate Sustainability Performance and Idiosyncratic Risk: A Global Perspective
  • Author: Lee, D. and R. Faff
  • Journal: Financial Review
  • Analyzing two mutually exclusive leading and lagging global corporate sustainability portfolios (Dow Jones) the authors find that (1) leading sustainability firms do not underperform the market portfolio, and (2) their lagging counterparts outperform the market portfolio and the leading portfolio. The authors find that leading (lagging) corporate social performance (CSP) firms exhibit significantly lower (higher) idiosyncratic risk and that idiosyncratic risk might be priced by the broader global equity market.
2009 Environmental, Social, Governance
  • Socially Responsible Investment Fund Performance: The Impact of Screening Intensity
  • Author: Lee, D., J. Humphrey, K. Benson and J. Ahn
  • Journal: Accounting & Finance
  • The study investigates the proposition that the number of screens employed has a linear or curvilinear relation with return. Screening intensity has no effect on unadjusted (raw) returns or idiosyncratic risk. However, the authors find a significant reduction in alpha of 70 basis points per screen using the Carhart performance model. Increased screening results in lower systematic risk - in line with managers choosing lower beta stocks to minimize overall risk.
2010 Environmental, Social, Governance
  • Ownership Structure and Corporate Governance in Latin America
  • Author: Lefort, F.
  • Journal: Revista Abante
  • This paper provides an overview of corporate governance practices in Latin American countries, surveying the available empirical literature, reviewing the reports on the subject prepared by multinational organizations, and providing new data for ownership and control structures of companies in different Latin American economies. New empirical evidence indicates that Latin American markets penalize excessive separation between control and cash flow rights held by controlling shareholders. In addition, legislation, regulations and the judiciary power in the region are less effective in promoting and enforcing good practices than in more developed markets.
2005 Governance
2007 Governance
  • Currency Hedging and Corporate Governance: A Cross-Country Analysis
  • Author: Lel, U.
  • Journal: Journal of Corporate Finance
  • This paper examines the impact of the strength of governance on firms' use of currency derivatives. The authors find that strongly governed firms tend to use derivatives to hedge currency exposure and overcome costly external financing. On the other hand, weakly governed firms appear to use derivatives mostly for managerial reasons.
2011 Governance
  • Shareholder Protection: A Leximetric Approach
  • Author: Lele, P. and M. Siems
  • Journal: Journal of Corporate Law Studies
  • The authors build a new shareholder protection index for five countries and measure the development of the laws for over three decades. The study finds that shareholder protection has been improving in the last three decades; that the protection of minority against majority shareholders is considerably stronger in "blockholder countries" as compared to the non-blockholder countries and that convergence in shareholder protection is taking place since 1993 and is increasing since 2001. Also, the examination of the legal differences between the five countries does not confirm the distinction between common law and civil law countries.
2006 Governance
  • Ownership Structure, Corporate Governance, and Firm Value: Evidence from the East Asian Financial Crisis
  • Author: Lemmon, M. and K. Lins
  • Journal: Journal of Finance
  • This paper studies the effect of ownership structure on firm value during the East Asian financial crisis that began in July 1997. This paper finds that Tobin's Q ratios of those firms in which minority shareholders are potentially most subject to expropriation decline twelve percent more than Q ratios in other firms during the crisis period. A similar result holds for stock returns- firms in which minority shareholders are most likely to experience expropriation underperform other firms by about nine percent per year during the crisis period. Further, during the pre-crisis period the authors find no evidence that firms with a separation between cash flow rights and control rights exhibit performance changes different from firms with no such separation.
2003 Governance
  • Why Do Firms Go Dark? Causes and Economic Consequences of Voluntary SEC Deregistrations
  • Author: Leuz, C., A. Triantis and T. Yue Wang
  • Journal: Journal of Accounting and Economics
  • This paper examines a comprehensive sample of 'going dark' deregistrations where companies cease SEC reporting, but continue to trade publicly. The authors find that firms experience large negative abnormal returns when going dark. Many firms go dark due to poor future prospects, distress and increased compliance costs after SOX. This paper also finds evidence suggesting that controlling insiders take their firms dark to protect private control benefits and decrease outside scrutiny, particularly when governance and investor protection are weak.
2008 Governance
  • Earnings Management and Investor Protection: An International Comparison
  • Author: Leuz, C., D. Nanda and P. Wysocki
  • Journal: Journal of Financial Economics
  • This paper examines systematic differences in earnings management across 31 countries. The authors propose that insiders, in an attempt to protect their private control benefits, use earnings management to conceal firm performance from outsiders. Thus, earnings management is expected to decrease under investor protection because strong protection limits insiders' ability to acquire private control benefits, which reduces their incentives to mask firm performance.
2003 Governance
  • Do Foreigners Invest Less in Poorly Governed Firms?
  • Author: Leuz, C., K. Lins and F. Warnock
  • Journal: Review of Financial Studies
  • This paper finds that foreigners invest less in firms that reside in countries with poor outsider protection and disclosure and have ownership structures that are conducive to governance problems. This effect is particularly pronounced when earnings are opaque, indicating that information asymmetry and monitoring costs faced by foreign investors likely drive the results.
2010 Governance
  • Is Doing Good Good for You? Yes, Charitable Contributions Enhance Revenue Growth
  • Author: Lev, B.
  • Journal: Working paper
  • Using a large sample of charitable contributions made by public companies from 1989 through 2000, and a statistical methodology that distinguishes causation from association, the authors document that charitable contributions enhance the future revenue growth of the donors. In industries that are highly sensitive to consumer perception, corporate giving is associated with subsequent sales growth.
2006 Social
  • Sharpening the Intangibles Edge
  • Author: Lev, B.
  • Journal: Harvard Business Review
  • The author argues that companies need to generate better information about their investments in intangible assets (a skilled workforce, patents, software, customer relationships, brands, etc.) and the benefits that flow from them- and then disclose at least some of that information to the capital markets. Doing so will both improve managerial decisions and give investors a sharper picture of the company and its performance, which will lead to more accurate valuations and lower the cost of capital.
2004 Social
  • The Valuation of Organization Capital
  • Author: Lev, B. and S. Radhakrishnan
  • Journal: Measuring Capital in the New Economy
  • This paper develops a measure of a firm's organization capital (unique systems and processes employed in the investment, production, and sales activities of the enterprise, along with the incentives and compensation systems governing its human resources) and estimate it for a large sample of publicly traded companies. The authors show that organization capital helps explain of differences in market values of firms, and document that financial analysts fail to fully comprehend the value of firms' organization capital.
2005 Social
  • Diversity, Discrimination, and Performance
  • Author: Levine, D.
  • Journal: Working paper
  • Employee diversity may affect business performance both as a result of customer discrimination and as a result of how members of a group work with each other in teams. The authors test for both channels and find little payoff from matching employee demographics to those of potential customers except when the customers do not speak English. Diversity of race or gender within the workplace does not predict sales or sales growth, although age diversity predicts low sales.
2004 Social
2011 Governance
  • Finance and Growth: Theory and Evidence
  • Author: Levine, R.
  • Journal: Handbook of Economic Growth
  • This paper reviews, appraises, and critiques theoretical and empirical research on the connections between the operation of the financial system and economic growth. While subject to ample qualifications and countervailing views, the preponderance of evidence suggests that both financial intermediaries and markets matter for growth and that reverse causality alone is not driving this relationship. Furthermore, theory and evidence imply that better developed financial systems ease external financing constraints facing firms, which illuminates one mechanism through which financial development influences economic growth.
2005 Governance
  • Financial Development and Economic Growth: Views and Agenda
  • Author: Levine, R.
  • Journal: Journal of Economic Literature
  • This theoretical paper argues that the preponderance of theoretical reasoning and empirical evidence suggests a positive, first-order relationship between financial development and economic growth. The authors also provide evidence that the level of financial development is a good predictor of future rates of economic growth, capital accumulation, and technological change.
1997 Governance
  • Nonbinding Voting for Shareholder Proposals
  • Author: Levit, D. and N. Malenko
  • Journal: Journal of Finance
  • This theoretical paper shows that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.
2011 Governance
  • Islamic Corporate Governance
  • Author: Lewis, M.
  • Journal: Review of Islamic Economics
  • In many conventional conceptions of corporate governance the constituents are confined either to the links between those supplying capital and finance to the firm and its management or, more narrowly still, to the relationship between shareholders and management. By contrast, Islamic corporate governance necessarily has a wide commission, with obligations extending to suppliers, customers, competitors and employees, embracing the spiritual as well as the temporal needs of the Islamic community. Nevertheless, while the mandate is clear, and the ethical underpinnings unequivocal, there are some important challenges in implementing this vision.
2005 Governance
  • Corporate Governance When Founders Are Directors
  • Author: Li, F. and S. Srinivasan
  • Journal: Journal of Financial Economics
  • The authors find that founder-director firms offer a different mix of incentives to their CEOs than other firms. Pay-for-performance sensitivity for nonfounder CEOs in founder-director firms is higher and the level of pay is lower than that of other CEOs. CEO turnover sensitivity to firm performance is also significantly higher in founder-director firms compared with nonfounder firms. Stock returns around M&A announcements and board attendance are also higher in founder-director firms compared with nonfounder firms.
2011 Governance
  • Diversity and Performance
  • Author: Li, F. and V. Nagar
  • Journal: Management Science
  • This paper measures the performance of U.S. firms initiating same sex domestic partnership benefit (SSDPB) policies. Holding these firms in a calendar portfolio upon their SSDPB initiation earns a four-factor annualized excess return (alpha) of approximately 10%. SSDPB adopters also show significant improvement in operating performance relative to nonadopters.
2008 Social
  • Product Market Competition and Corporate Governance in China: Complementary or Substitute
  • Author: Li, W. and J. Niu
  • Journal: IFSAM VIIIth World Congress
  • The authors find that moderate concentrated ownership and product market competition on productivity are complementary, as are relatively disperse ownership and competition. They also notice the substitute impact between board governance and competition. Finally, the paper finds CEO duality is a substitute for competition.
2006 Governance
  • Cross-Listing and Corporate Governance: Bonding or Avoiding
  • Author: Licht, A.
  • Journal: Chicago Journal of International Law
  • This paper questions the bonding hypothesis on cross-listing- namely, the idea that firms may list on a foreign stock market with a view to renting that market's superior corporate governance system. A critical review of the extant empirical evidence reveals that an opposite, "avoiding hypothesis" more aptly describes firms' cross-listing behavior with regard to corporate governance issues. If anything, more stringent regimes deter issuers, and there is evidence that insiders behave opportunistically with regard to the cross-listing decision.
2003 Governance
  • Managerial Opportunism and Foreign Listing: Some Direct Evidence
  • Author: Licht, A.
  • Journal: University of Pennsylvania Journal of International Economic Law
  • This paper considers the corporate governance aspects of a regulatory program aimed at luring Israeli issuers currently listed only on U.S. markets into a dual-list on the Tel Aviv Stock Exchange. The program provides a rare opportunity to analyze the role of managerial opportunism in foreign listing transactions. The staunch resistance from the business and financial sectors to any additional disclosure under Israeli regulation is consistent with managerial reluctance to become subject to a more exacting corporate governance framework.
2001 Governance
  • Ownership Structure and Financial Constraints: Evidence from a Structural Estimation
  • Author: Lin, C., Y. Ma and Y. Xuan
  • Journal: Journal of Financial Economics
  • The authors find that the shadow value of external funds is significantly higher for companies with a wider insider control-ownership divergence, suggesting that companies whose corporate insiders have larger excess control rights are more financially constrained. The effect of insider excess control rights on external finance constraints is more pronounced for firms with higher degrees of informational opacity and for firms with financial misreporting, and is moderated by institutional ownership.
2011 Governance
  • Corporate Ownership Structure and Bank Loan Syndicate Structure
  • Author: Lin, C., Y. Ma, P. Malatesta and Y. Xuan
  • Journal: Journal of Financial Economics
  • The authors show that the divergence between the control rights and cash-flow rights of a borrowing firm's largest ultimate owner has a significant impact on the concentration and composition of the firm's loan syndicate. When the control-ownership divergence is large, lead arrangers form syndicates with structures that facilitate enhanced due diligence and monitoring efforts.
2012 Governance
  • Ownership Structure and the Cost of Corporate Borrowing
  • Author: Lin, C., Y. Ma, P. Malatesta and Y. Xuan
  • Journal: Journal of Financial Economics
  • This article identifies an important channel through which excess control rights affect firm value. The authors find that the cost of debt financing is significantly higher for companies with a wider divergence between the largest ultimate owner's control rights and cash-flow rights and investigate factors that affect this relation.
2011 Governance
  • Effectiveness of Outside Directors as a Corporate Governance Mechanism: Theories and Evidence
  • Author: Lin, L.
  • Journal: Northwestern University Law Review
  • This article contributes to the ongoing debate over the role of outside directors in two ways. First, after reviewing the law's current treatment of outside directors, the authors survey the theoretical research and empirical studies in the management science and financial economics literatures measuring the effectiveness of outside directors, in order to make those studies readily accessible to the legal community.
1995 Governance
  • Standardization and Discretion: Does the Environmental Standard ISO 14001 Lead to Performance Benefits?
