how do payments for environmental services affect land tenure theory and evidence from china we gratefully acknowledge the financial support from renmin university for the research on land market development in the forest tenure reform project no 11xnc002 the british academy reference sg121920 the cambridge humanities research grants scheme and the economy and environment program for southeast asia reference pco13 0308 009

bipolarity multipolarity and free trade recent literature typically attributes the relative scarcity of open international markets to the prisoner s dilemma structure of state preferences with respect to trade i argue that the prisoner s dilemma representation does not reflect the most critical aspect of free trade agreements in an anarchic international system security externalities explicit consideration of these effects suggests that a bipolar international political system has an advantage relative to its multipolar counterpart with respect to the opening of markets among states less credible exit threats and stronger incentives to engage in altruism within its alliances explain the advantage of a two power system the real income gains that motivate free trade are also the source of the security externalities that impede it their ability to internalize these effects makes military alliances the natural basis of agreements to open international markets the evolutionary prospects of alliances vary however ones that are the products of bipolar systems are more likely to evolve into free trade coalitions than are their multipolar counterparts i argue that less credible exit threats and stronger incentives to engage in alliance altruism explain the advantage of a two power system several important limits of the argument should be made clear immediately i argue at the systemic level i attempt to isolate the political and economic incentives for free trade that occur at the level of the international system i do not therefore consider the impact of unitlevel factors on the pursuit of these incentives for example neither the role of special interest groups nor the organization of domestic exchange via hierarchies instead of markets is considered doyle 1986 frieden 1988 ruggie 1982 the conditions i assume are those of standard international trade theory ethier 1983 and illustrative rather than systematic empirical referents are used these restrictions are appropriate given my purpose to demonstrate analytically the advantage of a bipolar international political system with respect to free trade

interim news and the role of proxy voting advice this paper examines the information content and consequences of third party voting advice that arrives as news at an interim stage in corporate proxy contests we first document significant stock returns around announcements of proxy vote recommendations we then develop a multiequation empirical procedure for disentangling the price impact of prediction effects changes in contest outcome probabilities from the price impact of certification effects changes in outcome contingent valuations both effects are present in the data voting advice is both predictive about contest outcomes and informative about the ability of dissidents to add value consequently proxy advice plays a dual informational role

limitation of liability and the ownership structure of the firm this paper models the optimal choice of shareholder liability if investors want managers to be monitored the monitors should be residual claimants shareholders and monitoring and firm value will increase as shareholders commit more of their wealth to the firm when liquidating wealth is costly contingent liability dominates direct investment as a wealth commitment device however if wealth is unobservable under this regime only relatively poor investors will hold shares in equilibrium this may be prevented at a cost by verifying shareholder wealth and restricting stock transfers comparative statics on various liability regimes are used to motivate actual contractual arrangements

the effect of large investors on asset quality evidence from subprime mortgage securities abstract fannie mae and freddie mac the gses the dominant investors in subprime mortgage backed securities before the 2008 crisis substantively affected collateral composition in this market mortgages included in securities designed for the gses performed better than those backing other securities in the same deals holding observable risk constant consistent with the transmission of private information these effects are concentrated in low documentation loans and for issuers that were highly dependent on the gses and were corporate affiliates of the mortgage originators additional analysis of yield spreads shows that these performance differences were not reflected in prices

risky business the decline of defined benefit pensions and firms shifting of risk since the early 1980s employment in the united states has undergone significant transformation as the large corporations that once safeguarded employees with stable jobs and rewards for loyalty have replaced these employment relationships with ones based on cost containment and flexibility one important consequence of these developments is that firms have abdicated their role as a critical risk bearer in society although evidence suggests that firms have increasingly shifted market risks onto their workforce to date there have been few detailed analyses exploring what factors have driven this phenomenon this study adds to our understanding of why firms have transferred risk to their employees by examining the decline of a highly institutionalized practice wherein large u s firms used to bear retirement risk the defined benefit db pension plan through a detailed analysis i show that variance in the presence power and interests of shareholders and employees at the firm level differentially affect a firm s willingness to shift the risk of retirement onto its workers specifically i demonstrate empirically that different types of shareholders have differential effects on a firm s retirement practices suggesting that the changing equity ownership structure of large u s firms has played a key role in how risk is allocated between workers and firms declines in employee power have also played a role because firm levels of unionization positively affect rates of db participation for both unionized and nonunionized workers

