does corporate governance influence earnings management in latin american markets although us and european research has documented improvement in earnings quality associated with corporate governance characteristics the situation in latin america is questionable given the business environment in which firms operate which is characterized by controlling family ownership and weak legal protection the purpose of this study is to examine the relation between the internal mechanisms of corporate governance and earnings management measured by discretionary accrual we use a sample of listed latin american non financial companies from the period 2006 2009 our results show how in the latin american context the role of external directors is limited and that boards which meet more frequently take a more active position in the monitoring of insiders so showing a lower use of manipulative practices in addition we find a non linear relation between insider ownership and discretionary accruals also pointing to the fact that ownership concentration may be a manipulative practices constrictor mechanism only when the ownership of main shareholders is moderate the findings have important policy implications since this is to the best of our knowledge the first study to analyze the relation between the effectiveness of the government and the earnings management behavior as policy implications we document how when a country implements controls aimed at reducing corruption strengthening the rule of law or improving the effectiveness of government this leads to a reduction in firm earnings management

the translation of corporate governance changes across national cultures the case of germany contrasting systems of corporate governance persist internationally but are subject to regulatory and firm level institutional change such changes may be viewed as organisational innovations often imported from the usa in the face of different national cultures this paper analyses the implications of national culture for the translation of innovations and provides case study illustrations of regulatory and firm level governance changes experienced in germany these illustrations demonstrate that the diffusion of both kinds of change has been subject to substantial translation that is consistent with german national culture

does the form of compensation matter abstract the role of fee contracts in the agency relation between investment bankers and client firms in tender offers is investigated using a sample of offers between 1978 and 1986 different fees have different payoff functions which can be used by firms to create incentives and by bankers to signal differences in abilities the effectiveness of fee contracts in resolving agency problems in tested with mixed results the evidence suggests that fee contracts are used as a tool by both firms and bankers and that contracts influence tender offer outcomes but that contracting is only a partial solution to the agency problem

disclosure policy a discussion of leuz triantis and wang 2008 on going dark abstract ltw 2008 examine firms withdrawing from the sec reporting system but continuing to trade on pink sheets the paper finds that sarbanes oxley increased the propensity of firms to go dark but counter to conventional wisdom had no significant effect on the rate of going private transactions agency costs as well as poor growth opportunities proximity to financial distress and increased compliance costs arising from sox increase the propensity to go dark suggestions to improve the empirical implementation and interpretation involve including additional control and more suitable explanatory variables and more attention to causation issues and to the quantification of economic significance

restricted stock markets in simple general equilibrium models with production uncertainty it is shown that in a two sector production model with uncertainty analogous to work of batra and sakai there exists an implicit and arbitrarily restricted stock market interpretation of the model and that the appropriate duality lies between the relation of factor endowments and equity outputs and the relation of factor prices and equity prices these observations permit a generalization of the batra sakai assumption of maximization of expected utility of profits this is accompanied by an extensive characterization of the implicit market and several of its comparative statics properties a 2 2 2 2 joint production formulation is developed to examine stability properties

decomposition analysis of gas consumption in the residential sector in ireland abstract to date decomposition analysis has been widely used at the macro economic level and for in depth analyses of the industry and transport sectors however its application in the residential sector has been rare this paper uses the log mean divisia index i lmdi i methodology to decompose gas consumption trends in the gas connected residential sector in ireland from 1990 to 2008 which despite an increasing number of energy efficiency policies experienced total final consumption growth of 470 the analysis decomposes this change in gas consumption into a number of effects examining the impact over time of market factors such as a growing customer base varying mix of dwelling types changing share of vacant dwellings changing size of new dwellings the impact of building regulations policy and other factors such as the weather the analysis finds the most significant effects are changing customer numbers and changing intensity the analysis also quantifies the impact of building regulations and compares it with other effects such as changing size of new dwellings by comparing the historical impact on gas consumption of policy factors and non policy factors this paper highlights the challenge for policy makers in achieving overall energy consumption reduction

decomposition analysis of the variations in residential electricity consumption in brazil for the 1980 2007 period measuring the activity intensity and structure effects abstract introduced at the end of the 1970s to study the impacts of structural changes on electricity consumption by industry index decomposition analysis techniques have been extended to various other areas to help in the formulation of energy policies notably in developed countries however few authors have applied these techniques to study the evolution of energy consumption in developing countries in brazil the few available studies have focused only on the industrial sector in this article we apply the decomposition technique called the logarithmic mean divisia index lmdi to electricity consumption of the brazilian residential sector to explain its evolution in terms of the activity structure and intensity affects over the period from 1980 to 2007 the technique is sufficiently robust and flexible to perform this analysis by disaggregating residential consumers by consumption classes and regions of the country among the main results is measurement of the impact of government programs for income transfer and universal service on variations in residential consumption typical of developing countries