  • Author: Link, S. and E. Naveh
  • Journal: IEEE Transactions on Engineering Management
  • Making ISO 14001 requirements part of an organization's daily practices leads to better organizational environmental performance, both directly and through a positive impact on employee discretion. Analysis of survey and financial data did not reveal any support for the hypothesis that achieving improvement in environmental performance as result of ISO 14001 implementation leads to better business performance; on the other hand, business performance was not harmed.
2006 Environmental
  • Equity Ownership and Firm Value in Emerging Markets
  • Author: Lins, K.
  • Journal: Journal of Financial and Quantitative Analysis
  • This paper investigates whether management stock ownership and large non-management blockholder share ownership are related to firm value. This paper finds that firm values are lower when a management group's control rights exceed its cash flow rights. The authors also find that large non-management control rights blockholdings are positively related to firm value. Both of these effects are significantly more pronounced in countries with low shareholder protection.
2003 Governance
  • A Modest Proposal for Improved Corporate Governance
  • Author: Lipton, M. and J. Lorsch
  • Journal: Business Lawyer
  • This paper outlines the limits on firm board effectiveness, and then proposes changes to reduce the board's role as an effective monitor in a fashion that does not blur the distinction between the executives who manage the company and the directors who monitor its performance.
1992 Governance
2007 Governance
2010 Governance
  • Vice vs. Virtue Investing around the World
  • Author: Lobe, S. and C. Walkshäusl
  • Journal: Working paper
  • This paper empirically tests the extent to which a portfolio of socially not responsible firms screened out of a market portfolio will trade at a discount. The authors find no compelling evidence in the data that ethical and unethical screens lead to a significant difference in their financial performance.
2011 Environmental, Social
  • The Whole Relationship between Environmental Variables and Firm Performance: Competitive Advantage and Firm Resources as Mediator Variables
  • Author: Lopez-Gamero, M., J. Molina-Azorin and E. Claver-CortEs
  • Journal: Journal of Environmental Management
  • This paper finds support that early investment timing and intensity in environmental issues impact the adoption of proactive environmental management, which in turn helps to improve environmental performance. The authors use questionnaire data to show that a firm's resources and competitive advantage act as mediator variables for a positive relationship between environmental protection and financial performance. The effect of environmental protection on firm performance is not direct and can vary depending on the sector considered.
2009 Environmental
  • Character, Conformity, or the Bottom Line? How and Why Downsizing Affected Corporate Reputation
  • Author: Love, E. and M. Kraatz
  • Journal: Academy of Management Journal
  • This paper examines the reputational consequences of corporate downsizing. Downsizing exerted a strong, negative effect on reputation, consistent with the character explanation. However, significant moderation of this negative effect by factors such as stock market reaction and downsizing's overall prevalence, indicates the need for a multi-theoretical approach to reputational change.
2009 Social
  • Socially Responsible Investment in the Spanish Financial Market
  • Author: Lozano, J., L. Albareda and M. Balaguer
  • Journal: Journal of Business Ethics
  • This paper presents an analysis of the impact of SRI mutual funds managed by Spanish fund managers comparing the evolution of managed assets and number of investors. The analysis shows that Spanish investors have had limited sensitivity to social issues and knowledge of SRI, as well as a lack of development of SRI investment strategies.
2006 Environmental, Social
  • Environmental Performance and Profits
  • Author: Lundgren, T. and P. Marklund
  • Journal: Working paper
  • The study investigates how firm-level environmental performance (EP) affects firm-level economic performance measured as profit efficiency (PE) in a stochastic profit frontier setting. The results show that EP induced by environmental policy is not a determinant of PE, while voluntary or non-policy induced EP seem to have a significant (+) effect on firm PE in most sectors.
2012 Environmental
  • Corporate Social Responsibility, Customer Satisfaction, and Market Value
  • Author: Luo, X. and C. Bhattacharya
  • Journal: Journal of Marketing
  • This study develops and tests a conceptual framework that predicts that customer satisfaction partially mediates the relationship between CSR and firm market value. The authors find empirical support for this framework.
2006 Environmental, Social
  • Signaling through Corporate Accountability Reporting
  • Author: Lys, T., J. Naughton and C. Wang
  • Journal: Working paper
  • The authors find that CSR expenditures are not charity nor do they improve future financial performance. Rather, firms undertake CSR expenditures in the current period when they anticipate stronger future financial performance.
2013 Environmental, Social
  • Enjoying the Quiet Life? Corporate Governance and Managerial Preferences
  • Author: M. Bertrand and S. Mullainathan
  • Journal: Journal of Political Economy
  • This paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences. The authors find that when managers are insulated from takeovers, worker wages (especially those of white-collar workers) rise. The destruction of old plants falls, but the creation of new plants also falls. Finally, overall productivity and profitability decline in response to these laws.
2003 Governance
2007 Environmental, Social
  • Investor Reaction to a Corporate Social Accounting
  • Author: Mahapatra, S.
  • Journal: Journal of Business Finance & Accounting
  • This study is an empirical investigation of the long-term market response to corporate social responsibility accounting. Investors view pollution control expenditures, legal or voluntary, as a drain on resources which could have been invested profitably, and do not 'reward' the companies for socially responsible behavior. Thus, an average investor is not an 'ethical investor' and industries and investors left to themselves do not have any incentive to spend for pollution control.
1984 Environmental
  • The Corporate Social Performance and Corporate Financial Performance Debate: Twenty-Five Years of Incomparable Research
  • Author: Mahon, J. and J. Griffin
  • Journal: Business & Society
  • This study uses four sources of corporate social responsibility ratings and five common accounting measures to demonstrate that the link between corporate social responsibility and corporate financial performance is predetermined by the choice of measures. Surprisingly, Fortune and KLD environmental indices very closely track one another, whereas TRI and corporate philanthropy differentiate between high and low social performers and do not correlate to the firm's financial performance.
1997 Environmental
2007 Environmental, Social
  • Poison Pill Securities: Stockholder Wealth, Profitability, and Ownership Structure
  • Author: Malatesta, P. and R. Walkling
  • Journal: Journal of Financial Economics
  • This paper tests hypotheses about the wealth effects of poison pill securities and the characteristics of firms that adopt them. The results indicate that poison pill defenses reduce stockholder wealth by a statistically significant amount. The authors also find that firms that adopt poison pill defenses are significantly less profitable than the average firm in their industry during the year prior to adoption.
1988 Governance
  • Effects of Board Composition and Stock Ownership on the Adoption of Poison Pills
  • Author: Mallette, P. and K. Fowler
  • Journal: Academy of Management Journal
  • This research examined the relationships between board composition and stock ownership and the passage of "poison pill" takeover defense provisions by U.S. industrial manufacturing firms. The impact of board leadership on poison pill decisions depends on the proportion of independent directors on a board. Results also suggest that equity holdings significantly enter into decisions to adopt poison pills. Companies are more likely to pass such provisions the lower the equity holdings of inside directors and the higher the equity holdings of institutional investors.
1992 Governance
  • Do Socially Responsible Investment Indexes Outperform Conventional Indexes?
  • Author: Managi, S., T. Okimoto and A. Matsuda
  • Journal: Applied Financial Economics
  • In this study, using Socially Responsible Investment (SRI) indicies and conventional stock indicies from the U.S., the U.K. and Japan, first and second moments of firm performance distributions are estimated based on the Markov Switching (MS) model. The authors find two distinct regimes (bear and bull) in the SRI markets as well as the stock markets for all three countries. These regimes occur with the same timing in both types of market. No statistical difference in means and volatilities generated from the SRI indicies and conventional indicies in either region was found.
2012 Environmental, Social, Governance
2011 Social
  • The United Shareholders Association Shareholder 1000 and Firm Performance
  • Author: Manry, D. and D. Stangeland
  • Journal: Journal of Corporate Finance
  • This paper examines two measures, reported by the United Shareholders Association (U.S.), of the alignment between managers' and shareholders' interests: a shareholder rights score and a management compensation rating. The authors find evidence that the U.S. shareholder rights and management compensation scores are significantly and positively associated with measures of operating performance and investment spending. Further tests indicate that U.S. management compensation scores proxy for aspects of corporate behavior that have significant valuation implications not reflected in financial statements.
2003 Governance
  • Misery Loves Companies: Rethinking Social Initiatives by Business
  • Author: Margolis, J. and J. Walsh
  • Journal: Administrative Science Quarterly
  • This paper examines the consequences for organizational research and theory in the 30-year quest for an empirical relationship between a corporation's social initiatives and its financial performance, as well as the development of stakeholder theory. The authors propose an alternative approach, embracing the tension between economic and broader social objectives as a starting point for systematic organizational inquiry.
2003 Environmental, Social, Governance
2011 Environmental, Social, Governance
  • Managers' Green Investment and Related Disclosure Decisions
  • Author: Martin, P. and D. Moser
  • Journal: AAA 2012 Management Accounting Section
  • In the simulation experiment, managers who are shareholders in their company make green investments even when this reduces shareholder value. Moreover, managers voluntarily disclose to potential investors that they have made such green investments and tend to focus their disclosures on the societal benefits of their investment rather than on the cost to the company. Finally, the cost of the green investment to the managers and other current shareholders is lower when the managers disclose their green investment because potential investors' standardized bids for the company are higher when managers disclose their green investments than when they do not.
2011 Environmental
  • Independent Director Incentives: Where Do Talented Directors Spend Their Limited Time and Energy?
  • Author: Masulis, R. and S. Mobbs
  • Journal: Working paper
  • This paper studies reputation incentives in the director labor market and find that directors with multiple directorships distribute their effort unequally according to the directorship's relative prestige. When directors experience an exogenous increase in a directorship's relative ranking, their board attendance rate increases and subsequent firm performance improves. Also, directors are less willing to relinquish their relatively more prestigious directorships, even when firm performance declines.
2013 Governance
  • Are All inside Directors the Same? Evidence from the External Directorship Market
  • Author: Masulis, R. and S. Mobbs
  • Journal: Journal of Finance
  • Agency theory and optimal contracting theory posit opposing roles and shareholder wealth effects for corporate inside directors. The authors evaluate these theories using the market for outside directorships to differentiate among inside directors. Firms with inside directors holding outside directorships have better operating performance and market-to-book ratios, especially when monitoring is more difficult. Announcements of outside board appointments improve shareholder wealth, while departure announcements reduce it.
2011 Governance
  • Agency Problems at Dual-Class Companies
  • Author: Masulis, R., C. Wang and F. Xie
  • Journal: Journal of Finance
  • The authors examine how divergence between insider voting and cash flow rights affects managerial extraction of private benefits of control. They find that as this divergence widens, corporate cash holdings are worth less to outside shareholders, CEOs receive higher compensation, managers make shareholder value-destroying acquisitions more often, and capital expenditures contribute less to shareholder value.
2009 Governance
  • Corporate Governance and Acquirer Returns
  • Author: Masulis, R., C. Wang and F. Xie
  • Journal: Journal of Finance
  • The authors examine whether corporate governance mechanisms, especially the market for corporate control, affect the profitability of firm acquisitions. This paper finds that acquirers with more anti-takeover provisions experience significantly lower abnormal stock returns in the announcement period. The authors also find that acquirers operating in more competitive industries or separating the positions of CEO and chairman of the board experience higher abnormal announcement returns.
2007 Governance
  • Carbon Emissions and Firm Value
  • Author: Matsumura, E., R. Prakash and S. Vera-Munoz
  • Journal: Working paper
  • This paper studies the relationship between carbon emissions and both firm value and the cost of capital components of firm value: cost of equity capital and cost of debt. The authors find a negative association between carbon emission levels and firm value, contingent upon firms voluntarily disclosing their carbon emissions in the first place.
2011 Environmental
  • Green Schemes: Corporate Environmental Strategies and Their Implementation
  • Author: Maxwell, J., S. Rothenberg, F. Briscoe and A. Marcus
  • Journal: California Management Review
  • This note qualitatively examines the environmental strategies and implementation schemes of three companies in different industries: Volvo, Polaroid, and Procter & Gamble. The challenges of implementation and success factors are discussed.
2002 Environmental
  • Behind the Scenes: The Corporate Governance Preferences of Institutional Investors
  • Author: McCahery, J., L. Starks and Z. Sautner
  • Journal: AFA 2011 Denver Meetings Paper
  • The authors find that corporate governance is important to institutional investor investment decisions and the majority are willing to engage in shareholder activism. When examining institutional investors' portfolio holdings, the authors find that their investment decisions appear to be related to their revealed preferences.
2010 Governance
  • Corporate Social-Responsibility and Firm Financial Performance
  • Author: McGuire, J., A. Sundgren and T. Schneeweis
  • Journal: Academy of Management Journal
  • This paper analyzes the relationships between perceptions of firms' corporate social responsibility and measures of their financial performance. Results show that a firm's prior performance, assessed by both stock-market returns and accounting-based measures, is more closely related to corporate social responsibility than is subsequent performance. Results also show that measures of risk are more closely associated with social responsibility than previous studies have suggested.