heterogeneity and peer effects in mutual fund proxy voting this paper studies voting in corporate director elections we construct a comprehensive data set of 2 058 788 mutual fund votes over a two year period we find systematic heterogeneity in voting some funds are consistently more management friendly than others we also establish the presence of peer effects a fund is more likely to oppose management when other funds are more likely to oppose it all else being equal we estimate a voting model whose supermodular structure allows us to compute social multipliers due to peer effects heterogeneity and peer effects are as important in shaping voting outcomes as firm and director characteristics

rational hegemons excludable goods and small groups an epitaph for hegemonic stability theory in defining international free trade as a public good hegemonic stability theory posited early in the 1970s that its reliable supply depended upon a distribution of international power analogous to that within a privileged group more recently however critics have challenged three assumptions fundamental to hegemonic theory its premises of free trade public goods and privileged groups they have concluded that hegemony is not necessary for and indeed may be antithetical to a stable world economy based on market exchange the author argues that the critics overstate their case the assumptions they attack allow hegemonic theory to represent analytically several critically important barriers to free trade among states among these are the existence of strategic interdependence among the actors and the prevalence of informational asymmetries the most significant flaw in hegemonic theory is its neglect of the essence of the domain to which it applies the politics of inter state trade in an anarchic world

monotone equilibria in bayesian games of strategic complementarities for bayesian games of strategic complementarities we provide a constructive proof of the existence of a greatest and a least bayes nash equilibrium each one in strategies that are monotone in type our main assumptions besides strategic complementarities are that each player s payoff displays increasing differences in own action and the profile of types and that each player s interim beliefs are increasing in type with respect to first order stochastic dominance e g types are affiliated the result holds for general action and type spaces single multi or infinite dimensional continuous or discrete and no prior is assumed we also provide the following comparative statics result the greatest and least equilibria are higher if there is a first order stochastic dominant shift in the interim beliefs we apply this result to strategic information revelation in games of voluntary disclosure

government management of village commons comparing two forest policies abstract when monitoring or enforcement is difficult governments may find it impossible to manage village forest commons directly village level institutions might be better able to manage these commons yet villagers management objectives may not coincide with those of the state this article considers the effects of two different government policies on the local management of village commons one policy tool attempts to induce villagers to conserve forest commons by giving them a share of the timber harvest we investigate the question of whether or not this scheme joint forest management jfm is preferred either by the villagers or the government to a simple benchmark policy under which the government harvests at random we show that when villagers are sufficiently patient for any equilibrium jfm policy there exists a benchmark policy which gives villagers the same level of utility however whether the government is similarly indifferent between these two arrangements depends on the villagers ability to enforce collective agreements and on the curvature of villagers utility functions

when ownership structure matters a review of the effects of investor horizon on corporate policies this paper surveys the literature on the impact of investor horizon on corporate policies while the desire to encourage long term investor ownership is shared among managers boards and policy makers how greater long term investor ownership benefits corporate decisions and ultimately firm performance is still under academic investigation the contribution of this paper is twofold the paper s first contribution is providing an up to date review of theoretical and empirical findings this paper introduces the groups of long term and short term investors and the related classification methodologies and investor horizon proxies used to form them it further reviews the determinants of an investor s horizon then this paper organizes the literature on the impact of investor horizon on corporate policies around three main channels the short term pressure hypothesis the monitoring hypothesis and the catering hypothesis the paper s second contribution is identifying six major challenges ahead that need to be addressed to improve the understanding of the impact of long term short term investor ownership on corporates policies these challenges represent opportunities for further research

common property institutions and sustainable governance of resources abstract the literature on common property based resource management comprises many important studies that seek to specify the conditions under which groups of users will self organize and sustainably govern resources upon which they depend using three of the more comprehensive such studies and with an extensive review of writings on the commons this paper demonstrates that the enterprise of generating lists of conditions under which commons are governed sustainably is a flawed and impossibly costly research task for a way out the paper examines the relative merits of statistical comparative and case study approaches to studying the commons it ends with a plea for careful research design and sample selection construction of causal mechanisms and a shift toward comparative and statistical rather than single case analyses such steps are necessary for a coherent empirically relevant theory of the commons