founders heirs and corporate opacity in the united states abstract we argue that information about firm activities can vary substantially in the presence of founder or heir ownership thereby influencing the risks borne by minority investors we explore two hypotheses with regard to these controlling shareholders and corporate transparency focusing on their role as monitor in place and their potential to exploit firm opacity to accrue private benefits of control to test these notions we create an opacity index that ranks the relative transparency of the two thousand largest industrial us firms and find founder and heir ownership in 22 and 25 of these firms respectively our analysis indicates that in large publicly traded companies both founder and heir firms are significantly more opaque than diffuse shareholder firms we also find that founder and heir controlled firms exhibit a negative relation to performance in all but the most transparent firms surprisingly additional tests reveal that concerns about divergences in ownership versus control management type dual class shares and board influence appear to be substantially less important than corporate opacity in explaining the performance impacts of founder and heir control finally we decompose corporate opacity into disclosure and market scrutiny components finding that the disclosure quality component appears to be of greater importance to investors however irrespective of whether these controlling shareholders create or stay in the firm because of corporate opacity our analysis suggests that founders and heirs in large publicly traded firms exploit opacity to extract private benefits at the expense of minority investors

management control systems in family firms a review of the literature and directions for the future family firms play a significant role in the global economy although family firm literature has devoted much time and effort to investigating topics concerning corporate governance leadership ownership and succession accounting issues have received relatively scant attention in this paper we assemble and critically review extant literature on the choice of management controls this is an essential topic for firms as management control systems mcs are used to make sure subordinates behave in function of the goals of the firm family firms however have distinct features such as differences in governance structures and goals which can have a significant impact on whether and how mcs are used we conclude this review paper by providing avenues for future research that can advance our understanding of both the determinants and the outcomes of the choice of mcs

the agency problems embedded in firm s equity investment we find that agency problems are embedded in firm s excess and abnormal equity investments that are mainly dictated by controlling shareholder s motives and ethical choices manifested in ownership and board structure the excess equity investment is gauged with respect to industry average the abnormal equity investment is specifically referred to the number of nominal investment companies that are fully controlled by the controlling owners while subject to little governance our empirical evidences of 345 taiwanese non financial listed firms show that firm s excess and abnormal equity investments are negatively correlated with controlling shareholder s cash flow rights while are positively correlated with the control cash flow deviation and board affiliation the results are supportive of the positive incentive hypothesis and the negative entrenchment hypothesis put forth by la porta et al 2002 journal of finance57 1147 1171 and claessen et al 2002 journal of finance57 2741 2742 the negative relation between equity investment and firm s value further supports the agency postulation that corporate excess and abnormal equity investments represent a leeway for controlling shareholder to exploit wealth of minority shareholders this study potentially contributes to the literature of business ethics by portraying an empirically testable linkage from controlling owner s ethical choices to his actions and therefore firm s value

does best practice in setting executive pay in the uk encourage good behaviour we examine how uk listed companies set executive pay reviewing the implications of following best practice in corporate governance and examining how this can conflict with what shareholders and other stakeholders might perceive as good behaviour we do this by considering current governance regulation in the light of interviews with protagonists in the debate setting out the dilemmas faced by remuneration setters and showing how the processes they follow can lead to ethical conflicts

disentangling the incentive and entrenchment effects of large shareholdings this article disentangles the incentive and entrenchment effects of large ownership using data for 1 301 publicly traded corporations in eight east asian economies we 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 given that concentrated corporate ownership is predominant in most countries these findings have relevance for corporate governance across the world

managerial ownership of voting rights abstract managers of firms with dual classes of common stock can choose different quantities of votes for a given cash flow interest by choosing different quantities of the two securities we study managerial stock holdings in 45 dual class firms and find that vote ownership per se is an important motivation for these holdings in that corporate officers and their families hold a median 56 9 of the votes and 24 0 of the common stock cash flows we also find significant family involvement in many sample firms and document four case studies in which explicit acquisition premiums were paid for superior voting shares

testing agency theory with entrepreneur effort and wealth we develop a principal agent model in an entrepreneurial setting and test the model s predictions using unique data on entrepreneurial effort and wealth in privately held firms accounting for unobserved firm heterogeneity using instrumental variables techniques we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk effort increases with ownership and effort increases firm performance the magnitude of the effects in the cross section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity

price differences between equity classes corporate control foreign ownership or liquidity abstract this paper is the first comprehensive study of price differences for dual class equity at the oslo stock exchange it analyzes the relative importance of corporate control foreign ownership restrictions and stock market liquidity for the price differences the norwegian market has the peculiar feature that in part of the sample period non voting shares were trading at a premium to voting shares i e what is usually termed the voting premium was negative this result can be rationalized by restrictions on foreign ownership in the later part of the period with no regulatory restrictions on foreign ownership the voting premium is positive and related to corporate governance and liquidity

bayesian learning in an infant industry model abstract most analyses of the infant industry argument assume that production early on benefits subsequent production in deterministic fashion this paper presents an alternative framework for evaluating the infant industry argument that focuses on imperfect information as a barrier to entry initial entrants provide information of social value by reducing uncertainty for potential followers about the suitability of local conditions in contrast to earlier work i show that factors that increase the informational barrier to entry may lower the optimal subsidy to the infant industry and that the standard test of the success of infant industry policy is not always valid 1997 elsevier science b v

the performance of privatized firms in the czech republic abstract with the growing importance of privatizations as a part of government policy most empirical studies of these privatizations conclude that firm performance immediately improves following privatization privatization has been the most important part of the transition from the centrally planned economies of central and eastern europe and has a larger impact on those economies than privatizations in other countries however few studies have looked at the performance of firms following mass privatization this study uses 453 separate firms 101 firms privatized in both waves for a total of 554 observations in the first and second waves of czech voucher privatization using methodology from previous studies we find that while the overall effects from privatization are positive the effects vary by privatization wave size and industry firms privatized in the first wave performed worse decline in performance following privatization than firms privatized in the second wave we also fail to find ownership concentration or debt as an important factor in restructuring the firm i believe that the results are consistent with two hypotheses first economic and political structure surrounding the privatization waves plays an important part in the success of privatization stable environments both political and economic help privatized firms restructure and improve operating performance as well as attract foreign investors and capital even in less developed countries but in transitional economies undergoing mass privatization in rapidly changing and developing economic and political environments hinder firms from restructuring and improving performance following privatization results are also consistent with the hypothesis that firms with a longer preparation period prior to privatization an implicit seasoning improve performance following privatization

ownership concentration corporate control activity and firm value evidence from the death of inside blockholders we analyze how ownership concentration affects firm value and control of public companies by examining effects of deaths of inside blockholders we find shareholder wealth increases ownership concentration falls and extensive corporate control activity ensues share price responses are related to the deceased s equity stake control group holdings fall for two thirds of the firms due to either the estate s dispersal or inheritors selling stock a majority of firms become targets of control bids three quarters of bids are successful one third are hostile our evidence is broadly consistent with stulz s 1988 model of the relationship between ownership concentration and firm value the objective of this paper is to assess how changes in insider ownership concentration affect firm value corporate governance and the control of public companies we obtain our evidence on these issues by examining the effects of the death of an inside blockholder that is a member of the firm s control group as defined by securities and exchange commission sec disclosure rules who holds 5 percent or more of a firm s equity overall we find that the death of an inside blockholder an exogenous event is value enhancing reduces ownership concentration and leads to extensive corporate control activity our analysis has three components one we use market based evidence to evaluate how changes in ownership concentration affect firm value by analyzing the share price response to the death of an inside blockholder financial market efficiency implies that share prices capitalize gains or losses from changes in ownership concentration and future control events expected to ensue from an inside blockholder s death thus such valuation effects provide a test of the continuing controversy as to whether ownership concentration promotes managerial entrenchment or aligns insider and noninsider interests we find that the share price response to the death of an inside blockholder is significantly positive when the level of ownership concentra

toward a theory of agency and altruism in family firms surprisingly the majority of u s family firms offer employed family members short and long term performance based incentive pay we draw on the household economics and altruism literatures to explain why family firms might feel compelled to do so and develop theory that predicts when this practice will be beneficial results based on data obtained from 883 family firms show that altruism as reflected by the parents estate and share transfer intentions moderates the effect of these pay incentives as our theory predicts as such this article helps explain both how altruism influences agency relationships in family firms and why business practice in family firms differs from those found in other types of firms

the structure of ownership and the theory of the firm the separation of ownership from control produces a condition where the interests of owner and of ultimate manager may and often do diverge and where many of the checks which formerly operated to limit the use of power disappear in creating these new relationships the quasi public corporation may fairly be said to work a revolution it has divided ownership into nominal ownership and the power formerly joined to it thereby the corporation has changed the nature of profit seeking enterprise 1