1988 Environmental
  • Corporate Social Responsibility: A Theory of the Firm Perspective
  • Author: McWilliams, A. and D. Siegel
  • Journal: Academy of Management Review
  • This theoretical paper outlines a supply and demand model of corporate social responsibility (CSR). Based on this framework, the authors hypothesize that a firm's level of CSR will depend on its size, level of diversification, research and development, advertising, government sales, consumer income, labor market conditions, and stage in the industry life cycle. From these hypotheses, the paper concludes that there is an "ideal" level of CSR, which managers can determine via cost-benefit analysis, and that there is a neutral relationship between CSR and financial performance.
2001 Environmental, Social
1999 Environmental, Social
  • Managerial Share Ownership and the Stock Price Effects of Antitakeover Amendment Proposals
  • Author: McWilliams, V.
  • Journal: Journal of Finance
  • Studies that test for an average stock price effect due to antitakeover amendments present different results, disagreeing with respect to both the significance and the direction of the effect. This study determines whether effects can be identified when managerial share ownership and amendment type are considered. Results suggest a negative relation between managerial share ownership and the stock price reaction to all but fair price amendment proposals.
1990 Governance
  • Board Monitoring and Antitakeover Amendments
  • Author: McWilliams, V. and N. Sen
  • Journal: Journal of Financial and Quantitative Analysis
  • This study examines the joint influence of board composition, leadership structure, and board ownership structure on the market's reaction to corporate antitakeover amendment proposals. The stock price reaction to antitakeover amendments is more negative when the board is dominated by inside and affiliated outside board members. Further, for firms in which the CEO also chairs the board, the reaction becomes increasingly negative as inside and affiliated outside board members increase their ownership stake in the firm and proportional representation on the board.
1997 Governance
  • Executive Compensation Structure, Ownership, and Firm Performance
  • Author: Mehran, H.
  • Journal: Journal of Financial Economics
  • An examination of the executive compensation structure provides evidence supporting advocates of incentive compensation, and also suggests that the form rather than the level of compensation is what motivates managers to increase firm value. Firm performance is positively related to the percentage of equity held by managers and to the percentage of their compensation that is equity-based. Finally, firms in which a higher percentage of the shares are held by insiders or outside blockholders use less equity-based compensation.
1995 Governance
  • Assessing the Impact of Environmental Management Systems on Corporate and Environmental Performance
  • Author: Melnyk, S., R. Sroufe and R. Calantone
  • Journal: Journal of Operations Management
  • Drawing on data provided by a survey of North American managers and their attitudes toward EMS and ISO 14001, this study assesses the relative effects of having a formal but uncertified EMS compared to having a formal, certified system. The results strongly demonstrate that firms in possession of a formal EMS perceive impacts well beyond pollution abatement and see a critical positive impact on many dimensions of operations performance that further increases with EMS certification.
2003 Environmental
  • Labor and the Market Value of the Firm
  • Author: Merz, M. and E. Yashiv
  • Journal: American Economic Review
  • In this paper the authors investigate links between the financial market and the labor market. Toward this end, they build on the production-based model for firms' market value proposed by John H. Cochrane (1991, 1996) and insert labor and capital adjustment costs as crucial ingredients. The authors quantify the link between financial markets and labor markets by structurally estimating the model using aggregate time-series data for the U.S. corporate sector.
2003 Social
  • Effect of Announcements of Withdrawal from South Africa on Stockholder Wealth
  • Author: Meznar, M., D. Nigh and C. Kwok
  • Journal: Academy of Management Journal
  • The authors analyzed investor reaction to corporate announcements of withdrawal from South Africa during apartheid for socially responsible reasons. The announcements were associated with a significant drop in the value of the withdrawing firms' stock, particularly for firms withdrawing earlier in the debate surrounding the issue of withdrawal.
1994 Social
  • Pay for Performance? CEO Compensation and Acquirer Returns in BHCs
  • Author: Minnick, K., H. Unal and L. Yang
  • Journal: Review of Financial Studies
  • The authors find that higher pay-for-performance sensitivity (PPS) leads to value-enhancing acquisitions. Banks whose CEOs have higher PPS have significantly better abnormal stock returns around the time of the acquisition announcements. On average, acquirers in the high-PPS group outperform their counterparts in the low-PPS group by 1.4% in a three-day window around the announcement. Higher PPS helps reduce the incentives for making value-destroying acquisitions, while at the same time promotes value-enhancing acquisitions.
2011 Governance
  • A Cross-Firm Analysis of the Impact of Corporate Governance on the East Asian Financial Crisis
  • Author: Mitton, T.
  • Journal: Journal of Financial Economics
  • This paper suggests that firm-level differences in variables related to corporate governance had a strong impact on firm performance during the East Asian financial crisis of 1997 to 1998. Significantly better stock price performance is associated with firms that had indicators of higher disclosure quality (ADRs and auditors from Big Six accounting firms), with firms that had higher outside ownership concentration, and with firms that were focused rather than diversified. The results suggest that individual firms have some power to preclude expropriation of minority shareholders if legal protection is inadequate.
2002 Governance
  • Business Groups and the Big Push: Meiji Japan's Mass Privatization and Subsequent Growth
  • Author: Morck, R. and M. Nakamura
  • Journal: Enterprise and Society
  • The authors argue that Japan's zaibatsu, or pyramidal business groups, provide coordinated rapid growth of diverse complementary industries after the Meiji government failed at the task. They propose that pyramidal business groups are private sector mechanisms for coordinating and financing 'big push' growth, and that unique historical circumstances aided their success in prewar Japan. Specifically, Japan uniquely marginalized its feudal elite; withdrew its hand with a propitious mass privatization that rallied the private sector; marginalized an otherwise entrenched first generation of wealthy industrialists; and remained open to foreign trade and capital.
2007 Governance
  • The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?
  • Author: Morck, R., B. Yeung and W. Yu
  • Journal: Journal of Financial Economics
  • Stock prices move together more in poor economies than in rich economies. This finding is not due to market size and is only partially explained by higher correlation with fundamentals in low-income economies. However, measures of property rights do explain this difference. Among developed economy stock markets, higher firm-specific returns variation is associated with stronger public investor property rights.
2000 Governance
  • Corporate Governance, Economic Entrenchment and Growth
  • Author: Morck, R., D. Wolfenzon and B. Yeung
  • Journal: Journal of Economic Literature
  • Outside the U.S. and the U.K., pyramidal control structures, cross shareholding and super voting rights are common. At the firm level, these ownership structures vest dominant control rights with families who often have little real capital invested in creating agency and entrenchment problems simultaneously. At the economy level, extensive control of corporate assets by a few families distorts capital allocation and reduces the rate of innovation. Third, the paper conceives of a relationship between the distribution of corporate control and institutional development that generates and preserves economic entrenchment as one equilibrium; but not the only one.
2005 Governance
  • Corporate Governance and Capital Structure Dynamics
  • Author: Morellec, E., B. Nikolov and N. Schurhoff
  • Journal: Journal of Finance
  • The authors develop a dynamic tradeoff model to examine the importance of manager-shareholder conflicts in capital structure choice. Using data on leverage choices and the model's predictions for different statistical moments of leverage, the authors find that agency costs of 1.5% of equity value on average are sufficient to resolve the low-leverage puzzle and to explain the dynamics of leverage ratios.
2012 Governance
  • Diversity in the Workplace
  • Author: Morgan, J. and F. Vardy
  • Journal: American Economic Review
  • This paper studies diversity in the workplace when employers engage in optimal sequential search and minority workers have noisier ability signals, thus creating a tension between job security and diversity. Distortions can occur even when majority and minority populations have identical skill levels. The authors show that lower firing costs and making bankruptcy laws more liberal would improve workplace diversity.
2009 Social
  • Active Investors and Performance in Private Equity Funds
  • Author: Morse, A.
  • Journal: Working paper
  • The author investigates whether large, active limited partners exert influence over the portfolio decisions made by private equity (PE) fund managers to the detriment, or benefit, of smaller investors in the pool. PE funds with these deal linkages perform 2.3 percentage points worse in IRR, robust to benchmark and placebo tests. On the flip side, the author documents that 2.2 percent of portfolio companies are bought by acquirers linked to the active investor. These exit linkages bring a positive excess IRR of 5.8 percentage points.
2013 Governance
  • Environmental Accounting for Pollution in the United States Economy
  • Author: Muller, N., R. Mendelsohn and W. Nordhaus
  • Journal: American Economic Review
  • This study presents a framework to include environmental externalities into a system of national accounts. This paper estimates the air pollution damages for each industry in the United States. Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added.
2011 Environmental
  • Finance for All? Policies and Pitfalls in Expanding Access
  • Author: Mundial, B.
  • Journal: World Bank Policy Research Report
  • This report is a broad-ranging review of research work focusing on access to finance. The report presents indicators to measure financial access, analyzes its determinants, and evaluates the impact of access on growth, equity, and poverty reduction, drawing on research that uses data both at the firm and household level.
2008 Governance
  • Social Investing: Pension Plans Should Just Say 'No
  • Author: Munnell, A. and A. Sunden
  • Journal: Pension Fund Politics
  • This discussion paper argues that current social investing initiatives are generally not effective and, even if they were, public plans should not engage in any form of social investing, and while private plans have more leeway, they should not be sacrificing returns for social considerations.
2005 Environmental, Social, Governance
  • Hazardous Waste Lawsuits, Stockholder Returns, and Deterrence
  • Author: Muoghalu, M., H. Robison and J. Glascock
  • Journal: Southern Economic Journal
  • This paper measures the impact of hazardous waste mismanagement lawsuits on stockholder returns, a first step in the empirical examination of the deterrent effect of hazardous waste laws. Stockholders suffer on average a statistically significant 1.2 percent loss in market value at the filing of an environmental lawsuit, with no significant abnormal returns at the disposition of the suit. The pattern of returns indicates that lawsuits impose lump-sum penalties on firms when information about the suit becomes publicly available.
1990 Environmental
  • Energy and Pollution Effects on Productivity: A Putty-Clay Approach
  • Author: Myers, J. and L. Nakamura
  • Journal: New Developments in Productivity Measurement
  • In this paper the authors present the first stage of a project designed to measure the impact of environmental manufacturing constraints on individual industries and the derived effect on productivity. The model is dynamic and is designed to represent the succession of changes that will occur over time as an industry reacts to higher energy costs and increased penalties for pollution.
1980 Environmental
  • Social Capital, Intellectual Capital, and the Organizational Advantage
  • Author: Nahapiet, J. and S. Ghoshal
  • Journal: Academy of Management Review
  • This paper develops the arguments that organization social capital facilitates the creation of new intellectual capital. The authors present a model that incorporates this overall argument in the form of a series of hypothesized relationships between different dimensions of social capital and the main mechanisms and processes necessary for the creation of intellectual capital.
1998 Social
  • Relationship between Environmental Performance and Financial Performance: An Empirical Analysis of Japanese Corporations
  • Author: Nakao, Y., A. Amano, K. Matsumura, K. Genba and M. Nakano
  • Journal: Business Strategy and the Environment
  • The hypotheses that a firm's environmental performance has a positive impact on its financial performance and vice versa are statistically supported by Japanese data. However, this tendency for two-way positive interaction appears to be only a relatively recent phenomenon. It is not limited to the top-scoring firms in terms of both financial and environmental performance, but is more general. In Japan, the authors infer that information-based environmental policy measures are effective to encourage the ongoing transition toward a more sustainable market economy.
2007 Environmental
  • Timing and Intensity Effects of Environmental Investments
  • Author: Nehrt, C.
  • Journal: Strategic Management Journal
  • This paper examines the investment timing and intensity conditions under which advantages exist for first movers in environmental investments in recent pollution-reducing manufacturing technologies. The authors measure the impact of investment timing and intensity on growth in profits. Results indicate a positive relationship between timing of investments and profit growth. There is also evidence that more intense investment patterns, lacking sufficient absorption time, may lead to lower profit growth.
1996 Environmental
  • Corporate Governance Patterns in OECD Economies: Is Convergence Underway?
  • Author: Nestor, S. and J. Thompson
  • Journal: Corporate Governance in Asia: A Comparative Perspective
  • Convergence is taking place for reasons related to the globalization of financial and product markets, an increasing proximity of legal and institutional norms and a more open circulation of and attitude towards foreign ideas. Ownership and control arrangements are still a part of a society's core characteristics and will remain to a considerable degree idiosyncratic.
2001 Governance
  • Does Home Bias Affect Firm Value? Evidence from Holdings of Mutual Funds Worldwide
  • Author: Ng, L., K. Chan and V. Covrig
  • Journal: Journal of International Economics
  • This study finds strong evidence that home bias affects firm valuation at both country and firm levels. Results show that, at the country level, domestic investors increasing weights in countries that they have over-weighted produces a negative impact on market valuation, while foreign investors increasing weights in countries that they have underweighted leads to enhanced market valuation. At the firm level, firm value increases as domestic and foreign investors weight local firms toward the firms' global market capitalization weights, but decreases as their weights deviate from global weights.