outsourcing corporate governance conflicts of interest within the proxy advisory industry proxy advisory firms wield large influence with voting shareholders however conflicts of interest may arise when an advisor sells services to both investors and issuers using a unique data set o

exit as governance an empirical analysis recent theory posits a new governance channel available to blockholders threat of exit threat of exit as opposed to actual exit is difficult to measure directly however a crucial property is that it is weaker when stock liquidity is lower and vice versa we use natural experiments of financial crises and decimalization as exogenous shocks to stock liquidity firms with larger blockholdings experience greater declines increases in firm value during the crises decimalization particularly if the manager s wealth is sensitive to the stock price and thus to exit threats additional tests suggest exit threats are distinct from blockholder intervention

hegemonic stability theory and 19th century tariff levels in europe although the theory of hegemonic stability has attracted an impressive array of adherents current formulations leave many conceptual issues unresolved existing formulations also fail to draw from the theory any implications concerning the process by which a hegemonic state creates and maintains a regime as an example great britain is generally agreed to have been hegemonic in the nineteenth century but britain s behavior was generally inconsistent with that implied by a theory of hegemonic stability i advance an alternative set of explanations for changes in international tariff levels based on the notion of a political business cycle

agents watching agents evidence from pension fund ownership and firm value abstract this paper examines the valuation effects associated with the incentive structures of different types of institutional investors using the ownership levels of public and private pension funds in a firm the results suggest that institutional monitoring is associated with valuation effects when both observable and unobservable aspects of the relationship between institutions and firms are taken into account moreover the valuation effects vary according to the objective functions of institutions administrators thus other shareholders do not necessarily benefit from relationships between institutions and managers and they could be hurt when the institutional agents watching firm agents have conflicts of interest with other shareholders

the sterling dollar franc triangle monetary diplomacy 1929 1937 the late interwar years encompass a full spectrum of international monetary conflict and cooperation why did great britain france and the united states cooperate in some periods and not in others first the transience of monetary cooperation and conflict is explained in part by inherent characteristics of gold exchange and floating monetary systems second environmental changes swings between prosperity and depression between peace and the threat of war and between monetary orthodoxy and inflationist heresy altered the strategic setting confronting the central monetary powers third the actions of governments both followed from and shaped the circumstances that they confronted through strategies of composition across issues and decomposition across time and actors nations deliberately fostered the emergence of cooperation by altering the context of monetary diplomacy

the effect of a large shareholder on corporate value this article analyzes the value of a corporation as a function of its ownership structure shareholders can acquire costly information about the manager s effort to produce output concentrating share ownership leads the largest shareholder to i acquire more precise signals of effort and ii modify the compensation contract better monitoring increases output and hence firm value however the risk averse large shareholder bears more idiosyncratic firm risk as his stake in the firm increases these forces equilibrate at a unique welfare maximizing ownership structure under a strong condition on the purchase or sale of shares by large stockholders investors have incentives to trade toward the ownership structure that maximizes the social surplus when all investors are price takers only a diffuse ownership structure can arise in a competitive equilibrium

the costs of shareholder activism evidence from a sequential decision model abstract this paper provides benchmarks for monitoring costs and evaluates the net returns to shareholder activism i model activism as a sequential decision process consisting of demand negotiations board representation and proxy contest and estimate the costs of each activism stage a campaign ending in a proxy fight has average costs of 10 71 million i find 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 the large sample evidence presented in this paper aids in understanding the nature and evolution of activist engagements

the role of proxy advisory firms evidence from a regression discontinuity design proxy advisory firms have become important players in corporate governance but the extent of their influence over shareholder votes is debated we estimate the effect of institutional shareholder services iss recommendations on voting outcomes by exploiting exogenous variation in iss recommendations generated by a cutoff rule in iss voting guidelines using a regression discontinuity design we find that from 2010 to 2011 a negative iss recommendation on a say on pay proposal leads to a 25 percentage point reduction in say on pay voting support suggesting a strong influence over shareholder votes we also use our setting to examine the informational role of iss recommendations received april 13 2015 editorial decision june 13 2016 by editor itay goldstein

