Using a unique panel dataset that tracks corporate board development from a firm's IPO through 10 years later, we find that: (i) board size and independence increase as firms grow and diversify over ...time; (ii) board size—but not board independence—reflects a tradeoff between the firm-specific benefits and costs of monitoring; and (iii) board independence is negatively related to the manager's influence and positively related to constraints on that influence. These results indicate that economic considerations—in particular, the specific nature of the firm's competitive environment and managerial team—help explain cross-sectional variation in corporate board size and composition. Nonetheless, much of the variation in board structures remains unexplained, suggesting that idiosyncratic factors affect many individual boards’ characteristics.
Informed Trading in Stock and Option Markets Chakravarty, Sugato; Gulen, Huseyin; Mayhew, Stewart
The Journal of finance (New York),
June 2004, Volume:
59, Issue:
3
Journal Article
Peer reviewed
We investigate the contribution of option markets to price discovery, using a modification of Hasbrouck's (1995) "information share" approach. Based on five years of stock and options data for 60 ...firms, we estimate the option market's contribution to price discovery to be about 17% on average. Option market price discovery is related to trading volume and spreads in both markets, and stock volatility. Price discovery across option strike prices is related to leverage, trading volume, and spreads. Our results are consistent with theoretical arguments that informed investors trade in both stock and option markets, suggesting an important informational role for options.
To understand the economic value of computers, one must broaden the traditional definition of both the technology and its effects. Case studies and firm-level econometric evidence suggest that: 1) ...organizational “investments” have a large influence on the value of IT investments; and 2) the benefits of IT investment are often intangible and disproportionately difficult to measure. Our analysis suggests that the link between IT and increased productivity emerged well before the recent surge in the aggregate productivity statistics and that the current macroeconomic productivity revival may in part reflect the contributions of intangible capital accumulated in the past.
Takeover Defenses of IPO Firms Field, Laura Casares; Karpoff, Jonathan M.
The Journal of finance (New York),
October 2002, Volume:
57, Issue:
5
Journal Article
Peer reviewed
Many firms deploy takeover defenses when they go public. IPO managers tend to deploy defenses when their compensation is high, shareholdings are small, and oversight from nonmanagerial shareholders ...is weak. The presence of a defense is negatively related to subsequent acquisition likelihood, yet has no impact on takeover premiums for firms that are acquired. These results do not support arguments that takeover defenses facilitate the eventual sale of IPO firms at high takeover premiums. Rather, they suggest that managers shift the cost of takeover protection onto nonmanagerial shareholders. Thus, agency problems are important even for firms at the IPO stage.
Increased enforcement can displace crime to alternative lawbreaking methods. This paper examines a customs reform in the Philippines that raised enforcement against a specific method of avoiding ...import duties. Increased enforcement applied only to shipments from some countries, so shipments from other countries serve as a control group. Increased enforcement reduced the targeted duty-avoidance method, but caused substantial displacement to an alternative method. The hypothesis of zero change in total duty avoidance cannot be rejected. Displacement was greater for products with higher tariff rates and import volumes, consistent with the existence of fixed costs of switching to alternative duty-avoidance methods.
Given the governance issues arising from the separation of ownership from control, the ability to align managerial and shareholder interests via the managerial ownership of equity is an important ...topic of inquiry. The findings of the primarily US based literature suggest that management is aligned at low and possibly high levels of ownership but is entrenched (pursuing self interests) at intermediate ownership levels. This paper extends the US based literature in a number of important ways. First, the analysis is extended to the UK where there are important differences, as compared to the US, in the governance system. A comparative analysis of key differences between the US and UK governance systems suggest that management should become entrenched at higher levels of ownership in the UK. Some of the reasons for this suggestion are that in the UK management do not have the same freedom as their US counterparts to mount takeover defenses and institutional investors in the UK are more able to co-ordinate their monitoring activities. The empirical results of the paper confirm that UK management become entrenched at higher levels of ownership than their US counterparts. Second, the results from extending the analysis to consider different measures of firm performance and a more generalized form of the relationship confirm the general finding of the US literature of a non-linear relationship between firm performance and managerial ownership.
This article explores the fundamental factors that affect cross-country stock return correlations. Using transactions data from 1988 to 1992, we construct overnight and intraday returns for a ...portfolio of Japanese stocks using their NYSE-traded American Depository Receipts (ADRs) and a matched-sample portfolio of U.S. stocks. We find that U.S. macroeconomic announcements, shocks to the Yen/Dollar foreign exchange rate and Treasury bill returns, and industry effects have no measurable influence on U.S. and Japanese return correlations. However, large shocks to broad-based market indices (Nikkei Stock Average and Standard and Poor's 500 Stock Index) positively impact both the magnitude and persistence of the return correlations.
We propose a structural approach to measuring brand and subbrand value using observational data. Brand value is defined as the difference in equilibrium profit between the brand in question and its ...counterfactual unbranded equivalent on search attributes. Our model allows us to make this computation rigorously, taking into account competitors' and retailers' reactions in the real and counterfactual situations. We illustrate our method using quarterly city-level data on ready-to-eat breakfast cereals, and compare our brand value estimates with those obtained from previously used reduced-form methods. A key advantage of our methodology is that it provides estimates of the value of brands to firms—manufacturers and retailers—taking into account the brand's value to consumers as well as its impact on firm decisions.
This paper considers the role of innovation in determining export behaviour for a sample of UK firms including both innovating and non-innovating firms. Export behaviour is defined both as the ...probability of a firm exporting and the propensity to export of the exporting firms. An empirical model of the determinants of export behaviour is estimated, and the determinants are found to vary between innovating and non-innovating firms. Non-innovative firms are found to be more likely to export than innovative firms of the same size. However, the number of past innovations has a positive impact on the probability of an innovative firm exporting. The paper concludes that the capacity to innovate changes the behaviour of the firm relative to non-innovating firms.
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