2009 Governance
2012 Governance
  • A Study of the Provision of Environmental Information in Financial Analysts' Research Reports
  • Author: Nilsson, H., G. Cunningham and L. Hassel
  • Journal: Sustainable Development
  • This study extends prior research by examining the inclusion of environmental information by financial analysts in their research reports on companies in the chemical and in the oil and gas industries. Results show that only 35 percent of financial analysts' reports have environmental information. Those reports that do have such information have more environmental information for North American companies than for European companies and analysts tend to report more information for companies in their regions. The chemical industry receives more attention, especially for downside information.
2008 Environmental
  • Creditor Control Rights, Corporate Governance, and Firm Value
  • Author: Nini, G., D. Smith and A. Sufi
  • Journal: Review of Financial Studies
  • The authors document that, in any given year, between 10% and 20% of firms report to the SEC being in violation of a financial covenant in a credit agreement. This paper shows that violations are followed immediately by a decline in acquisitions and capital expenditures, a sharp reduction in leverage and shareholder payouts, and an increase in CEO turnover. The authors also show that firm operating and stock price performance improve post-violation.
2012 Governance
  • Tunnel-Proofing the Executive Suite: Transparency, Temptation, and the Design of Executive Compensation
  • Author: Noe, T.
  • Journal: Review of Financial Studies
  • This theoretical paper considers optimal compensation for a CEO who is entrusted with administering corporate assets honestly. Optimal compensation designs maximize integrity at minimum cost. These designs are very "low powered," i.e., while specifying a lower bound for performance and increasing pay with performance, they increase compensation at a rapidly decreasing rate. Thus, integrity considerations engender optimal compensation packages that closely resemble the very pervasive 80/120 bonus plans, exactly the sort of compensation that Jensen (2003) argues should compromise integrity.
2009 Governance
  • Optimal Corporate Governance and Compensation in a Dynamic World
  • Author: Noe, T. and M. Rebello
  • Journal: Review of Financial Studies
  • The authors model long-run firm performance, management compensation, and corporate governance in a dynamic, nonstationary world. Board passivity is positively correlated with both the value of management compensation and the firm's good fortune. Managerial opportunism tends to follow sudden reversals of good fortune. Moreover, managerial private benefits, by increasing managers' stake in the long-run viability of the firm, may actually ameliorate agency conflicts.
2012 Governance
  • Forced Board Changes: Evidence from Norway
  • Author: Nygaard, K.
  • Journal: Working paper
  • The recently introduced gender quota on Norwegian corporate boards dramatically increased the share of female directors. The author finds that investors that anticipate the new directors to be more effective in firms with less information asymmetry between insiders of the firm and outsiders. Firms with low information asymmetry experience positive and significant cumulative abnormal returns (CAR) at the introduction of the quota, whereas firms with high information asymmetry show negative but insignificant CAR.
2011 Social, Governance
  • EU Emission Allowances and the Stock Market: Evidence from the Electricity Industry
  • Author: Oberndorfer, U.
  • Journal: Ecological Economics
  • This study conducts an econometric analysis on stock market effects of the EU Emission Trading Scheme (EU ETS). Results show that EU Emission Allowance (EUA) price changes and stock returns of the most important European electricity corporations are positively related. This effect does not work asymmetrically; stock markets do not seem to react differently to EUA appreciations in comparison to depreciations. The carbon market effect is shown to be both time- and country-specific.
2009 Environmental
  • Portfolio Performance and Environmental Risk
  • Author: Olsson, R.
  • Journal: Working paper
  • This paper examines the performance of U.S. stock portfolios constructed and rebalanced to have different environmental (EV) risk. Portfolios with high EV risk generate higher raw returns than low EV risk portfolios, but when risk and other factors are controlled for using the three Fama-French factors and a momentum factor, the risk-adjusted returns of both high and low EV risk portfolios are not statistically different from zero. The evidence thus indicates that a portfolio of stocks with low EV risk, intended to be more responsible, neither underperform or outperform on a risk-adjusted basis.
2007 Environmental
  • Does Coordinated Institutional Activism Work? An Analysis of the Activities of the Council of Institutional Investors
  • Author: Opler, T. and J. Sokobin
  • Journal: Working paper
  • The Council of Institutional Investors has issued a focus list of poorly performing firms for each of the last five years to its members who have the discretion to pursue activism programs. This study documents the performance of 96 firms which appeared on the Council's focus lists in 1991, 1992 and 1993 relative to several control groups. Firms on Council focus lists experience poor share price performance in the year before being included on a focus list. In the year after being listed, these firms experienced an average share price increase of 11.6% above the S&P 500.
1996 Governance
  • Corporate Social and Financial Performance: A Meta-Analysis
  • Author: Orlitzky, M., F. Schmidt and S. Rynes
  • Journal: Organization Studies
  • The meta-analysis suggest that corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility is likely to pay off, although the operationalizations of CSP and CFP also moderate the positive association. CSP appears to be more highly correlated with accounting-based measures of CFP than with market-based indicators, and CSP reputation indices are more highly correlated with CFP than are other indicators of CSP.
2003 Environmental, Social, Governance
  • The Political Economy of Corporate Governance
  • Author: Pagano, M. and P. Volpin
  • Journal: American Economic Review
  • This paper analyzes the political determinants of investor and employment protection. The proportionality of a country's electoral voting system is significantly and negatively correlated with shareholder protection in a panel of 45 countries, and positively correlated with employment protection in a panel of 21 OECD countries. Other political variables also affect regulatory outcomes, especially for the labor market.
2005 Governance
  • Globalization and Similarities in Corporate Governance: A Cross-Country Analysis
  • Author: Palepu, K., T. Khanna and J. Kogan
  • Journal: Review of Economics and Statistics
  • The authors find robust evidence of de jure similarity in governance across nations. Interestingly, this is not driven by convergence to U.S. standards. Rather, pairs of economically interdependent countries- especially if the countries are both economically developed- appear to adopt common corporate governance standards, even after accounting for the effects of common legal origin. In contrast to the de jure results, the authors find virtually no evidence of de facto similarity in corporate governance in a battery of estimations at the country, industry and firm levels.
2006 Governance
  • Gender Quotas and Female Leadership: A Review
  • Author: Pande, R. and D. Ford
  • Journal: World Development Report on Gender
  • This paper reviews the evidence on the equity and efficiency impacts of gender quotas for political positions and corporate board membership. The Indian evidence demonstrates that quotas increase female leadership and influence policy outcomes. In addition, rather than create a backlash against women, quotas can reduce gender discrimination in the long-term. The board quota evidence is more mixed. While female entry on boards is correlated with changing management practices, this change appears to adversely influence short-run profits.
2011 Social
  • Investment, Idiosyncratic Risk, and Ownership
  • Author: Panousi, V. and D. Papanikolaou
  • Journal: Journal of Finance
  • The authors empirically document that, when idiosyncratic risk rises, firm investment falls, and more so when managers own a larger fraction of the firm. This negative effect of managerial risk aversion on investment is mitigated if executives are compensated with options rather than with shares or if institutional investors form a large part of the shareholder base.
2012 Governance
  • Insider Ownership and Firm Value: Evidence from Indian Corporate Sector
  • Author: Pant, M. and M. Pattanayak
  • Journal: Economic and Political Weekly
  • The study investigates the relationship between insider's equity holding and firm value. This paper provides evidence that the relationship between insider shareholding and firm value is not linear in nature and documents a significant non-monotonic relationship between the two. Tobin's Q first increases, then declines and finally rises as ownership by insiders rises. It also confirms that foreign promoter/collaborator shareholding has a significant positive impact on firm value.
2007 Governance
  • Corporate Governance, Regulatory Changes, and Corporate Restructuring in Korea, 1993-2004
  • Author: Park, C. and S. Kim
  • Journal: Journal of World Business
  • The authors argue that the effectiveness of governance factors on firms' activities is bound to the institutional context created by government regulations. Results show that institutional ownership and regulatory changes in corporate governance had significantly influenced Korean firms' restructuring. Regulatory changes have positively moderated the relationship between business group affiliation and restructuring, and between institutional ownership and restructuring.
2008 Governance
  • Voting with Their Feet: Institutional Ownership Changes around Forced CEO Turnover
  • Author: Parrino, R., R. Sias and L. Starks
  • Journal: Journal of Financial Economics
  • This paper investigates whether institutional investors "vote with their feet" when dissatisfied with a firm's management by examining changes in equity ownership around forced CEO turnover. The authors find that aggregate institutional ownership and the number of institutional investors decline in the year prior to forced CEO turnover. Measures of institutional ownership changes are negatively related to the likelihoods of forced CEO turnover and that an executive from outside the firm is appointed CEO.
2003 Governance
  • Corporate Social Responsibility, the Role of Stakeholders and Sustainable Development: A Case Study of Pakistan
  • Author: Paryani, M.
  • Journal: Working paper
  • The country Pakistan is chosen as a case study on the topic "Corporate Social Responsibility (CSR), the Role of Stakeholders and Sustainable Development" because of the unique nature, social & environmental challenges facing by the corporate sector of Pakistan. This study aims to provide understanding of CSR and the status of existence, implementation and utilization of CSR in the corporate sector of Pakistan along with the details of long term financial success associated with CSR. This paper also focuses on the environmental and social externalities affecting the socio-economic and financial success and point out the difficulties for best implementation of CSR activities in Pakistan. What should be the objective of the corporate sector was also discussed before giving suggestions and conclusion.
2011 Environmental, Social, Governance
  • Corporate Social Responsibility and Economic Performance
  • Author: Paul, C. and D. Siegel
  • Journal: Journal of Productivity Analysis
  • This paper describes some perspectives on corporate social responsibility (CSR) in order to provide a context for considering the strategic motivations and implications of CSR. Based on this framework, which is based on characterizing optimal firm decision making and underlies most existing work on CSR, the authors propose an agenda for further theoretical and empirical research on CSR.
2006 Governance
1996 Environmental, Social
  • Board Monitoring and Earnings Management: Do Outside Directors Influence Abnormal Accruals?
  • Author: Peasnell, K., P. Pope and S. Young
  • Journal: Journal of Business Finance & Accounting
  • This paper examines whether the incidence of earnings management by U.K. firms depends on board monitoring. Results indicate that the likelihood of managers making income-increasing abnormal accruals to avoid reporting losses and earnings reductions is negatively related to the proportion of outsiders on the board. In contrast, the authors find little evidence that outside directors influence income-decreasing abnormal accruals when pre-managed earnings are high.
2005 Governance
  • Outside Directors and Firm Performance During Institutional Transitions
  • Author: Peng, M.
  • Journal: Strategic Management Journal
  • The authors find that outside directors do make a difference in firm performance, if such performance is measured by sales growth, and that they have little impact on financial performance such as return on equity (ROE). The results also document a bandwagon effect behind the diffusion of the practice of appointing outsiders to corporate boards. This article not only highlights the need to incorporate multiple theories beyond agency theory in corporate governance research, but also generates policy implications in light of the recent trend toward having more outside directors on corporate boards in emerging economies.
2004 Governance
  • Institutional Activism through Litigation: An Empirical Analysis of Public Pension Fund Participation in Securities Class Actions
  • Author: Perino, M.
  • Journal: Journal of Empirical Legal Studies
  • In the Private Securities Litigation Reform Act of 1995, Congress created the lead plaintiff provision in the hope that institutions would closely monitor class counsel and thereby curb the agency costs that typically plague securities class actions. This paper analyzes whether there is any correlation between the participation of one kind of institutional investor, public pension funds, and settlement outcomes, attorney effort, or attorneys' fee requests or awards. This paper finds that cases with public pension lead plaintiffs have larger settlements, recover a greater percentage of the stakes at issue in the case, have greater attorney effort, and have lower fee requests and awards than cases with other types of lead plaintiffs.
2012 Governance
  • An Exploration of Ethical Investment in the UK
  • Author: Perks, R., D. Rawlinson and L. Ingram
  • Journal: British Accounting Review
  • This paper examines ethical investment in the U.K. with particular reference to ethical unit trusts, institutional investors (universities for example), and environmental issues. It focuses on the obstacles that limit the potential for ethical investors to influence the environmental practices of corporations, and argues that ethical investing has not been shown to be at least as financially beneficial as other investments.
1992 Environmental, Social
  • Financiers vs. Engineers: Should the Financial Sector Be Taxed or Subsidized?
  • Author: Philippon, T.
  • Journal: American Economic Journal: Macroeconomics
  • This theoretical paper studies the allocation of human capital in an economy with production externalities, financial constraints and career choices. The author finds that when investment and education subsidies are chosen optimally, the financial sector should be taxed in exactly the same way as the non-financial sector.
2010 Social
  • Does the Contribution of Corporate Cash Holdings and Dividends to Firm Value Depend on Governance? A Cross-Country Analysis
  • Author: Pinkowitz, L., R. Stulz and R. Williamson
  • Journal: Journal of Finance
  • Agency theories predict that the value of corporate cash holdings is less in countries with poor investor protection because of the greater ability of controlling shareholders to extract private benefits from cash holdings in such countries. Using various specifications of the valuation regressions of Fama and French (1998), the authors find that the relation between cash holdings and firm value is much weaker in countries with poor investor protection than in other countries.