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

hugging trees claiming de facto property rights by blockading resource use this paper explores conflicts between two groups the industry and theenvironmentalists over whether an indivisible resource e g an ancient tree should be harvested or preserved in a complete information war ofattrition the environmentalists willingness to blockade harvest attemptsmay control resource use as effectively as if they held property rights optimal government intervention will override this ability for somebenefit cost combinations but may augment it for other combinations introducing uncertainty about the environmentalists benefits results inextended disputes and consequent lack of efficiency governmentintervention for welfare reasons generally reduces these efficiencylosses

on the endogeneity of resource comanagement theory and evidence from indonesia we examine theoretically the emergence of participatory comanagement agreements that share between state and user the management of resources and the benefits from use going beyond user user interactions our state user model addresses a critical question when will comanagement arise in order to consider the right baseline for evaluating comanagement s forest and welfare impacts we then compare our model s hypotheses concerning de facto rights negotiated agreements and transfers all endogenous with community level data including observed agreements in a protected indonesian forest these unique data could refute the model despite being limited but instead offer support

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

context dependent biodiversity conservation management regimes theory and simulations ecosystem degradation hasmotivated a search for successful conservation approaches the perceived failure of state directed protected areas in the tropics has prompted experimentation with community management and co management strategies numerous case studies suggest that none of these are effective universally there exists however little analytical or empirical work to identify under what conditions one arrangement will be more effective than another this paper develops a model of statedependent equilibrium conservation management design that identifies the comparative advantage of different managers in the interest of appropriately locating authority for conservation tasks as a function of prevailing biophysical economic and sociopolitical conditions

property rights and liability for deforestation under redd implications for permanence in policy design reducing emissions from deforestation and forest degradation redd is critical in efforts to mitigate the effects of anthropogenic climate change despite uncertainty about the exact form of a future international redd system redd carbon property rights would need to be created and allocated with liability assigned for the potential loss of climate benefits in the event of carbon reversal from deforestation this commentary explores the links between forest property rights and liability to different redd policy options and their implications for permanence should national governments retain liability for permanence then project level activities that have individually assigned redd carbon rights may have a higher risk of carbon reversal than policies where rights are assigned to the state knowledge of pre existing forest rights is necessary for some policies implemented with government assigned redd rights in order to compensate for potential income losses from policy implementation

ties that bind how business connections affect mutual fund activism we investigate whether business ties with portfolio firms influence mutual funds proxy voting using a comprehensive data set spanning 2003 to 2011 in contrast to prior literature we find that business ties significantly influence promanagement voting at the level of individual pairs of fund families and firms after controlling for institutional shareholder services iss recommendations and holdings the association is significant only for shareholder sponsored proposals and stronger for those that pass or fail by relatively narrow margins our findings are consistent with a demand driven model of biased voting in which company managers use existing business ties with funds to influence how they vote abstract from author

for better or for worse local impacts of the decentralization of indonesia s forest sector this paper quantifies the local impacts of mechanized logging on forest dependent communities in indonesia before and after decentralization a conceptual framework incorporates financial social enforcement rent seeking and environmental impacts using data from 60 communities in east kalimantan the empirical results suggest that significantly more households received financial and in kind benefits after decentralization compared to before many communities engaged in self enforcement activities against firms both before and after decentralization post decentralization a significantly higher proportion of households perceived community forest ownership there were few significant differences in perceived environmental impacts little evidence exists of a post decentralization trade off between environmental and financial contractual provisions

business ties and proxy voting by mutual funds abstract 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 because the votes took place when funds knew their votes would be publicly scrutinized fund families with a larger client base may have adopted voting policies that led to less frequent opposition to management at all firms

the institutional foundations of hegemony explaining the reciprocal trade agreements act of 1934 in 1930 congress approved the highly restrictive smoot hawley tariff the textbook case of pressure group politics run amok four years later congress passed the reciprocal trade agreements act rtaa surrendering much of its tariff making authority to a policy process in which internationalists had increasing influence while the united states had used reciprocity to expand exports before the stick of discriminatory treatment took precedence over the carrot of liberalizing concessions with the transfer of tariff making authority to the executive the united states could make credible commitments and thus exploit its market power to liberalize international trade despite later modifications the rtaa set the fundamental institutional framework for trade politics

