Archive for May, 2009

Corporate Governance and Liquidity

by Kee H. Chung, John Elder, Jang-Chul Kim for SUNY at Buffalo – School of Management at SSRN, May 31, 2009.

We investigate the empirical relation between corporate governance and stock market liquidity. We find that firms with better corporate governance have narrower spreads, higher market quality index, smaller price impact of trades, and lower probability of information-based trading. In addition, we show that changes in our liquidity measures are significantly related to changes in the governance index over time. These results suggest that firms may alleviate information-based trading and improve stock market liquidity by adopting corporate governance standards that mitigate informational asymmetries. Our results are remarkably robust to alternative model specifications, across exchanges, and different measures of liquidity…

To read the complete paper click here.

The Current Economic and Financial Crisis: A Gender Perspective

by The Levy Economics Institute of Board College, May 30, 2009.

Widespread economic recessions and protracted financial crises have been documented as setting back gender equality and other development goals in the past. In the midst of the current global crisis—often referred to as “the Great Recession”—there is grave concern that progress made in poverty reduction and women’s equality will be reversed. Indeed, for many developing countries it is particularly worrisome that, through no fault of their own, the global economic downturn has exacerbated effects from other crises manifest in food insecurity, poverty, and increasing inequality. This paper explores both well-known and less discussed paths of transmission through which crises affect women’s world of work and overall wellbeing. As demand for textile and agricultural exports decline, along with tourism, job losses are expected to rise in these female-intensive industries. In addition, the gendered nature of the world of work suggests that women will see an increase in their share among informal and vulnerable workers worldwide, and will also supply more of their labor under unpaid conditions. The latter is particularly important in the context of developing countries, where many production activities take place outside the strict boundaries of the market. The paper also makes this point: examined through the prism of gender equality, the ability of the state to implement countercyclical policies matters greatly. If policy responses at the national and international levels end up aggravating inequities, gender equality processes face many more barriers, especially among the poor…

To download this paper please click here.

Did the financial crisis kill the governance reform agenda?

by AlfredoGonzalez Briseno for blog.worldbank.org, May 27, 2009.

A few days ago, Dani Rodrik opened an interesting discussion with his post “How the financial crisis has killed the
governance reform agenda.”  Basically what he says is that “we need to downplay the role of improved governance as
a causal mechanism for economic growth.”
His main argument is that the financial crisis in the US did not only undercovered issues of capture and corruption
in this country -as Simon Johnson and Dani Kaufmann have argued- but also showed that it is possible to be corrupt
and rich at the same time.  Based on this evidence and on his previous belief that the causal relation between
governance and growth was never proofed to be strog, he concluded that even though governance reform is a good
thing to do, it should not be confused for a growth strategy.

A few days ago, Dani Rodrik opened an interesting discussion with his post “How the financial crisis has killed the governance reform agenda.” Basically what he says is that “we need to downplay the role of improved governance as a causal mechanism for economic growth.”

His main argument is that the financial crisis in the US did not only undercovered issues of capture and corruption in this country -as Simon Johnson and Dani Kaufmann have argued- but also showed that it is possible to be corrupt and rich at the same time.  Based on this evidence and on his previous belief that the causal relation between governance and growth was never proofed to be strog, he concluded that even though governance reform is a good thing to do, it should not be confused for a growth strategy…(continue reading by clicking here)

Britain Trains Women to Be Directors

by Joseph McCafferty for Directorship Boardroom Intelligence,  May 26, 2009.

Recent research in Britain has found that businesses want to appoint women to their boards but cannot find enough experienced female candidates, reports The Financial Times.

Kathleen O’Donovan, deputy chairwoman of Great Portland estates and non-executive director at Prudential, Trinity Mirror, and ARM Holdings, co-founded with Isabel Bird, Bird & Co. Executive Board and Mentoring. The firm interviewed 36 directors of FTSE companies, public sector, and not-for-profit organizations, two-thirds of them women.

O’Donovan became the first FTSE 100’s first female finance director at BTR in 1991, but has found that businesses cannot appoint women as they’d like because not enough women are trained…(to read the complete article, click here)

CEO Centrality

by Lucian A. Bebchuk , Martijn Cremers, Urs Peyer for Harvard University at SSRN, May 10 2009.

We investigate the relationship between CEO centrality – the relative importance of the CEO within the top executive team in terms of ability, contribution, or power – and the value, performance and behavior of public firms. Our proxy for CEO centrality is the fraction of the aggregate compensation of the top-five executive team captured by the CEO. We find that CEO centrality is negatively associated with firm value (as measured by industry-adjusted Tobin’s Q). This result is robust to controlling for all standard controls in Q regressions as well as additional controls such as CEO tenure, whether the CEO is a founder or a large owner, and whether the company’s top-five aggregate compensation is high or low relative to peer companies. CEO centrality also has a rich set of relations with firms’ behavior and performance. In particular, CEO centrality 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’s receiving a “lucky” option grant at the lowest price of the month, (iv) greater tendency to reward the CEO for luck due to positive industry-wide shocks, (v) lower performance sensitivity of CEO turnover, and (vi) lower firm-specific variability of stock returns over time…

To read the complete paper click here.

The Role of Boards of Directors in Corporate Governance: A Conceptual Framework & Survey

by Renee B. Adams, Benjamin E. Hermalin and Michael S. Weisbach for Fisher College of Business at SSRN, May 4, 2009.

Abstract:
This paper is a survey of the literature on boards of directors, with an emphasis on research done subsequent to the Hermalin and Weisbach (2003) survey. The two questions most asked about boards are what determines their makeup and what determines their actions? These questions are fundamentally intertwined, which complicates the study of boards because makeup and actions are jointly endogenous. A focus of this survey is how the literature, theoretical as well as empirically, deals – or on occasions fails to deal – with this complication. We suggest that many studies of boards can best be interpreted as joint statements about both the director-selection process and the effect of board composition on board actions and firm performance…

To download this paper click here.

GOVERNANCE IN CRISIS: A comparative case study of six US investment banks

byNestor Advisors has just published a research paper on “Governance in Crisis: a comparative case study of six US investment banks”. The note brings forth
some interesting insights regarding board entrenchment, executive alignment with shareholders and the concentration of power in some of the “departed banks”
such as Lehman Brothers and Bear Stearns. It identifies countervailing strengths in areas such as risk oversight among “survivors” such as Goldman Sachs and
JP Morgan Chase. You can access the full study by cliking here.

by NeAd, April 2009.

Nestor Advisors has just published a research paper on “Governance in Crisis: a comparative case study of six US investment banks”. The note brings forth some interesting insights regarding board entrenchment, executive alignment with shareholders and the concentration of power in some of the “departed banks” such as Lehman Brothers and Bear Stearns. It identifies countervailing strengths in areas such as risk oversight among “survivors” such as Goldman Sachs and JP Morgan Chase. You can access the full study by cliking here.


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(in Portuguese) A weekly chronicle about shareholders' rights & duties, activism and capital markets regulation, by Renato Chaves.
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