2006 Governance
  • Exposure to Socially Responsible Investing of Mutual Funds in the Euronext Stock Markets
  • Author: Plantinga, A., B. Scholtens and N. Brunia
  • Journal: Journal of Performance Measurement
  • This paper finds that sustainable investing does not result in a return distribution that significantly differs from a more conventional or regular investment strategy. Also European funds have a strong 'home bias' to investing in European SRI indices rather than American SRI indicies.
2002 Environmental, Social, Governance
  • Toward a New Conception of the Environment-Competitiveness Relationship
  • Author: Porter, M. and C. Van der Linde
  • Journal: Journal of Economic Perspectives
  • Economists as a group are resistant to the notion that even well-designed environmental regulations might lead to improved competitiveness, but this resistance is based on an incorrect, static model. The authors of this discussion paper argue that the orientation of business should shift from pollution control to resource productivity. No lasting success can come from policies that promise that environmentalism will triumph over industry, nor from policies that promise that industry will triumph over environmentalism. Instead, success must involve innovation-based solutions that promote both environmentalism and industrial competitiveness.
1995 Environmental
  • Green and Competitive: Ending the Stalemate
  • Author: Porter, M. and C. van der Linde
  • Journal: Harvard Business Review
  • In this essay, the authors argue in favor of innovation-friendly regulation regarding the natural environment. Outside pressure, through the right kind of regulation, can motivate companies to innovate, and innovating in order to meet regulatory requirements can lead to better resource productivity. The authors call for a paradigm shift from fighting regulation to competing on resource productivity.
1995 Environmental
  • Proxy Voting and the SEC: Investor Protection versus Market Efficiency
  • Author: Pound, J.
  • Journal: Journal of Financial Economics
  • This paper analyzes the SEC's proxy regulations and assesses their effects on corporate governance. The authors present evidence that since 1956, when the SEC imposed extensive disclosure requirements, the rules have significantly increased the costs of communication and coordinated action among shareholders. They have thus deterred shareholder initiatives and inhibited the development of a private market for information about voting issues.
1991 Governance
  • The Impact of Governance Reform on Performance and Transparency
  • Author: Price, R., F. Roman and B. Rountree
  • Journal: Journal of Financial Economics
  • This study examines the influence of Mexico's efforts to improve corporate governance on firm performance and transparency. The authors document a significant increase in compliance over 2000-2004 indicating Mexican companies view non-compliance as costly. However, they find no association between the governance index and firm performance, nor is there a relation with transparency. Instead, the authors find firms with greater compliance resort to the more costly mechanism of making dividend payments (higher propensity to pay and greater yield) to reduce agency conflicts.
2011 Governance
  • How Laws and Institutions Shape Financial Contracts: The Case of Bank Loans
  • Author: Qian, J. and P. Strahan
  • Journal: Journal of Finance
  • Legal and institutional differences shape the ownership and terms of bank loans across the world. This paper shows that under strong creditor protection, loans have more concentrated ownership, longer maturities, and lower interest rates. In addition, the impact of creditor rights on loans depends on borrower characteristics such as the size and tangibility of assets.
2007 Governance
  • Do Shareholder Rights Matter? Evidence from a Quasi-Natural Experiment
  • Author: Qian, J. and S. Zhao
  • Journal: Working paper
  • Using a non-uniform governance mandate on cumulative voting in China as a plausibly exogenous shock, the authors examine the effects of strengthening shareholder rights on tunneling. Overall, this paper suggests that in emerging markets characterized by entrenched controlling shareholders and weak institutions, laws and regulations aimed at improving a specific aspect of governance are not likely to be effective.
2011 Governance
2001 Environmental, Social, Governance
  • Governance of Financial Supervisors and Its Effects: A Stocktaking Exercise
  • Author: Quintyn, M. and K. Kyprou
  • Journal: IMF Institute
  • This review paper takes stock of the regulatory governance debate. The authors first discuss the main premise of the paper, that regulatory governance plays a pivotal role in instilling financial sector governance, which in turn is a key source of corporate governance in the nonfinancial sector (the governance nexus). This paper then identifies the main pillars for regulatory governance-independence, accountability, transparency, and integrity.
2007 Governance
  • The Great Reversals: The Politics of Financial Development in the Twentieth Century
  • Author: Rajan, R. and L. Zingales
  • Journal: Journal of Financial Economics
  • This theoretical paper analyzes the development of financial sectors over time. The authors propose an "interest group" theory of financial development where incumbents oppose financial development because it breeds competition. The theory predicts that incumbents' opposition will be weaker when an economy allows both cross-border trade and capital flows.
2003 Governance
  • Financial Dependence and Growth
  • Author: Rajan, R. and L. Zingales
  • Journal: American Economic Review
  • This paper examines whether financial development reduces the costs of external finance to firms. The study finds that industrial sectors that are relatively more in need of external finance develop disproportionately faster in countries with more-developed financial markets. The authors also show that this result is unlikely to be driven by omitted variables, outliers, or reverse causality.
1998 Governance
  • Environmental Product Differentiation
  • Author: Reinhardt, F.
  • Journal: Environmental Management: Readings and Cases, edited by M. Russo
  • This article describes three requirements for successful environmental product differentiation: 1) firms must discover or create a willingness in consumers to pay for public goods; 2) they must overcome barriers to the dissemination of credible information about the environmental attributes of their products; and 3) they must defend themselves against imitation.
2008 Environmental
2008 Environmental, Social, Governance
  • The Economic Performance of European Stock Corporations: Does Sustainability Matter?
  • Author: Rennings, K., M. Schroder and A. Ziegler
  • Journal: Greener Management International
  • This paper econometrically examines the effect of environmental and social performance on the average monthly stock return of European stock corporations for the period from 1996 to 2001. Higher environmental sector performance has a significantly positive influence on a firm's shareholder value. In contrast, a higher social sector performance has a negative influence on the average monthly stock returns. The variables of the corporate environmental or social activities relative to the industry average have no significant effect on the shareholder value.
2003 Environmental
  • Coming Clean: Corporate Disclosure of Financially Significant Environmental Risks
  • Author: Repetto, R. and D. Austin
  • Journal: World Resources Institute
  • This report provides additional evidence that many publicly listed companies do not adequately disclose their financially material environmental exposures in compliance with Securities and Exchange Commission (SEC) rules. Disclosure of environmental risks is limited, despite evidence that information disclosure regarding a company's environmental exposures is considered relevant by investors and can affect the valuation of the company and its financial risks.
2000 Environmental
  • Pure Profit: The Financial Implications of Environmental Performance
  • Author: Repetto, R. and D. Austin
  • Journal: World Resources Institute
  • This paper develops a methodology for integrating environmental issues into financial analysis, and demonstrates the approach by applying it empirically to companies in the U.S. pulp and paper industry. The results show that companies within this industry face environmental risks that are of material significance and that vary widely in magnitude from firm to firm. These risks are not evident in companies' financial statements nor are they likely to be incorporated in current market valuations.
2000 Environmental
  • Environmental Exposures in the U.S. Electric Utility Industry
  • Author: Repetto, R. and J. Henderson
  • Journal: Utilities Policy
  • Quantitative analysis of 47 U.S. electric utilities' environmental exposures to impending air quality and climate policies shows potentially material and highly differentiated financial impacts. For many companies, the minimized compliance costs of a four-pollutant cap-and-trade regulatory regime would not necessarily exceed those of a three-pollutant regime that omitted controls on carbon dioxide emissions. Fragmented regulatory requirements would have the highest compliance costs.
2003 Environmental
  • Racial Diversity, Business Strategy, and Firm Performance: A Resource-Based View
  • Author: Richard, O.
  • Journal: Academy of Management Journal
  • In this study the author examined the relationships among cultural (racial) diversity, business strategy, and firm performance in the banking industry. Racial diversity interacted with business strategy in determining firm performance measured in three different ways, as productivity, return on equity, and market performance. The results demonstrate that cultural diversity does in fact add value and, within the proper context, contributes to firm competitive advantage.
2000 Social
  • The Impact of Racial Diversity on Intermediate and Long-Term Performance: The Moderating Role of Environmental Context
  • Author: Richard, O., B. Murthi and K. Ismail
  • Journal: Strategic Management Journal
  • The authors conduct a firm-level, 6-year longitudinal analysis on the impact that racial diversity in human resources has on financial performance. When considering short-term performance outcomes, the authors find evidence of a U-shaped relationship between racial diversity and productivity. For longer-term profitability, the authors find support for more of a positive linear relationship between diversity and performance (i.e., Tobin's q) than a nonlinear one.
2007 Social
  • Socially Responsible Investments: Return Expectations or Social Preferences?
  • Author: Riedl, A. and P. Smeets
  • Journal: Working paper
  • The authors show that social preferences rather than return expectations or risk perceptions are the main drivers of investments in socially responsible (SRI) mutual funds. Most investors who hold SRI funds expect to earn lower financial returns on these funds than on other funds. Social preferences are only associated with investments in SRI funds without tax benefits, but are unrelated to investments in SRI funds with tax incentives.
2013 Governance
  • Does One Size Fit All?: A Reexamination of the Finance and Growth Relationship
  • Author: Rioja, F. and N. Valev
  • Journal: Journal of Development Economics
  • The authors examine the relationship of a country's financial development on economic growth, and find support that there exist three distinct regions of financial development. In the low region (countries with very low levels of financial development), additional improvements in financial markets have an uncertain effect on growth. In the intermediate region, financial development has a large, positive effect on growth. Finally, in the high region, additional financial improvements have a positive, but smaller effect on growth.
2004 Governance
2003 Environmental, Social, Governance
  • Tunneling and Propping: A Justification for Pyramidal Ownership
  • Author: Riyanto, Y. and L. Toolsema
  • Journal: Journal of Banking & Finance
  • This paper links existence of the pyramidal ownership structure to tunneling and propping. The authors show that tunneling alone cannot justify the pyramidal structure unless outside investors are myopic, since rational outside investors anticipate tunneling and adjust their willingness-to-pay for the firm's shares accordingly. With propping, however, they may be willing to be expropriated in exchange for implicit insurance against bankruptcy.
2008 Governance
  • Corporate Social Responsibility in a Corporate Governance Framework
  • Author: Riyanto, Y. and L. Toolsema
  • Journal: Working paper
  • This paper offers a theoretical model analyzing how CSR and the threat of stakeholder activism influence the effort of managers and shareholders, and describes how CSR may arise endogenously in this context. By engaging in CSR the shareholder can commit to less monitoring, increase the manager's effort, and raise profits.
2007 Governance
  • Do Private Equity Fund Managers Earn Their Fees? Compensation, Ownership, and Cash Flow Performance
  • Author: Robinson, D. and B. Sensoy
  • Journal: AFA 2012 Chicago
  • This paper studies the relation between compensation practices, incentives, and performance in private equity using new data that connects ownership structures, management contracts, and quarterly cash flows. The authors find no evidence that higher compensation or lower managerial ownership are associated with worse net-of-fee performance, in stark contrast to other asset management settings. Instead, compensation is largely unrelated to net-of-fee cash flow performance. In addition, the behavior of distributions around contractual triggers for fees and carried interest is consistent with an underlying agency conflict between investors and general partners.
2013 Governance
  • Public and Private Enforcement of Securities Laws: Resource-Based Evidence
  • Author: Roe, M. and H. Jackson
  • Journal: Working paper
  • This paper shows that private enforcement of investor protection via disclosure is associated with financial market development, whereas private liability rules are not. Public enforcement fails to correlate with financial development. When securities regulators' resources are used as a proxy for regulatory intensity of the securities regulator, financial depth regularly, significantly, and robustly correlates with stronger public enforcement.
2009 Governance
  • Outside Directors, Board Independence, and Shareholder Wealth
  • Author: Rosenstein, S. and J. Wyatt
  • Journal: Journal of Financial Economics
  • Management plays a dominant role in selecting outside directors, inviting skepticism about outsiders' ability to make independent judgments on firm performance. The authors' examination of wealth effects surrounding outside director appointments find significantly positive share-price reactions. They find no clear evidence that outside directors of any particular occupation are more or less valuable than others.
1990 Governance
  • Cross-Country Determinants of Mergers and Acquisitions
  • Author: Rossi, S. and P. Volpin
  • Journal: Journal of Financial Economics
  • The study finds that the volume of M&A activity is significantly larger in countries with better accounting standards and stronger shareholder protection. The probability of an all-cash bid in an acquisition decreases with the level of shareholder protection in the acquirer country. In cross-border deals targets are typically from countries with poorer investor protection than acquirers, suggesting that cross-border transactions play a governance role by improving the degree of investor protection within target firms.
2004 Governance
2001 Social
  • A Resource-Based Perspective on Corporate Environmental Performance and Profitability
  • Author: Russo, M. and P. Fouts
  • Journal: Academy of Management Journal
  • Drawing on the resource-based view of the firm, the authors posit that environmental performance and economic performance are positively linked and that industry growth moderates the relationship, with the returns to environmental performance higher in high-growth industries. The authors tested these hypotheses using independently developed environmental ratings. Results indicate that "it pays to be green" and that this relationship strengthens with industry growth.
1997 Environmental
  • The Effect of Poison Pill Securities on Shareholder Wealth
  • Author: Ryngaert, M.
