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Abstract:
Data on corporate governance and disclosure practices reveal wide within-country variation that decreases with the strength of investors' legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data in 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices and that 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.

Corporate Governance, Investment Opportunities, External Financing, Ownership, Legal Environment, Valuation

Abstract:
Newly released data on corporate governance and disclosure practices reveal wide within-country variation, with the variation increasing as legal environment gets less investor friendly. This paper examines why firms practice high-quality governance when law does not require it; firm attributes related to the quality of governance; how the attributes interact with legal environment; and the relation between firm valuation and corporate governance. A simple model, in which a controlling shareholder trades off private benefits of diversion against costs that vary across countries and time, identifies three relevant firm attributes: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data on 859 firms in 27 countries, we find that firms with greater growth opportunities, greater needs for external financing, and more concentrated cash flow rights practice higher-quality governance and disclose more. Moreover, firms that score higher in governance and transparency rankings are valued higher in the stock market. Equally important, all these relations are stronger in countries that are less investor friendly, demonstrating that firms do adapt to poor legal environments to establish efficient governance practices.

Corporate governance, investment opportunities, external financing

Abstract:
Newly released data on corporate governance and disclosure practices reveal wide within-country variation, with the variation increasing as legal environment gets less investor friendly. This paper examines why firms practice high-quality governance when law does not require it; firm attributes related to the quality of governance; how the attributes interact with legal environment; and the relation between firm valuation and corporate governance. A simple model, in which a controlling shareholder trades off private benefits of diversion against costs that vary across countries and time, identifies three relevant firm attributes: investment opportunities, external financing, and ownership structure. Using firm-level governance and transparency data on 859 firms in 27 countries, we find that firms with greater growth opportunities, greater needs for external financing, and more concentrated cash flow rights practice higher-quality governance and disclose more. Moreover, firms that score higher in governance and transparency rankings are valued higher in the stock market. Equally important, all these relations are stronger in countries that are less investor friendly, demonstrating that firms do adapt to poor legal environments to establish efficient governance practices.

Corporate Governance, External Financing, Valuation

Abstract:
This paper analyzes conflicts of interest in proxy voting by mutual funds using newly-available data on funds' voting records for 2004. We first examine mutual funds' ties to corporate clients created via pension fund business and their patterns of portfolio ownership. We then link these to proxy votes at specific firms and to overall voting policies for 21 mutual fund families, CalPERS and CREF. Among large fund families, levels of ownership are essentially independent of client relationships between mutual funds and firms, and funds are no more likely to vote with management at client firms than non-clients. At the policy level, however, we find a positive relation between the volume of pension business a fund's parent does and its propensity to vote with management.

Conflicts of interest, proxy voting, mutual funds, employee pension plans

Abstract:
We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.

Citations, innovations in economics

Abstract:
We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.

Abstract:
We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.

Abstract:
We compile the list of articles published in major refereed economics journals during the last 35 years that have received more than 500 citations. We document major shifts in the mode of contribution and in the importance of different sub-fields: Theory loses out to empirical work, and micro and macro give way to growth and development in the 1990s. While we do not witness any decline in the primacy of production in the United States over the period, the concentration of institutions within the U.S. hosting and training authors of the highly-cited articles has declined substantially.

citations, innovations in economics

Abstract:
We study the location-specific component in research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We decompose this university fixed effect and find that its decline is due to the reduced importance of physical access to productive research colleagues. We also find that salaries increased the most where the estimated externality dropped the most, consistent with the hypothesis that the de-localization of this externality makes it more difficult for universities to appropriate any rent. Our results shed some light on the potential effects of the internet revolution on knowledge-based industries.

Abstract:
We study the location-specific component in research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We decompose this university fixed effect and find that its decline is due to the reduced importance of physical access to productive research colleagues. We also find that salaries increased the most where the estimated externality dropped the most, consistent with the hypothesis that the de-localization of this externality makes it more difficult for universities to appropriate any rent. Our results shed some light on the potential effects of the internet revolution on knowledge-based industries.