interbank contagion at work evidence from a natural experiment this article tests financial contagion due to interbank linkages for identification we exploit an idiosyncratic sudden shock caused by a large bank failure in conjunction with detailed data on interbank exposures first we find robust evidence that higher interbank exposure to the failed bank leads to large deposit withdrawals second the magnitude of contagion is higher for banks with weaker fundamentals third interbank linkages among surviving banks further propagate the shock finally we find results suggesting that there are real economic effects these results suggest that interbank linkages act as an important channel of contagion and hold important policy implications jel g01 g21 g28 e58 since the onset of the financial turmoil increased uncertainty reflected particularly in counterparty risk has led banks to hoard liquidity this has resulted in a significant decline of trading in the interbank money markets jean claude trichet president of the european central bank december 2008

who is afraid of political risk multinational firms and their choice of capital structure this paper investigates how multinational firms choose the capital structure of their foreign affiliates in response to political risk we focus on two choice variables the leverage and the ownership structure of the foreign affiliate and we distinguish different types of political risk such as expropriation unreliable intellectual property rights and confiscatory taxation in our theoretical analysis we find that as political risk increases the ownership share tends to decrease whereas leverage can both increase or decrease depending on the type of political risk using the microdatabase direct investment of the deutsche bundesbank we find supportive evidence for these different effects

inheritance law and investment in family firms entrepreneurs may be legally bound to bequeath a minimal stake to noncontrolling heirs the size of this stake can reduce investment in family firms by reducing the future income they can pledge to external financiers using a purpose built indicator of the permissiveness of inheritance law and data for 10 004 firms from 38 countries in 1990 2006 we find that stricter inheritance law is associated with lower investment in family firms but does not affect investment in nonfamily firms moreover as the model predicts inheritance law affects investment only in family firms that experience a succession jel g31 g32

mutual funds ownership and firm performance evidence from china mutual funds have emerged and rapidly developed since 2000 in china this study tests empirically the impact of mutual funds ownership on firm performance in china using a large sample for the period of 2001 2005 we find that equity ownership by mutual funds has a positive effect on firm performance the result is robust to several measures of firm performance and various estimations our finding supports recent regulatory efforts in china to promote mutual funds as a corporate governance mechanism and suggests that pooling diffuse minority interests of individual shareholders who are prone to free rider problems via mutual funds is beneficial

agency relationships in family firms theory and evidence does owner management necessarily eliminate the agency costs of ownership drawing on agency literature and on the economic theory of the household we argue that private ownership and owner management expose privately held owner managed firms to agency threats ignored by jensen s and meckling s 1976 agency model private ownership and owner management not only reduce the effectiveness of external control mechanisms they also expose firms to a self control problem created by incentives that cause owners to take actions which harm themselves as well as those around them jensen 1994 p 43 thus shareholders have incentive to invest resources in curbing both managerialand owner opportunism we extend this thesis to the domain of the family firm after developing hypotheses which describe how family dynamics and specifically altruism exacerbate agency problems experienced by these privately held owner managed firms we use data obtained from a large scale survey of family businesses to field test our hypotheses and find evidence which suggests support for our proposed theory finally we discuss the implications of our theory for research on family and other types of privately held owner managed firms

optimal input trade policy under economic uncertainties in a small open economy this article theoretically analyses optimal input trade policy under economic uncertainties in a small open economy the benchmark model explains both key business cycle moments and asset prices of

institutional ownership stability and bhc performance abstract in this study the association between performance of bhcs and institutional ownership stability is investigated and contrasted to those found for the less regulated utility and industrial firms in order to determine whether regulation displaces owner monitoring we employ a simultaneous equations model treating firm performance and institutional ownership stability as endogenous variables several results are obtained first bhc performance is positively associated with institutional ownership stability second this association is weaker for bhcs than for comparable utility and industrial firms possibly because of the substitution of regulation for owner monitoring in banking third this association is stronger in the recent deregulated years and for bhcs with lower likelihood of regulatory intervention

comparing structural decomposition analysis and index to analyze and understand historical changes in economic environmental employment or other socio economic indicators it is useful to assess the driving forces or determinants that underlie these changes two techniques for decomposing indicator changes at the sector level are structural decomposition analysis sda and index decomposition analysis ida for example sda and ida have been used to analyze changes in indicators such as energy use co2 emissions labor demand and value added the changes in these variables are decomposed into determinants such as technological demand and structural effects sda uses information from input output tables while ida uses aggregate data at the sector level the two methods have developed quite independently which has resulted in each method being characterized by specific unique techniques and approaches this paper has three aims first the similarities and differences between the two approaches are summarized second the possibility of transferring specific techniques and indices is explored finally a numerical example is used to illustrate differences between the two approaches