  • Journal: Journal of Financial Economics
  • This paper examines empirical evidence about the effect of poison pill takeover defenses on shareholder wealth. The authors find evidence that announcements of the most restrictive forms of the pill defense are associated with stock price declines. Also, the most restrictive forms of the pill defense are associated with abnormally high rates of defeat of unsolicited tender offers.
1988 Governance
  • Novo Mercado and Its Followers: Case Studies in Corporate Governance Reform
  • Author: Santana, M., M. Ararat, P. Alexandru, B. Yurtoglu and M. da Cunha
  • Journal: International Finance Corporation
  • The basic premise guiding the creation in December 2000 of the Novo Mercado (a special segment of the Sao Paulo Stock Exchange [BOVESPA] available to companies that commit to adopting high standards of corporate governance) was that a reduction in investor perceptions of risk would have a positive effect on share values and liquidity. Studies now show that an index of Novo Mercado companies outperformed the BOVESPA index. Partly as a result, foreign investors have bought up 74% of shares in new listings.
2008 Governance
  • Environmental Shareholder Value: Economic Success with Corporate Environmental Management
  • Author: Schaltegger, S. and F. Figge
  • Journal: Eco-Management and Auditing
  • This paper discusses the links between environmental management and shareholder value. The authors suggest how corporate environmental management should be designed to increase the shareholder value. They argue against the claim that "more corporate environmental protection increases the economic success and the value of the company." Only a pollution prevention strategy that takes into account the effects on the drivers of shareholder value can secure economic success and improved eco-efficiency.
2000 Environmental
  • The Link between 'Green' and Economic Success: Environmental Management as the Crucial Trigger between Environmental and Economic Performance
  • Author: Schaltegger, S. and T. Synnestvedt
  • Journal: Journal of Environmental Management
  • This article presents a theoretical framework to explain the coexistence of conflicting views as to whether improving a firm's environmental performance increases or decreases profitability. It is argued that not only the firm's level of environmental performance, but also the kind of environmental management employed to achieve that level, influences the economic outcome. Research and business practice should focus less on general correlations and more on causal relationships of eco-efficiency, i.e. the effect of different environmental management approaches on economic performance.
2002 Environmental
  • Managing Human Capital Risk
  • Author: Schmalz, M.
  • Journal: Working paper
  • This paper provides a model and empirical support for the idea that labor adjustment costs and firm-specificity of employees' human capital can motivate a conservative financial strategy. When firing, hiring, or training is costly, firms have an incentive to retain employees even in bad times. To be able to do so amid financial constraints risk, firms that face higher labor adjustment costs accumulate more equity-financed cash, if they can. A regression discontinuity design shows that unionization, a proxy for labor adjustment costs, indeed causes higher cash-to-asset ratios and lower leverage in financially unconstrained firms.
2013 Social
  • The Performance of Socially Responsible Investments: Investment Funds and Indices
  • Author: Schroder, M.
  • Journal: Financial Markets and Portfolio Management
  • This paper reviews the portfolio performance literature and argues that SRI portfolios exhibit performance that is comparable to conventional funds. The authors' own analysis shows that most German, Swiss and U.S. SRI investment funds do not significantly underperform their benchmarks.
2004 Environmental, Social
  • Is There a Difference? The Performance Characteristics of SRI Equity Indices
  • Author: Schroder, M.
  • Journal: Journal of Business Finance & Accounting
  • The study finds that SRI screens for equities do not lead to a significant performance difference. The authors also finds that SRI indicies exhibit the same performance as the conventional benchmarks and that differences in the risk-return characteristics primarily stem from risk differentials.
2007 Environmental, Social, Governance
2011 Environmental, Governance
  • Industry Risk Moderates the Relation between Environmental and Financial Performance
  • Author: Semenova, N. and L. Hassel
  • Journal: Sustainable Investment and Corporate Governance Working Papers
  • This study extends previous research on the relation between different measures of environmental and financial performance by introducing moderating effects of inherent environmental industry risk. This paper makes a distinction between the reputational benefits of environmental preparedness and the operational gains of environmental performance when studying the effects on market value. A significant direct effect of environmental preparedness on the market value of the companies is present, while the relation between environmental performance and market value is stronger in low risk industries than in high risk industries.
2008 Environmental
  • The Impact of Corporate Social Responsibility on Firm Value: The Role of Customer Awareness
  • Author: Servaes, H. and A. Tamayo
  • Journal: Management Science
  • This paper shows that CSR and firm value are positively related for firms with high customer awareness, as proxied by advertising expenditures, and either negative or insignificant for firms with low customer awareness. For firms with low customer awareness, the relation is either negative or insignificant. In addition, the authors find that the effect of awareness on the value-CSR relation is reversed for firms with a poor prior reputation as corporate citizens.
2012 Environmental, Social
  • Market Response to Environmental Information Produced Outside the Firm
  • Author: Shane, P. and B. Spicer
  • Journal: Accounting Review
  • This study investigates whether security price movements are associated with the release of externally produced information about companies' performances in the pollution-control area-information which has attributes of consistency and comparability not typically found in voluntarily reported, socially-oriented data. Companies that had low pollution-control performance rankings in eight reports released by the Council on Economic Priorities (CEP) were found to have significantly more negative returns than companies with high rankings.
1983 Environmental
  • Environmental Risk Management and the Cost of Capital
  • Author: Sharfman, M. and C. Fernando
  • Journal: Strategic Management Journal
  • This paper's findings provide an alternative perspective on the environmental-economic performance relationship, which has been dominated by the view that improvements in economic performance stem from better resource utilization. Firms also benefit from improved environmental risk management through a reduction in their cost of equity capital, a shift from equity to debt financing, and higher tax benefits associated with the ability to add debt.
2008 Environmental
  • Investor Protection and Equity Markets
  • Author: Shleifer, A. and D. Wolfenzon
  • Journal: Journal of Financial Economics
  • The authors present a simple model of an entrepreneur going public in an environment with poor legal protection of outside shareholders. The model incorporates elements of Becker's (J. Political Econ. 106 (1968) 172) "crime and punishment" framework into a corporate finance environment of Jensen and Meckling (J. Financial Econ. 3 (1976) 305). The model is consistent with a number of empirical regularities concerning the relation between investor protection and corporate finance.
2002 Governance
  • A Survey of Corporate Governance
  • Author: Shleifer, A. and R. Vishny
  • Journal: Journal of Finance
  • In a survey of Corporate Governance literature, the authors find that successful corporate governance systems, such as those of the United States, Germany and Japan, combine significant legal protection of at least some investors with an important role for large investors. This combination separates them from governance systems in most other countries, which provide extremely limited legal protection of investors, and are stuck with family and insider-dominated firms receiving little external financing. At the same time, the authors do not believe that the available evidence informs which one of the successful governance systems is the best.
2012 Governance
  • Women in Management and Firm Financial Performance: An Exploratory Study
  • Author: Shrader, C., V. Blackburn and P. Iles
  • Journal: Journal of Managerial Issues
  • Large firms with high percentages of women managers also have high ROA, ROI, ROE and ROS. Firms with a higher percentage of women in 'top' management positions do not have a disproportionately higher financial performance.
1997 Social
  • The Role of Corporations in Achieving Ecological Sustainability
  • Author: Shrivastava, P.
  • Journal: Academy of Management Review
  • This article offers a theoretical framework for how companies can contribute to ecological sustainability. It articulates corporate ecological sustainability through the concepts of (a) total quality environmental management, (b) ecologically sustainable competitive strategies, (c) technology transfer through technology-for nature-swaps, and (d) reducing the impact of populations on ecosystems. It also examines the implications that these concepts have for organizational research.
1995 Environmental
  • An Empirical Analysis of the Strategic Use of Corporate Social Responsibility
  • Author: Siegel, D. and D. Vitaliano
  • Journal: Journal of Economics & Management Strategy
  • This paper shows that observed patterns of corporate investment in CSR are consistent with the strategic use of CSR. Firms selling durable experience goods (e.g automobiles, software) or credence services (e.g financial services) are respectively 15% and 23% more likely to be socially responsible than are firms selling search goods (e.g. clothing), experience services (e.g. air travel), or nondurable experience goods (e.g. health and beauty products).
2007 Social
  • Is There a Better Commitment Mechanism Than Cross-Listings for Emerging-Economy Firms? Evidence from Mexico
  • Author: Siegel, J.
  • Journal: Journal of International Business Studies
  • Weak legal institutions at the country level hinder firms in emerging economies from accessing finance and technology affordably. To attract outside resources firms may list the emerging economy firm's shares on a U.S. exchange. This paper uses a quasi-natural experiment from Mexico to examine the conditions under which forming a strategic alliance with a foreign multinational firm is actually a superior mechanism for ensuring good corporate governance
2009 Governance
  • Can Foreign Firms Bond Themselves Effectively by Renting U.S. Securities Laws?
  • Author: Siegel, J.
  • Journal: Journal of Financial Economics
  • The study tests the functional convergence hypothesis, which states that foreign firms can leapfrog their countries' weak legal institutions by listing equities in New York and agreeing to follow U.S. securities law. Evidence shows that the SEC and minority shareholders have not effectively enforced the law against cross-listed foreign firms. Detailed evidence from Mexico further shows that while some insiders exploited this weak legal enforcement with impunity, others that issued a cross-listing and passed through an economic downturn with a clean reputation went on to receive privileged long-term access to outside finance. As compared with legal bonding, reputational bonding better explains the success of cross-listings.
2005 Governance
  • A Reexamination of Tunneling and Business Groups: New Data and New Methods
  • Author: Siegel, J. and P. Choudhury
  • Journal: Review of Financial Studies
  • One of the most rigorous methodologies in the corporate governance literature uses firms' reactions to industry shocks to characterize the quality of governance. This methodology can produce the wrong answer unless one considers the ways firms compete. Using the example of Indian firms, the authors show that an influential finding is reversed when these differences are considered.
2012 Governance
  • Egalitarianism and International Investment
  • Author: Siegel, J., A. Licht and S. Schwartz
  • Journal: Journal of Financial Economics
  • This study identifies how country differences on a key cultural dimension- egalitarianism- influence the direction of different types of international investment flows. Controlling for a large set of competing explanations, the study finds a robust influence of egalitarianism distance on cross-national investment flows of bond and equity issuances, syndicated loans, and mergers and acquisitions.
2011 Governance
  • Do the Best Companies to Work for Provide Better Customer Satisfaction?
  • Author: Simon, D. and J. DeVaro
  • Journal: Managerial and Decision Economics
  • Strong evidence suggests that firms on Fortune's '100 Best Companies to Work For' earn higher customer satisfaction ratings than firms not on the list. The result is stronger for firms in the service sector than for those in the manufacturing sector. The increase in customer satisfaction resulting from 'Best Company' status yields about a 1.6% increase in ROA.
2006 Social
  • Eco-Efficiency and Firm Value
  • Author: Sinkin, C., C. Wright and R. Burnett
  • Journal: Journal of Accounting and Public Policy
  • This study empirically examines the proposition that implementation of eco-efficient business strategies is associated with higher firm value. The authors posit that, firms which adopt eco-efficient business strategies and, as a consequence, achieve reduced costs and increased profits should be more highly valued by the market than similar firms that do not adopt eco-efficient business strategies. The empirical testing supports this proposition.
2008 Environmental
  • Corporate Governance and the Cost of Equity Capital
  • Author: Skaife, H., D. Collins and R. LaFond
  • Journal: Working paper
  • The study finds that firms reporting larger abnormal accruals and less transparent earnings have a higher cost of equity. The authors find that concentrated ownership in the form of the percentage of shares held by institutions and the number of five-percent blockholders are positively related to the cost of equity. In addition, the authors find a negative relation between the cost of equity and the independence of the board, the percentage of the board that owns stock, and managerial power, as proxied by the shareholder rights score.
2004 Governance
  • The Potential of Impact Investing: The Institutional Investor Context
  • Author: Slegten, N.
  • Journal: Working paper
  • This study considers the potential of a new phenomenon in the financial world, Impact Investing. The author finds that even though the challenges to industry growth are substantial and the risks are perceived as high, over the next five to ten years the institutional investors intend to allocate a median of 1 - 4% of their investment portfolio to impact investments. The impact investments in the portfolio exhibit low volatility while generating moderate returns.
2013 Governance
  • Shareholder Activism by Institutional Investors: Evidence from CalPERS
  • Author: Smith, M.
  • Journal: Journal of Finance
  • Firm size and level of institutional holdings are found to be positively related to the probability of being targeted, and 72 percent of firms targeted after 1988 adopt proposed changes or make changes resulting in a settlement with CalPERS. Shareholder wealth increases for firms that adopt or settle and decreases for firms that resist. No statistically significant change in operating performance is found.
2012 Governance
  • Do Women in Top Management Affect Firm Performance? A Panel Study of 2,500 Danish Firms
  • Author: Smith, N., V. Smith and M. Verner
  • Journal: International Journal of Productivity and Performance Management
  • The proportion of women in top management jobs tends to have positive effects on firm performance, even after controlling for numerous observed characteristics of the firm and for the direction of causality. The results show that the positive effects of women in top management depend on the qualifications of female top managers.