Faculty productivity, firm boundaries, knowledge-based industries, theory of the fir

Abstract:
Korea has significantly improved its quality of corporate governance since the 1997 financial crisis. Most notable are improved corporate transparency, better alignment of managerial incentives to shareholder value, and more effective oversight by the board. A number of players also have emerged as key external monitors and enforcers of good governance. There remain, however, substantial differences between non-chaebol and chaebol affiliated firms and also across chaebol. This paper describes these differences and the current state of Korean corporate governance.

corporate governance, chaebol, Korea financial crisis

Abstract:
Our results highlight the importance of interaction among management, labor, and investors in shaping corporate governance. We 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.

Labor Laws, Stakeholders, Investor Protection, Management Turnover, Layoffs, Asset Sales, Financial Leverage, Ownership Concentration

Abstract:
We investigate how governance affects investor confidence and costs of raising external equity. Using stock price reaction to SEOs as a measure of investor confidence, we document that investors become more worried about non-productive use of SEO proceeds when (1) states pass laws with deterrent effects against hostile takeover attempts, (2) firms raise takeover defenses prior to SEOs, (3) managerial incentives are less aligned with shareholder value, and (4) firms engage in shareholder-value-reducing acquisitions. The economic magnitudes of the impacts of these governance measures are surprisingly large, explaining virtually all the negative investor reaction to SEOs. These findings challenge the notion that the mere act of issuing equity conveys negative signal about the firm. Rather, the governance structure surrounding the equity issuance has an overriding influence on investor confidence in SEOs.

Governance, Equity Issuance, Business Combination Statutes, Takeover defenses, Managerial Incentives, Signaling, Adverse Selection Problem

Abstract:
The corporation is where capital meets labor, a symbiotic relationship in which one cannot function without the other. Workers influence governance through various channels, as those who are governed inevitably influence the process of governing through their actions. To illustrate, I describe cases in which workers forced transparency, restrained managerial compensation, and impacted corporate performance. I summarize empirical evidence that properly motivating labor through employee stock ownership plans increases worker productivity, benefiting both shareholders and workers. However, socio-political and legal institutions bestowing workers with excessive influence vis-a-vis investors induces under performing management to form an alliance with labor, wherein the management engages in value-destroying decisions to garner worker support. American firms may not be immune from harmful effects of such alliances, especially those past their glory days. I conclude by calling for a balanced governance system geared toward shareholder value enhancement, which at the same time encourages worker participation and remains cognizant of their welfare. Such a system, I believe, will lead to greater welfare for all stakeholders.

To reach these conclusions, I begin by reviewing the rationale for shareholder value maximization. Although its importance is reaffirmed, single-minded focus on shareholder value at the expense of all other stakeholders is shortsighted. I also review recent articles combining the traditional corporate finance approach with the law and finance paradigm, which helps identify firm attributes explaining within country variation in individual companies' governance and disclosure practices. These papers also lead to important insights into the international flow of capital and explain why foreign acquirers cherry pick in cross-border acquisitions when they enter emerging markets.

corporate governance, labor relations, ESOPs

Abstract:
Employee share ownership plans (ESOPs) increase employee compensation and firm valuation, implying positive productivity gains. How the gains are divided depends on the size of ESOPs. When the plan has less than 5% of outstanding shares, compensation increases are small; when it is larger, compensation increases by a permanent 4.5%. The size has an opposite effect on shareholder value. Small ESOPs have substantially positive effects on firm valuation, whereas large plans show no valuation effects. This is robust to firm fixed effects and to controls for selection biases and time-varying firm characteristics. Financial leverage and unionization also influence the division of gains by affecting worker bargaining power. With higher financial leverage, employees gain less and stockholders gain more. The reverse is true with unionization rate.

ESOPs, 401-K Plans, Employee Incentives, Worker Compensation

Abstract:
We find a hump shaped relation between Tobin’s Q and CEO share ownership, but only when external pressure for good governance is weak, where the pressure is measured by product market competition and institutional ownership concentration. When external governance is strong, CEO share ownership is unrelated to Tobin’s Q. These results are robust to firm or CEO-firm pair fixed effects, alternative definitions of key variables, different statistical properties between strong and weak external governance regimes, founder effects, reverse causality, and other endogeneity issues. The hump shaped relation appears to be a manifestation of some CEOs capturing incentive contracts under weak external governance, while no relation under strong external governance is consistent with the contracting view that CEO ownership is a component of equilibrium contracts.