optimal toeholds in takeover contests abstract we offer an explanation for why raiders do not acquire the maximum possible toehold prior to announcing a takeover bid by endogenously modeling the target firm s value following an unsuccessful takeover we demonstrate that a raider may optimally acquire a small toehold even if the acquisition does not drive up the pre tender target price this occurs because although a larger toehold increases profits if the takeover succeeds it also conveys a higher level of managerial entrenchment and hence a lower firm value if the takeover fails we derive new predictions regarding the optimal toehold and target value following a failed takeover we also examine the impact of a rival bidder and dilution

the asymmetric relationship between executive earnings management and compensation a panel threshold regression approach abstractprior research shows that chief executive officers ceos are rewarded for their earnings management we re examine this issue using a panel threshold regression approach which allows the effect of earnings management on the ceo compensation to change across the level of earnings management and ceo compensation our results show that the effect of ceos discretionary accounting choices on their compensation is not homogeneous across various degrees of earnings management and compensation in particular for firms with moderate inordinate levels of earnings management and ceo compensation earnings management is rewarded penalized

the investment opportunity set and accounting procedure choice abstract this paper provides evidence on the cross sectional relation between firms investment opportunities their debt and compensation contracts their size and financial leverage and their accounting procedure choices this evidence is important because previous studies hypothesize that the link between firms investment opportunities and their accounting choices helps explain extant results on the size debt equity and bonus plan hypotheses however while i find that firms investment opportunities do affect the nature of their contracts i also find that the traditional explanations for accounting choice are important after controlling for the effects of the investment opportunity set

ceo duality as a double edged sword how boards of directors balance entrenchment avoidance and unity of command when a firm s chief executive officer is also the chairperson of its board directors have opposing objectives according to organization theory such ceo duality establishes strong unambiguous le

ownership and firm innovation in a transition economy evidence from china we examine innovation performance of firms in a transition economy from an ownership perspective we focus specifically on the relationship between ownership structures and firm innovation performance drawing on data from 548 chinese firms we find volume of patent registration to be most strongly influenced by foreign ownership in the firm along with firm affiliation within a business group the influence of state and institutional ownership on innovation performance is positive but lagged contrary to expectations insider ownership leads to lower innovation performance and concentrated ownership has no significant impact our study has two principal contributions firstly we utilize a comprehensive treatment of ownership characteristics overcoming weakness in previous studies that have used a more narrow focus on ownership type secondly we contribute to understanding of how firms in transition economies build indigenous capabilities for innovation by drawing attention to the interplay of foreign and domestic control of agents innovation

q and the tax bias theory abstract a growing body of literature analyzes the variation in q the ratio of financial market value to asset current replacement cost and makes inferences about attributes such as monopoly power profitability managerial performance etc these studies ignore potential biases embedded in q that result from non neutral tax policies this study examines the association between q and tax biases and establishes that differences in accumulated depreciation tax shields explain significant variation in q the implication that q should be adjusted for tax biases before use in empirical research is examined further adjusting q for tax biases at least with the factors herein leads only to minor changes in econometric analyses

gender diversity in the boardroom and firm financial performance the monitoring role performed by the board of directors is an important corporate governance control mechanism especially in countries where external mechanisms are less well developed the gender composition of the board can affect the quality of this monitoring role and thus the financial performance of the firm this is part of the business case for female participation on boards though arguments may also be framed in terms of ethical considerations while the issue of board gender diversity has attracted growing research interest in recent years most empirical results are based on u s data this article adds to a growing number of non u s studies by investigating the link between the gender diversity of the board and firm financial performance in spain a country which historically has had minimal female participation in the workforce but which has now introduced legislation to improve equality of opportunities we investigate the topic using panel data analysis and find that gender diversity as measured by the percentage of women on the board and by the blau and shannon indices has a positive effect on firm value and that the opposite causal relationship is not significant our study suggests that investors in spain do not penalise firms which increase their female board membership and that greater gender diversity may generate economic gains

the euro and corporate valuations in this paper we study the changes in corporate valuations induced by the adoption of the euro as the common currency in europe we use corporate level data from seventeen european countries of which eleven adopted the euro we show that the introduction of the euro has increased tobin s q ratios by 17 1 in the euro area countries that previously had weak currencies part of the increase in corporate valuations is explained by the decrease in interest rates and by the decrease in the cost of equity the increases in tobin s q are larger for firms that would be harmed by currency devaluations the author 2008 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