2006 Social, Governance
  • Corporate Governance, Family Ownership, and Firm Valuations in Emerging Markets: Evidence from Hong Kong Panel Data
  • Author: Song, F. and A. Lei
  • Journal: Working paper
  • This paper constructs a corporate governance (CG) index to represent Hong Kong corporate governance standards and rank listed companies. The index examines 12 variables among four governance mechanisms: board structure, executive compensation, ownership structure, and accounting standards. Results indicate that these areas significantly impact firm value and firms with better CG rating have higher firm value.
2008 Governance
  • Information Control, Career Concerns, and Corporate Governance
  • Author: Song, F. and A. Thakor
  • Journal: Journal of Finance
  • The authors examine corporate governance effectiveness when the CEO generates project ideas and the board of directors screens these ideas for approval. The board's career concerns cause it to distort its investment recommendation procyclically, whereas the CEO's career concerns cause her to sometimes reduce the precision of the board's information.
2006 Governance
  • The "Antidirector Rights Index" Revisited
  • Author: Spamann, H.
  • Journal: Review of Financial Studies
  • The "antidirector rights index" has been used as a measure of shareholder protection in over a hundred articles since it was introduced by La Porta et al. ("Law and Finance." 1998). A thorough reexamination of the legal data, however, leads to corrections for thirty-three of the forty-six countries analyzed. The correlation between corrected and original values is only 0.53. Consequently, the corrected index fails to support the widely influential claim that shareholder protection is higher in common than in civil law countries.
2010 Governance
  • The Maturing of Socially Responsible Investment: A Review of the Developing Link with Corporate Social Responsibility
  • Author: Sparkes, R. and C. Cowton
  • Journal: Journal of Business Ethics
  • This paper reviews the literature on socially responsible investment (SRI) over recent years and highlights the prospects for an increasingly strong connection with the practice of corporate social responsibility. As the movement matures into a mainstream investment philosophy adopted by a growing proportion of large investment institutions, it is leading to a new form of SRI shareholder pressure.
2004 Environmental, Governance
  • Corporate Governance Ratings and Corporate Performance: An Analysis of Governance Metrics International (GMI) Ratings of U.S. Firms, 2003 to 2008
  • Author: Spellman, G. and R. Watson
  • Journal: Working paper
  • The regression analysis results indicate that the GMI ratings are statistically related to both past shareholder returns and accounting returns. A positive statistically significant relationship between the GMI ratings and future shareholder returns (both raw returns and the sector-size-relative returns) was also found. In addition, the portfolio simulation results which allocated firms on the basis of high, medium and low GMI scores indicated that both the high and medium GMI portfolios significantly outperformed the low GMI scoring portfolio over the 5 years covered by the analysis.
2009 Governance
  • Investors, Corporate Social Performance and Information Disclosure: An Empirical Study
  • Author: Spicer, B.
  • Journal: Accounting Review
  • This paper tests the validity of the common belief that a moderate to strong association exists between the investment value of a company's common shares and its social performance. This was achieved by testing for associations between a number of economic and financial indicators of investment value (profitability, size, total and systematic risk, price/earnings ratio) and corporate performance on one key social issue (pollution control) in a sample of companies drawn from a pollution prone industry. Some statistically significant associations were found to exist although there was a reduction in the level of these associations over time.
1978 Environmental
  • Corporate Environmental Disclosures about the Effects of Climate Change
  • Author: Stanny, E. and K. Ely
  • Journal: Corporate Social Responsibility and Environmental Management
  • Through the Carbon Disclosure Project, 315 institutional investors asked the largest public firms to respond to a questionnaire about climate change. The authors explore whether firms' disclosures directed specifically to institutional investors are related to factors that explain voluntary disclosures to investors in general, such as level of scrutiny. They find that size, previous disclosures and foreign sales are related to firms' disclosure choices.
2008 Environmental
  • Cross-Border Mergers and Differences in Corporate Governance
  • Author: Starks, L. and K. Wei
  • Journal: European Finance Association Meeting Proceeding
  • This paper examines whether corporate governance differences affect firm valuation in cross-border mergers. The authors find that takeover premiums (estimated alternatively as the abnormal returns to target firm shareholders and as the difference between offer price and preceding target firm stock price) are decreasing in the quality of the foreign bidding firm's home country governance for deals completed with stock. Correspondingly, they find that the acquiring firm stockholders' abnormal returns are increasing in the quality of the home country corporate governance.
2004 Governance
  • Socially Responsible Indexes
  • Author: Statman, M.
  • Journal: Journal of Portfolio Management
  • The study examines four socially responsible indicies in comparison to the S&P 500. The authors cannot reject the hypothesis that returns of socially responsible companies are equal to those of conventional companies.
2006 Environmental, Social, Governance
  • Socially Responsible Mutual Funds
  • Author: Statman, M.
  • Journal: Financial Analysts Journal
  • This paper reports that the Domini Social Index, an index of socially responsible stocks, did as well as the S&P 500 Index over the sample period. Socially responsible mutual funds did worse than the S&P 500 and the DSI but no worse than conventional mutual funds.
2000 Environmental, Social
  • The Wages of Social Responsibility
  • Author: Statman, M. and D. Glushkov
  • Journal: Financial Analysts Journal
  • The study finds that investors that tilt their portfolios toward stocks of companies with high scores on social responsibility receive a higher return relative to conventional investors. However investors that screen stocks associated with tobacco, alcohol, gambling, firearms, military, and nuclear operations receive and lower return relative to conventional investors.
2009 Environmental, Social, Governance
  • Evaluating the Performance of Socially Responsible Investment Funds: A Holding Data Analysis
  • Author: Stenstrom, C. and J. Thorell
  • Journal: Masters thesis, Stockholm School of Economics, Stockholm
  • This paper investigates the performance of regular mutual funds compared to Socially Responsible Investment (SRI) mutual funds. Results from the study indicate that an exclusion of companies according to norm-based screening can improve a fund's performance. However, when looking specifically at the fund management of SRI funds, the results point towards inferior performance compared to regular funds.
2010 Environmental, Social, Governance
  • Securities Laws, Disclosure, and National Capital Markets in the Age of Financial Globalization
  • Author: Stulz, R.
  • Journal: Journal of Accounting Research
  • Securities laws remain an important determinant of whether and where securities are issued, how they are valued, who owns them, and where they trade. This paper shows that mandatory disclosure through securities laws can decrease agency costs between corporate insiders and minority shareholders, but only provided the investors can act on the information disclosed and the laws cannot be weakened ex post too much through lobbying by corporate insiders.
2009 Governance
  • The Limits of Financial Globalization
  • Author: Stulz, R.
  • Journal: Journal of Finance
  • Country attributes are critical to financial decision-making because of "twin agency problems" that arise because rulers of sovereign states and corporate insiders pursue their own interests at the expense of outside investors. When these twin agency problems are significant, diffuse ownership is inefficient and corporate insiders must co-invest with other investors, retaining substantial equity.
2005 Governance
  • Globalization of Equity Markets and the Cost of Capital
  • Author: Stulz, R.
  • Journal: Journal of Applied Corporate Finance
  • In this theoretical paper, the author argues that the cost of equity capital decreases because of globalization for two important reasons. First, the expected return that investors require to invest in equity to compensate them for the risk they bear generally falls. Second, the agency costs which make it harder and more expensive for firms to raise funds become less important. The existing empirical evidence is consistent with the theoretical prediction that globalization decreases the cost of capital, but the documented effects are lower than theory expected.
1995 Governance
  • Culture, Openness, and Finance
  • Author: Stulz, R. and R. Williamson
  • Journal: Journal of Financial Economics
  • This paper shows that a country's principal religion predicts the cross-sectional variation in creditor rights better than a country's natural openness to international trade, its language, its income per capita, or the origin of its legal system. Catholic countries protect the rights of creditors less well than Protestant countries. A country's natural openness to international trade mitigates the influence of religion on creditor rights.
2003 Governance
  • The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African Boycott
  • Author: Teoh, S., I. Welch and C. Wazzan
  • Journal: Journal of Business
  • The authors study the boycott of South Africa's apartheid regime. They find that corporate involvement with South Africa was so small that the announcement of legislative/shareholder pressure or voluntary corporate divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested.
1999 Governance
  • Socially Responsible Investments: Methodology, Risk Exposure and Performance
  • Author: Ter Horst, J., C. Zhang and L. Renneboog
  • Journal: ECGI-Finance Working paper
  • This paper surveys the literature on socially responsible investments (SRI). The risk-adjusted returns of SRI funds in the U.S. and U.K. are not significantly different from those of conventional funds, whereas SRI funds in Continental Europe and Asia-Pacific strongly underperform benchmark portfolios. The volatility of money-flows is lower in SRI funds than of conventional funds, and SRI investors' decisions to invest in an SRI fund are less affected by management fees than the decisions by conventional fund investors.
2007 Environmental, Social, Governance
  • The Price of Ethics: Evidence from Socially Responsible Mutual Funds
  • Author: Ter Horst, J., C. Zhang and L. Renneboog
  • Journal: ECGI-Finance Working paper
  • The study finds that SRI funds in many European and Asia-Pacific countries strongly underperform domestic benchmark portfolios by about 5% per annum, although U.K. and U.S. SRI funds do not significantly underperform their benchmarks. SRI funds do not suffer a cost of reduced selectivity nor do SRI funds managers time the market. The screening activities of SRI funds have a significant impact on funds' risk-adjusted returns and loadings on risk factors: corporate governance and social screens generate better risk-adjusted returns whereas other screens (e.g. environmental ones) yield significantly lower returns.
2007 Environmental, Social, Governance
  • Corporate Environmental Policy and Abnormal Stock Price Returns: An Empirical Investigation
  • Author: Thomas, A.
  • Journal: Business Strategy and the Environment
  • This paper examines the correlation between the excess stock market returns and the adoption of an environmental protocol by companies. The underlying hypothesis tested is whether evidence of the adoption of environmental policy, prosecution by an environmental agency or the routinized training of staff in environmental protocols, which proxies for the willingness of managers to invest for the long term, is associated with superior economic returns to shareholders. The author finds that both the adoption of an environmental policy and prosecution for breach of environment standards have significant explanatory power in an analysis of excess returns.
2001 Environmental
  • Resource Use and Waste Management in Vietnam Hotel Industry
  • Author: Trung, D. and S. Kumar
  • Journal: Journal of Cleaner Production
  • This paper reports the results of a study conducted to assess the resource use and management in the hotel industry in Vietnam. The energy and water use, as well as the waste generated in the various hotel categories have been estimated and compared with those in other countries. The current practices in the hotels to address these issues are highlighted, and benchmarks for efficient use of resources in Vietnamese hotels are presented.
2005 Environmental
  • Corporate Social Responsibility and Financial Performance
  • Author: Tsoutsoura, M.
  • Journal: Working paper
  • The study explores and tests the sign of the relationship between corporate social responsibility and financial performance. The author finds a statistically significant positive relationship between corporate social responsibility and firm performance.
2004 Environmental, Social, Governance
  • Corporate Social Performance and Organizational Attractiveness to Prospective Employees
  • Author: Turban, D. and D. Greening
  • Journal: Academy of Management Journal
  • Drawing on propositions from social identity theory and signaling theory, the authors hypothesize about CSP. Results indicate that independent ratings of CSP are related to firms' reputations and attractiveness as employers, suggesting that a firm's CSP may provide a competitive advantage in attracting applicants.
1997 Social
  • Banks as Coordinators of Economic Growth
  • Author: Ueda, K.
  • Journal: IMF Institute
  • This theoretical paper formulates a canonical growth model with externalities as a game among consumers, firms, and banks. Each bank forms a firm group endogenously and internalizes externalities directly within a firm group and indirectly across firm groups. This unique equilibrium requires a condition that separates competition for sources and uses of funds. Banks are shown to competitively internalize production externalities and facilitate economic growth.
2006 Governance
1985 Governance
  • Labor Flexibility and Firm Performance
  • Author: Valverde, M., O. Tregaskis and C. Brewster
  • Journal: International Advances in Economic Research
  • Although there is a strong argument that labor flexibility can lead to greater financial success through the reduction in labor costs and the ability to use labor resources more efficiently, only one measure of flexible HR practices led to increased firm performance, namely the use of temporary workers.
2000 Social
  • Employee Well-Being, Firm Leverage, and Bankruptcy Risk
  • Author: Verwijmeren, P. and J. Derwall
  • Journal: Journal of Banking & Finance
  • Employees of liquidating firms are likely to lose income and non-pecuniary benefits of working for the firm, which makes bankruptcy costly for employees. This paper examines whether firms take these costs into account when deciding on the optimal amount of leverage. The authors find that firms with leading track records in employee well-being significantly reduce the probability of bankruptcy by operating with lower debt ratios, and they have better credit ratings.
2010 Social
  • How Are U.S. Family Firms Controlled?
  • Author: Villalonga, B. and R. Amit
  • Journal: Review of Financial Studies
  • In large U.S. corporations, founding families are the only blockholders whose control rights on average exceed their cash-flow rights. The primary sources of the wedge (a pyramid) are dual-class stock, disproportionate board representation, and voting agreements. This papers findings suggest that the potential agency conflict between large shareholders and public shareholders in the United States is as relevant as elsewhere in the world.