Managerial Share Ownership, Tobin’s Q, Product Market Competition, Institutional Investor Concentration, Governance

Abstract:
How CEO share ownership is related to Tobin’s Q depends on the strength of external governance. When external pressure for good governance is weak, the relation is hump shaped; when external governance is strong, there is no relation. The strength of external governance is proxied by product market competition and institutional ownership concentration. The results are robust to controlling for firm or CEO-firm pair fixed effects and to using alternative regression specifications, definitions of key variables, and sample constructions. The results are also robust to accounting for endogeneity issues concerning external governance proxies and CEO ownership. The lack of significant relation under strong external governance is consistent with the contracting view that CEO ownership reflects equilibrium incentive contracts. The hump shaped relation appears to be a manifestation of CEOs’ capture of incentive contracts under weak external governance.

Managerial Share Ownership, Tobin’s Q, Product Market Competition, Institutional Investor Concentration, Governance, CEO Power

Abstract:
We study the location-specific component in research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We decompose this university fixed effect and find that its decline is due to the reduced importance of physical access to productive research colleagues. We also find that salaries increased the most where the estimated externality dropped the most, consistent with the hypothesis that the de-localization of this externality makes it more difficult for universities to appropriate any rent. Our results shed some light on the potential effects of the internet revolution on knowledge-based industries.

Faculty productivity, firm boundaries, knowledge-based industries, theory of the firm

Abstract:
We observe two waves of overseas programs offered by U.S. universities: A supply driven wave in the late 1980s to the mid 1990s, and a current wave beginning in the early 2000s, with distinctly different players. We compile a comprehensive dataset on overseas degree programs and host country characteristics. The data reveal that universities behave much like multinational corporations when they make investments overseas. Finance plays an important role. Real GDP per capita and tertiary school age population are two key determinants of the location choice. Asia and the Middle East are popular destinations for U.S. overseas programs, driven by market size and oil money, respectively. U.S. universities offer lower tuition discounts in countries with higher real GDP per capita. Undergraduate degree programs are discounted more than master degree programs because of greater local competition. When universities reduce costs through partnerships with local universities or through financial support from local governments, the savings are not passed on to local students in the form of lower tuition.

higher education, overseas program, foreign direct investment

Abstract:

Abstract:
This article begins with the premise that since the corporation involves a symbiotic relationship between labor and capital, a single-minded focus on shareholder value is likely to be shortsighted, and some degree of employee influence on corporate governance has the potential to increase an organization's efficiency and value. But the set of findings and implications that emerge from the author's analysis is a complicated one. On the one hand, “moderate” levels of employee ownership (for example, the 6% ownership of the average American ESOP) are associated with increases in corporate productivity and values as well as worker morale and productivity. On the other hand, majority employee ownership and corporate ownership and governance systems like “co-determination” that give labor a major say on governance issues often lead to worker-management alliances that end up hurting the firm's investors - and, in the longer run, the workers themselves - by reducing competitiveness. The author ends with a call for a balanced governance system that, while aiming to maximize the total value of the enterprise, seeks to encourage the participation and emotional allegiance of workers - and indeed all important corporate stakeholders.

Abstract:
This article is an exploratory examination of the benefits and risks associated with opening of stock markets. Specifically, we estimate changes in the level and volatility of stock returns, inflation, and exchange rates around market openings. We find that stock returns increase immediately after market opening without a concomitant increase in volatility. Stock markets become more efficient as determined by testing the random walk hypothesis. We find no evidence of an increase in inflation or an appreciation of exchange rates. If anything, inflation seems to decrease after market opening as do the volatility of inflation and volatility of exchange rates.

Abstract:
This paper examines the benefits and risks of market internationalization by analyzing the effect of recent market openings in developing countries. We estimate changes in the return and volatility of stock prices, portfolio flows, and the volatility of portfolio flows around market openings. We find that stock prices, on average, increase upon market opening without a significant change in volatility. Furthermore, portfolio inflows to these countries are significantly positive following market openings, but without a concurrent increase in the volatility of portfolio flows; hence, the concern about "hot money" appears to be unwarranted.