taking a view corporate speculation governance and compensation using responses to a well known confidential survey we study corporations use of derivatives to take a view on interest rate and currency movements characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively that is they do not speculate to increase risk by betting the ranch speculating firms encourage managers to speculate through incentive aligning compensation arrangements and bonding contracts and they use derivatives specific internal controls to manage potential abuse finally we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey they are not derivative instruments can be used to hedge market risk exposures or to spec ulate on movements in the value of the underlying asset to hedge generally implies that the derivative position is taken with the intention of reducing risk to speculate generally implies that the derivative position is undertaken with the primary intention of making a profit or increasing risk speculation has a pejorative connotation in the financial press yet it is not clear that this repu tation is deserved in this paper we explore whether speculation is an activity that is optimal ex ante but for which we should expect to observe some large negative outcomes ex post or whether it is an activity that will decrease ex pected shareholder value to the benefit of agents of the firm that is whether it is evidence of an agency problem and governance failure the extant theoretical and empirical literature presents an abundance of ev idence about why firms should and do use derivatives to hedge 1 we know

earnings quality evidence from the field abstract we provide insights into earnings quality from a survey of 169 cfos of public companies and in depth interviews of 12 cfos and two standard setters cfos believe that i above all high quality earnings are sustainable and repeatable specific characteristics include consistent reporting choices backing by actual cash flows and absence of one time items and long term estimates ii about 50 of earnings quality is driven by non discretionary factors such as industry and macro economic conditions iii in any given period about 20 of firms manage earnings to misrepresent economic performance and for such firms 10 of eps is typically managed iv earnings manipulation is hard to unravel from the outside but peer comparisons and lack of correspondence between earnings and cash flows provide helpful red flags in addition cfos disagree with current standard setting on a number of issues including the sheer number of promulgated rules the top down approach to rule making the neglect of the matching principle and the emphasis on fair value accounting they indicate that a rules based culture makes the audit function centralized and mechanical and hinders the development of audit professionals a summary impression from our work is that cfos view earnings quality as more of a single and unconditional characteristic in contrast to current research where measures of earnings quality are strongly conditional on the decision setting this cfo view is related to their idea of one number a single earnings metric that shapes both their interactions with external stakeholders and internal decision making

institutional ownership and governance this paper describes different forms of ownership across countries and how these forms influence the way companies are governed in most stock markets in the world listed companies frequently have a controlling shareholder usually a family however japan the uk and to a lesser extent the us are exceptions in these three countries ownership is frequently highly fragmented where share stakes are held by different institutional owners including asset managers both active and passive and by shareholder activists the paper focuses in particular on the governance structure of different institutional shareholders how they engage with target firms and their effectiveness the paper concludes with recommendations for regulators to enhance different forms of ownership

editor s choice active ownership we analyze an extensive proprietary database of corporate social responsibility engagements with u s public companies from 1999 2009 engagements address environmental social and governance concerns successful unsuccessful engagements are followed by positive zero abnormal returns companies with inferior governance and socially conscious institutional investors are more likely to be engaged success in engagements is more probable if the engaged firm has reputational concerns and higher capacity to implement changes collaboration among activists is instrumental in increasing the success rate of environmental social engagements after successful engagements particularly on environmental social issues companies experience improved accounting performance and governance and increased institutional ownership

behind the scenes the corporate governance preferences of institutional investors we survey institutional investors to better understand their role in the corporate governance of firms consistent with a number of theories we document widespread behind the scenes intervention as well as governance motivated exit these governance mechanisms are viewed as complementary devices with intervention typically occurring prior to a potential exit we further find that long term investors and investors that are less concerned about stock liquidity intervene more intensively finally we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions

europe s great depression coordination failure after the first world war in this paper i survey and reinterpret the extensive literature on europe s great depression i argue that europe could not exploit its vast economic potential after 1918 because the war had not yet come to an end indeed it did not end before 1945 both domestic and international institutions suffered from a lack of reciprocal trust and commitment which can be clearly illustrated in the realm of monetary policy but affected many other areas of policy making such as energy or migration policies these institutions in turn affected expectations and thereby the extent to which for example expansionary policies could be effective