2009 Governance
  • Governance with Poor Investor Protection: Evidence from Top Executive Turnover in Italy
  • Author: Volpin, P.
  • Journal: Journal of Financial Economics
  • This paper studies the determinants of executive turnover and firm valuation as a function of ownership and control structure in Italy, a country that features low legal protection for investors, firms with controlling shareholders, and pyramidal groups. The results suggest that there is poor governance, as measured by a low sensitivity of turnover to performance and a low Q ratio, when (i) the controlling shareholders are also top executives, (ii) the control is fully in the hands of one shareholder and is not shared by a set of core shareholders, and (iii) the controlling shareholders own less than 50% of the firm's cash-flow rights.
2002 Governance
  • Principle Guided Investing: The Use of Negative Screens and Its Implications for Green Investors
  • Author: Von Arx, U.
  • Journal: WIF Institute of Economic Research Working Paper
  • This paper examines how green investors can induce firms to invest in cleaner production technology by using exclusionary investment screens. SRI is more likely to be successful when abatement costs are low and if principle guided investors are numerous and have homogenous investment principles. The transformation process becomes more probable when shares of clean firms are viewed as a separate asset class by all investors. Green investors have to accept lower returns from shares of clean firms, even in the case of positive externalities.
2005 Environmental
  • The Corporate Social Performance- Financial Performance Link
  • Author: Waddock, S. and S. Graves
  • Journal: Strategic Management Journal
  • Using a greatly improved source of data on corporate social performance (KLD), this paper reports the results of a rigorous study of the empirical linkages between financial and social performance. Corporate social performance (CSP) is found to be positively associated with prior financial performance, supporting the theory that slack resource availability and CSP are positively related. CSP is also found to be positively associated with future financial performance, supporting the theory that good management and CSP are positively related.
1997 Environmental
2005 Environmental
  • Does the Market Value Corporate Environmental Responsibility? An Empirical Examination
  • Author: Wahba, H.
  • Journal: Corporate Social Responsibility and Environmental Management
  • The aim of this research was to present empirical evidence regarding the influence of engaging in environmental responsibility on corporate market value in Egypt. The market compensates those firms that care for their environment, as environmental responsibility exerted a positive and significant coefficient on the firm market value measured by Tobin's q ratio. This aligns with stakeholder theory and resource-based theory arguments, and provides supporting evidence that it pays to be environmentally responsive.
2008 Environmental
  • The Public Fiduciary: Emerging Themes in Canadian Fiduciary Law for Pension Trustees
  • Author: Waitzer, E.
  • Journal: Working paper
  • This paper reviews the efforts of the Supreme Court of Canada to develop a broader conceptual framework for fiduciary duties and consider steps that might be taken to address and mitigate liability in respect of these duties in the context of pension fund administration. The authors conclude by considering the trajectory of the law and how it appears to be positioning fiduciaries with public responsibilities and, in doing so, could alter legal and governance precepts.
2013 Governance
2010 Environmental, Social
  • Corporate Governance Transfer and Synergistic Gains from Mergers and Acquisitions
  • Author: Wang, C. and F. Xie
  • Journal: Review of Financial Studies
  • The authors present evidence on the benefits of changes in control from mergers and acquisitions. They find that the stronger the acquirer's shareholder rights relative to the target's, the higher the synergy created by an acquisition. They also find that the synergy effect of corporate governance is shared by target shareholders and acquiring shareholders, in that both target returns and acquirer returns increase with the shareholder-rights difference between the acquirer and the target.
2009 Governance
  • Ownership Structure and Environmental Disclosure: Taiwan Evidence
  • Author: Wang, J., H. Hsiung and W. Ku
  • Journal: International Research Journal of Finance and Economics
  • This study investigates the correlation between the disclosure of environmental information and ownership structures. The higher the degree of discrepancy between the voting rights of controlling shareholders and the ratio of cash flow rights in an environmentally sensitive industry, the lower the level of corporate disclosure of environmental information. Companies in sensitive industries tend toward detailed disclosure of environmental information. Regarding firms in non-sensitive industries, the three corporate governance mechanisms considered have no significant impact on corporate disclosure of environmental information.
2012 Environmental
  • Impact of Environmental Management System Implementation on Financial Performance: A Comparison of Two Corporate Strategies
  • Author: Watson, K., B. Klingenberg, T. Polito and T. Geurts
  • Journal: Management of Environmental Quality
  • This paper proposes a framework, adapted from the cost of quality literature, that allows managers to quantify environmental decisions to determine the impact of EMS on a corporation's profit/loss statement. Statistical analysis of EMS versus non-EMS adopters finds that EMS adopters do not experience superior financial performance. It can therefore be concluded that on one hand, the expected competitive advantage of EMS strategies is not yet fully exploited. On the other hand, it also indicates that the perceived cost of EMS implementation does not negatively affect financial performance.
2004 Environmental
  • Measuring the Impact of Socially Responsible Investing
  • Author: Weber, O.
  • Journal: Working paper
  • This article presents an overview of current measurement practices from the financial world and assesses whether they are effective in capturing the real social, ecological and financial impact of SRI. The authors conclude that measuring the impact of SRI should comprise both intended and unintended positive and negative impact. It should include all stakeholders and the total investment portfolio.
2013 Environmental, Social
  • The Financial Performance of SRI Funds between 2002 and 2009
  • Author: Weber, O., M. Mansfeld and E. Schirrmann
  • Journal: Working paper
  • This paper finds that the sample SRI fund portfolio reached a significantly higher return than MSCI World Index. Furthermore with respect to the financial performance of SRI funds, the beta-weight of the financial rating of the funds was positive while the beta-weight of the sustainability rating was negative.
2010 Environmental, Social
  • Outside Directors and CEO Turnover
  • Author: Weisbach, M.
  • Journal: Journal of Financial Economics
  • This paper examines the relation between the monitoring of CEOs by inside and outside directors and CEO resignations. CEO resignations are predicted using stock returns and earnings changes as measures of prior performance. There is a stronger association between prior performance and the probability of a resignation for companies with outsider-dominated boards than for companies with insider-dominated boards.
1988 Governance
  • Corporate Finance and Corporate Governance
  • Author: Williamson, O.
  • Journal: Journal of Finance
  • A combined treatment of corporate finance and corporate governance is herein proposed. Debt and equity are treated not mainly as alternative financial instruments, but rather as alternative governance structures. The author argues that whether a project should be financed by debt or by equity depends principally on the characteristics of the assets.
1988 Governance
  • Endogeneity and the Dynamics of Internal Corporate Governance
  • Author: Wintoki, M., J. Linck and J. Netter
  • Journal: Journal of Financial Economics
  • The authors use a well-developed dynamic panel generalized method of moments (GMM) estimator to alleviate endogeneity concerns in two aspects of corporate governance research: the effect of board structure on firm performance and the determinants of board structure. The authors re-examine the relation between board structure and performance using the GMM estimator, and find no causal relation between board structure and current firm performance.
2012 Governance
  • Controlling Shareholders and Corporate Value: Evidence from Thailand
  • Author: Wiwattanakantang, Y.
  • Journal: Pacific-Basin Finance Journal
  • The study finds that the presence of controlling shareholders is associated with higher performance in a firm, when measured by accounting measures such as the ROA and the sales-asset ratio. The controlling shareholders' involvement in the management, however, has a negative effect on the performance. The negative effect is more pronounced when the controlling shareholder-and-manager's ownership is at 25-50%.
2001 Governance
  • Research Notes. Layoff Announcements and Stockholder Wealth
  • Author: Worrell, D., W. Davidson and V. Sharma
  • Journal: Academy of Management Journal
  • This paper tested the reaction of the securities market to 194 layoff announcements prior to the Worker Adjustment and Retraining Notification Act. Investors reacted more negatively when financial reasons were cited, probably more attributable to the fact that layoffs signaled lower returns ahead than to disagreements about employee management.
1991 Social
  • Competitiveness through Management of Diversity: Effects on Stock Price Valuation
  • Author: Wright, P., S. Ferris, J. Hiller and M. Kroll
  • Journal: Academy of Management Journal
  • Announcement of both Department of Labor awards for exemplary affirmative action programs and damage awards from the settlement of discrimination lawsuits show an effect on firms' stock returns. High-quality affirmative action programs contribute to sustaining a competitive advantage and are valued in the market place.
1995 Social
  • Financial Markets and the Allocation of Capital
  • Author: Wurgler, J.
  • Journal: Journal of Financial Economics
  • This study finds that, across 65 countries, the efficiency of capital allocation is negatively correlated with the extent of state ownership in the economy, positively correlated with the amount of firm-specific information in domestic stock returns, and positively correlated with the legal protection of minority investors. In particular, strong minority investor rights appear to curb overinvestment in declining industries.
2000 Governance
  • Family Control and Corporate Governance: Evidence from Taiwan
  • Author: Yeh, Y., T. Lee and T. Woidtke
  • Journal: International Review of Finance
  • The study finds that family control is even more prevalent than previously suggested and that a non-linear relationship exists between family control and relative firm performance. Family-controlled firms that have low levels of control have lower relative performance than both family-controlled firms with high levels of control and widely held firms. This paper also finds that a positive valuation effect exists when controlling families hold less than 50% of a firms board seats.
2001 Governance
  • Convergence of Corporate Governance: Critical Review and Future Directions
  • Author: Yoshikawa, T. and A. Rasheed
  • Journal: Corporate Governance
  • In this theoretical paper, the researchers examine the question of convergence of corporate governance across countries. They find that despite the vigorous intellectual position of the proponents of convergence, there is only limited evidence to indicate that such convergence is actually occurring. Even when there is ostensible convergence, much of it is convergence in form rather than substance, and governance convergence is not a context-free phenomenon.
2009 Governance
  • Family Control and Ownership Monitoring in Family-Controlled Firms in Japan
  • Author: Yoshikawa, T. and A. Rasheed
  • Journal: Journal of Management Studies
  • The researchers examined the relationships between family controlled firms, dividend payouts, and profitability in Japan. The study finds that family control was positively related to dividend payouts. Furthermore, they found that while foreign ownership interacted with family control to reduce dividend payouts and increase profitability, bank ownership did not have such an effect.
2009 Governance
  • The Choice of Corporate Liquidity and Corporate Governance
  • Author: Yun, H.
  • Journal: Review of Financial Studies
  • The authors study how corporate governance influences firms' choices between cash and lines of credit. Stakeholders may disagree about firms' liquidity choices because they differ in the allocation of ex-post control rights for the firms' liquidity reserves. Using state-level changes in takeover protection as exogenous shocks to corporate governance, the authors find that firms increase cash relative to lines of credit when the threat of takeover weakens.
2009 Governance
  • Corporate Governance and Implications for Minority Shareholders in Turkey
  • Author: Yurtoglu, B.
  • Journal: Journal of Corporate Ownership & Control
  • While holding companies and non-financial firms are the most frequent owners at the direct level, families ultimately own more than 80 percent of all publicly listed firms in Turkey. The authors find that using pyramids and dual class shares to separate control rights from cash flow rights results in significantly lower market to book ratios, suggesting large agency costs due to the conflict of interests between controlling families and minority shareholders.
2003 Governance
  • Ownership, Control and Performance of Turkish Listed Firms
  • Author: Yurtoglu, B.
  • Journal: Empirica
  • Business ownership is highly concentrated in Turkey, with families being the dominant shareholders. Changes in large shareholdings do not suggest the existence of an active market for share stakes. The authors show that concentrated ownership and pyramidal structures have a negative effect on firm performance as reflected in lower return on assets, market to book ratios, and dividend payments.
2000 Governance
2013 Social, Governance
  • The Effect of Environmental and Social Performance on the Shareholder Value of European Stock Corporations
  • Author: Ziegler, A., K. Rennings and M. Schroder
  • Journal: Centre for European Economic Research
  • This paper considers the effect of sustainability performance of European stock corporations on their average monthly stock return from 1996 to 2001. The sustainability performance measure is evaluated by the environmental and social risks of a corporation compared to other corporations in the same industry. The most important result of the econometric analysis is that an increasing environmental sector performance has a significantly positive influence on the shareholder value. In contrast, an increasing social sector performance has a negative influence on the average monthly stock returns.
2002 Environmental
  • Corporate Responses to Climate Change and Financial Performance: The Impact of Climate Policy
  • Author: Ziegler, A., T. Busch and V. Hoffmann
  • Journal: Working paper
  • This papers' portfolio analysis shows a negative relationship between corporate activities to address climate change and stock performance. However the authors find that a trading strategy that bought stocks of corporations with a higher level of responses to climate change and sold stocks of corporations with a lower level, led to negative abnormal returns in regions and periods with less ambitious climate policy, but to positive abnormal returns in regions and periods with stringent climate policy.
2009 Environmental
  • In Search of New Foundations
  • Author: Zingales, L.
  • Journal: Journal of Finance
  • In this theoretical paper, the author argues that corporate finance theory, empirical research, practical applications, and policy recommendations are deeply rooted in an underlying theory of the firm that ineffectively handles newly emerging types of firms. This paper outlines vital characteristics of a new theory and how such a theory could change corporate finance, both theoretically and empirically.
2002 Governance