a reexamination of the neoclassical trade model under uncertainty abstract this paper presents a model that pinpoints the exact places and reasons that the propositions of the heckscher ohlin samuelson model break down under uncertainty within the model if preferences exhibit decreasing absolute risk aversion i a capital poor country tends to obtain lower revenues from its resources than the same resources would yield in capital rich countries ii if there is one riskless and one risky sector a capital abundant country tends to have a comparative advantage in the risky sector and iii the pattern of trade depends on the intra national as well as the inter national distribution of endowments

driving forces of residential co2 emissions in urban and rural china an index decomposition analysis abstract there exist many differences between urban and rural china among which residential co 2 emissions arising from energy consumption is a major one in this paper we estimate and compare the energy related co 2 emissions from urban and rural residential energy consumption from 1991 to 2004 the logarithmic mean divisia index decomposition analysis is then applied to investigate the factors that may affect the changes of the co 2 emissions it is found that energy intensity and the income effects respectively contributed most to the decline and the increase of residential co 2 emissions for both urban and rural china in urban china the population effect was found to contribute to the increase of residential co 2 emissions with a rising tendency however in rural china the population effect for residential co 2 emissions kept decreasing since 1998

the role of corporate governance strength in crisis and non crisis times this study evaluates corporate governance practices of listed firms in the united arab emirates and investigates whether corporate governance mitigates exacerbates the impact of leverage and risk o

does the bonding effect matter in a more integrated capital market world abstract this paper examines the bonding effect of cross listing before and after the stock market liberalization reforms in china consistent with the bonding hypothesis we find that chinese firms with foreign listings attain higher valuations than firms without foreign listings we also find that they manage earnings less than comparable purely domestic listed firms and have more informative stock prices further investigation indicates that the divergence in earnings quality between cross listed and non cross listed firms shrinks dramatically after the chinese stock market liberalization reforms in 2001 and 2002 overall the results suggest that the bonding effect is mitigated in an increasingly integrated capital market world

corporate governance and codes of ethics as a result of recent corporate scandals several rules have focused on the role played by boards of directors on the planning and monitoring of corporate codes of ethics in theory outside directors are in a better position than insiders to protect and further the interests of all stakeholders because of their experience and their sense of moral and legal obligations female directors also tend to be more sensitive to ethics according to several past studies which explain this affirmation by early gender socialization the fact that women are thought to place a greater emphasis on harmonious relations and the fact that men and women use different ethical frameworks in their judgments the goal of this paper is to determine the influence of these characteristics of the board in terms of promoting and hindering the creation of a code of ethics our findings show that a greater number of female directors does not necessarily lead to more ethical companies moreover within europe as a continent board ownership leads to an entrenchment of upper level management generating a divergence between the ethical interests of owners and managers in light of this situation the presence of independent directors is necessary to reduce such conflicts

inside the family firm the role of families in succession decisions and performance this paper uses a unique dataset from denmark to investigate the impact of family characteristics in corporate decision making and the consequences of these decisions on firm performance we focus on the decision to appoint either a family or an external chief executive officer ceo the paper uses variation in ceo succession decisions that result from the gender of a departing ceo s first born child this is a plausible instrumental variable iv as male firstchild firms are more likely to pass on control to a family ceo relative to female first child firms but the gender of a first child is unlikely to affect firms outcomes we find that family successions have a large negative causal impact on firm performance operating profitability on assets falls by at least four percentage points around ceo transitions our iv estimates are significantly larger than those obtained using ordinary least squares furthermore we show that family ceo underperformance is particularly large for firms in high growth industries and for relatively large firms overall the empirical results demonstrate that professional non family ceos provide extremely valuable services to the organizations they head