blocks liquidity and corporate control the paper develops a simple model of corporate ownership structure in which costs and benefits of ownership concentration are analyzed the model cornpares the liquidity benefits obtained through dispersed corporate ownership with the benefits from efficient management control achieved by some degree of ownership concentration the paper reexamines the free rider problem in corporate control in the presence of liquidity trading derives predictions for the trade and pricing of blocks and provides criteria for the optimal choice of ownership structure the recent incomplete contracting approach in corporate finance has considerably improved our understanding of how small firms determine their capital structure the basic setting considered in this line of research is one where a founder manager seeks funding from one or several financiers the main premise is that the founder manager in her dealings with the financiers is primarily concerned with maintaining her private benefits of control for small firms these are often quite large relative to the financial returns thus for a small firm the problem of determining the financial structure often reduces to the problem of how to obtain fundingr while giving away as little control as possible to the financiers of course most financiers insist on some form of protection so that the final compromise reached in most financial contracts for small firms is one resembling a debt contract or a venture capital contract which protects the founder manager s control as long as the firm is performing adequately this perspective for small firms does not extend naturally to large firms because the private benefits of control of the managers for large firms are likely to be small relative to the firm s monetary returns so that protection of these benefits is not an overriding consideration moreover large firms

endogenously chosen boards of directors and their monitoring of the ceo author s hermalin benjamin e abstract this paper develops a model in which the effectiveness of a board s monitoring of the ceo depends on the board s independence the independence of new directors is determined through negotiations implicit or explicit between the existing directors and the ceo the ceo s bargaining position and thus influence over the board selection process depends on an updated estimate of the ceo s ability based on prior performance many empirical findings about board structure and performance arise as equilibrium phenomena in this model we also explore the implications of this model for proposed regulations of corporate governance structures please contact the program in law and economics at boalt hall school of law uc berkeley berkeley ca 94720 for a copy of this paper

community industry contracting over natural resource use in a context of weak property rights the case of indonesia decentralization in indonesia has resulted in an increased influence of local communities over the terms of logging agreements with timber companies the outcomes of such community company negotiations vary significantly across communities what are the conditions that cause this variation and how can the outcomes be more effectively and efficiently influenced by third party actors such as the local government or ngos this paper addresses these questions by developing a game theoretic model to illustrate the strategic interactions between communities and companies the model allows for endogeneity of de facto property rights and bargaining positions we show that third party actions to improve the community s bargaining position by raising its reservation utility may result in an increase in the area logged and thereby harm the environment our results indicate that the strategy of intervention matters in particular strategies that raise the sensitivity of interventions to local logging threats are likely to be more cost effective in supporting communities and reducing forest degradation than more indiscriminatory strategies the model will be relevant to other situations where communities negotiate contracts over natural resource use with outside actors in a context of weak property rights a situation increasingly observed in other developing countries

decision making approaches and the propensity to default evidence and implications abstract this paper examines heterogeneity in the responsiveness to default options in a large state retirement plan focusing on individuals decision making approaches as well as their economic and demographic characteristics analyses of a survey of plan participants show that procrastination and the need for cognitive closure are important determinants of the likelihood of default this paper also explores an important implication of defaulting individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan the desire to change plans is also correlated with numerous economic and decision making characteristics including procrastination

the decline of social entrenchment social network cohesion and board responsiveness to shareholder activism shareholder activism through corporate governance proposals is a prominent avenue for investors to voice their concerns in corporate governance matters however shareholder proposals have an uneven effect on corporate governance this paper contributes to research on shareholder activism by joining social movement approaches to activism with network theoretic approaches to corporate governance the paper examines how firms position within cohesive sections of the board interlock network termed social entrenchment predicts 1 the likelihood of being targeted by activist investors and 2 firms responsiveness to proposal demands first a firm s position in the board network serves as a salient network prism attracting activists attention this is especially true for activist investors who lack other backchannel avenues for engagement or seek to use public reputational penalties as part of their activism strategy second the board network traditionally served as an important collective infrastruc