corporate governance and equity prices evidence from the czech and slovak republics the 1992 czechoslavakia mass privatization program involving about 1 500 eneterprises and implemented through a voucher scheme with competitive bidding was a bold step in changing the ownership and governance of a large part of the economy it represents a clear test case of one approach and other countries may benefit from its lessons at the time much skepticisism was voiced about mass privatization it would lead to diffuse ownership and no effective corporate governance would result but innovative forces led to the emergence of investment funds that collected much of the individuals voucher points leading to a much more concentrated ownership structure it has been expected that this concentrated ownership would lead to improved corporate governance but the jury is still out so far only limited and largely anecdotal evidence is available on the impact investment funds have on the way firms are being managed too little time has passed and too many shocks have occurred for example the split of the czech and slovak republics to expect to find discernible changes in corporate governance on measures of actual firm performance an alternative approach is to investigate whether firms that ended up with more concentrated ownership and possibly improved governance sell for higher prices either in the last voucher round or in the secondary market since then in a forward looking financial market one can expect prices to incorporate the effects of better ownership on future firm performance and associated dividends to shareholders put differently one would expect that two firms with different shareholding structures but otherwise identical would trade at different prices with the firm with a more concentrated ownership and presumably better corporate governance trading at a higher price on a cross sectional basis ownership structure may thus be significant in explaining relative share prices the author explores this line of reasoning controlling for a number of firm and sector specific variables he finds 1 majority ownership by a domestic or foreign investor has a positive influence on firm prices 2 firms with many small owners have lower prices 3 ownership by many small scale investors makes it easier for any single investor to establish effective control but such control does not necessarily translate into higher prices the author also provides two possible explanations of why higher prices appear to be associated only with majority ownership by a single investor he finds 1 the corporate legal framework and the difficulty in collecting proxy votes in the czech and slovak republics may prevent a small investor from making the necessary changes in the way firms are managed thus keeping prices low and 2 commercial banks are both managers of invesment funds and creditors of individual firms funds managers may face conflicts of interest and not be interested in increasing the value of equity alone but also the value of credits this could explain why prices are relatively lower for those firms in which investment funds have effective control

factorial decomposition of co2 emissions a generalized divisia index approach abstract this paper introduces a novel approach to estimating the impact of the major factors driving co 2 emissions gdp energy consumption population their carbon intensities and other related indicators that may be chosen arbitrarily the suggested approach is based on the generalization of the divisia index to interconnected factors the approach also extends the kaya identity by explicitly including gross domestic product and energy consumption a computer program in r language aimed at automating the calculations is supplied factorial analysis of the united states and china s co 2 emissions is provided as an example of application

risk taking and taxation an alternative perspective abstract the analysis of risk taking and taxation has almost invariably been in a portfolio choice framework this paper presents the alternative perspective of an occupational choice framework where risk taking involves the additional element of discrete choice between safe and risky activities it is shown that the specification of equilibrium must of necessity have a general equilibrium character in this setting the paper develops rules for government intervention in the market equilibrium and analyses the effects of taxation on risk taking

decomposing final energy use for heating in the residential sector in austria abstract in austria a considerable number of measures have been implemented to reduce final energy use for residential heating since the 1990s the aim of this analysis is to investigate why despite these implemented measures final energy use for heating has not decreased in the expected way the impact of eight factors on final energy use for heating is quantified by applying the logarithmic mean divisia index lmdi i method the dataset covers the sector of private households in austria for the period from 1993 to 2009 the main findings of the analysis are 1 while technical improvements reduce final energy use for heating significantly rising comfort needs nearly outweigh these savings 2 consumer behaviour reduces calculated final energy use considerably 3 the extent of this reduction is declining significantly in the period observed 4 the growing share of single family houses has increased energy demand for heating in the observed period though a reversal of this trend is detected from 2007 onwards 5 the impact of growing floor space per person is the major effect revealed by the analysis 6 weather conditions have a major impact on annual fluctuations of energy consumption

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

an empirical examination of the relation between debt contracts and management incentives abstract prior research on the factors influencing the use of debt covenants restricting dividends and additional borrowing is extended by considering management incentives when alternative incentive variables are considered separately we find covenants have a significant negative relation to ceo cash compensation an insignificant relation to the value of ceo equity held and significant positive relations to both the ratio of the value of ceo equity holdings to cash compensation and the fraction of equity held by the ceo in two stage simultaneous equations models only the latter is significant when jointly considered with each of the other incentive variables

the impact of foreign board membership on firm value abstract this study examines the effect of foreign anglo american board membership on corporate performance measured in terms of firm value tobin s q using a sample of firms with headquarters in norway or sweden the study indicates a significantly higher value for firms that have outsider anglo american board member s after a variety of firm specific and corporate governance related factors have been controlled for we argue that this superior performance reflects the fact that these companies have successfully broken away from a partly segmented domestic capital market by importing an anglo american corporate governance system such an import signals a willingness on the part of the firm to expose itself to improved corporate governance and enhances its reputation in the financial market

international trade and incomplete markets trade theorists since the influential paper by helpman and razin 1978 have considered the impact of uncertainty and international trade in securities from the point of view of available risk markets helpman and razin elegantly showed that in a model with multiplicative production uncertainty the validity of the traditional theorems of international trade follows from the existence of domestic securities markets and international trade in securities under their assumptions output was written