dyadic military conflict security alliances and bilateral fdi flows although multinationals operate under cross border jurisdictions the relevance of interstate security relations to international business has received little attention despite the impressive accumulation of knowledge in international business and international relations the two intellectual communities have largely ignored the insights from each other in this article we seek to bridge this gap we argue that interstate military conflict and security alliances as two central features of interstate security relations often change both government policies toward international business and investor expectations of political risk from the perspectives of both states and investors military conflict should reduce bilateral investment whereas security alliances increase it our empirical analysis applies the system gmm estimator to a gravity model of bilateral investment flows for 1117 directed dyads among 58 countries from 1980 to 2000 among 18 countries whose per capita real incomes remain consistently above 12 000 constant dollars the security factors do not affect bilateral investment in the high income low income dyads interstate military conflict and security alliances significantly influence bilateral investment as expected the findings depict two separate realms in which international politics does and does not interfere with international business helping us improve political risk assessments and understand the interactions between states and firms

the political economy of wildlife exploitation in this paper we analyze the exploitation of wildlife in a third world context in the model there are two agents an agency managing a habitat area of fixed size and a group of peasants the agency managing the habitat area has the legal right to exploit the wildlife while the local people hunt illegally introducing the concept of relative harvesting dominance we demonstrate that the stock utilization depends crucially on the prevailing economic and ecological conditions it is also shown that the existing property rights regime appears in different forms depending on these conditions

law finance and the international mobility of corporate governance we introduce the topic of this special issue on the role of financial and legal institutions in international governance with a particular emphasis on a notion of international mobility of corporate governance our discussion places the special issue at the intersection of law finance and international business with a focus on the contexts of foreign investors and directors country level legal and regulatory institutions facilitate foreign ownership foreign directors raising external financial capital and international m a activity the interplay between the impact of foreign ownership and foreign directors on firm governance and performance depends on international differences in formal regulatory institutions in addition to legal conditions informal institutions such as political connections also shape the economic value of foreign ownership and foreign directors we highlight key papers in the literature provide an overview of the new papers in this special issue and offer suggestions for future research

to steal or not to steal firm attributes legal environment and valuation 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 from 27 countries we 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

mutual fund activism and market regulation during the pre ifrs period the case of earnings informativeness in china from an ethical perspective this paper investigates the emerging effect of mutual fund involvement on the agency problem between majority and minority shareholders during the pre ifrs period in china indicated by earnings informativeness from an ethical perspective we find that the presence of mutual fund hampers earnings informativeness implying that mutual funds in general at their early stage in china are not yet capable of serving as an effective monitor this finding is in sharp contrast to the role of institutional investors in mature markets as documented in the literature however mutual funds affiliated with banks have been found to be effective to improve earnings informativeness of chinese listed companies and the impact is more pronounced among those affiliated with joint equity banks compared to their counterparts affiliated with state owned banks

public trading and private incentives this article studies the link between public trading and the activity of a firm s large shareholder who can affect firm value public trading results in the formation of a stock price that is informative about the large shareholder s activity this increases the latter s incentives to engage in value increasing activities indeed if he has to liquidate part of his stake before the effect of his activity is publicly observed a more informative price rewards him for his activity implications are derived for the decision to go public capital structure and security design we consider a firm with a large shareholder and otherwise dispersed shares which are publicly traded the block holder is an insider in the sense that he can undertake actions that directly affect the firm s value moreover the insider might not take all value increasing actions as at least some of them involve a private cost for him in other words there is an incentive problem the article s main premise is that public trading as part of the price formation process generates information not only about exogenous factors affecting firm value but also about the insider s activity for instance as a result of public trading a firm s stock price will incorporate the market s evaluation of how a controlling shareholder allocates corporate resources we identify two sources of incentives for the insider to engage in activities that will increase firm value the first one is his stake in the firm since the insider participates in a value increase in proportion to his equity stake a larger stake increases the benefit to him from the firm value being high the view that large shareholders affect firm value is indeed widespread shleifer and vishny 1997 they alleviate the free rider problem pervasive in firms with passive dispersed investors unable or unwilling to affect the firm s operations that is outsiders