south korean chaebols and value based management south korean industrial conglomerates chaebols are discussed in the context of value based management vbm recent economics and finance literature on the diversion of corporate resources from the firm to the controlling shareholders tunneling for which chaebols are notoriously known is discussed chaebols have engaged in empire building and expropriation of minority shareholders distorting the process of efficient resource allocation in south korea and became the root cause of the 1997 financial crisis we argue that the 1997 crisis should be viewed as a consequence of chaebols systematic deviation from the guiding principles of vbm we use tunneling within chaebols as an example of the need to directly address prohibition of the expropriation of minority shareholders as a primary postulate of vbm we argue that vbm should require that the value generated by the firm not be expropriated from minorities or any stakeholders by dominant shareholders we also examine moral and ethical considerations and present explanations as to why the unethical practice of tunneling has been tolerated by the south korean public we show that public opinion on tunneling is changing and that the treatment of minority shareholders by chaebols controlling families is becoming increasingly unacceptable to south koreans

earnings and management incentives comments abstract in the preceding papers pourciau murphy and zimmerman and clinch and magliolo address the role of earnings in evaluating ceo performance for dismissal or compensation decisions and the implications for earnings management this comment evaluates the three papers and suggests avenues for future research into the stewardship role of accounting data and opportunistic financial reporting behavior

understanding the determinants of managerial ownership and the link between ownership and performance comment abstract himmelberg et al j financial econom 53 1999 353 384 argue that fixed effects estimators should be used in examination of the relationship between managerial ownership and firm performance i show that managerial ownership while substantially different across firms typically changes slowly from year to year within a company with rational managers maximising long term utility small one year changes in ownership are not likely to reflect notable changes in incentives that would lead to substantive within year changes in performance by relying on within variation fixed effects estimators may not detect an effect of ownership on performance even if one exists

constant increasing and decreasing risk aversion with many commodities the arrow 1971 pratt 1964 theory of risk aversion has achieved important successes in the study of economic responses to risk this theory applies to a special class of cases in which the von neumann morgenstern expected utility hypothesis is used to explain these responses under this hypothesis individuals who maximize the expected utility of different utility functions will in general make different choices in the face of uncertainty for the purpose of predicting which of two different utility functions will lead to locally more risk averse economic behaviour the essential feature of these functions is their associated arrow pratt absolute risk aversion measures in fact the local comparisons can be extended to global comparisons if the arrow pratt absolute measures are uniformly comparable the arrow pratt measure of absolute risk aversion and a closely related measure of relative risk aversion also play crucial roles in the investigation of changes induced by wealth increases in the risk taking behaviour of a single expected utility maximizing individual this study has resulted in a satisfactory theory of increasing decreasing and constant absolute and relative risk aversion the special cases to which the arrow pratt theory is directly applicable are those in which the utility functions in question are functions of a single variable e g wealth unfortunately the models required to explain many economic decisions employ a version of the expected utility hypothesis in which the argument of the utility function is a multidimensional vector one example arises in the study of the consumption savings decision another occurs in the analysis of the combined consumption savings portfolio decision a final example is obtained in the investigation of demand for goods of uncertain quality the papers of kihlstrom mirman 1974 and diamond stiglitz 1974 have suggested a partial generalization of the arrow pratt theory of absolute risk aversion this

the heckscher ohlin and travis vanek theorems under uncertainty abstract the heckscher ohlin theorem is valid under uncertainty of the special benchmark sort modelled by helpman razin their pessimism over its validity is vanquished by more structure rational expectations are imposed on consumers and identical and constant relative aversion to income risk is assumed under these circumstances with free commodity trade the heckscher ohlin theorem holds for the international exchange of equities

dynamic stability and international trade under uncertainty in the presence of output or price uncertainty the heckscher ohlin samuelson h o s model with incomplete risk markets has been shown to exhibit a wide range of perverse comparative statics responses which contradict the predictions d la stolper samuelson and rybczynski and opens up the possibility of perverse price output responses this paper revisits the question raised by neary 1978 and examines the dynamic stability properties of an h o s model under uncertainty in relation to the conditions under which these perverse responses emerge the findings suggest that once the risk attitudes of the representative entrepreneur is appropriately accounted for in the specification of value factor intensities dynamic stability with respect to a marshallian adjustment process is necessary and sufficient for the normality of all of the standard comparative statics responses except for the rybczynski result the basic analytics are then applied to various existing setups of the h o s model under uncertainty in each case the applicability of the stability condition in precluding comparative static responses that violate standard predictions is examined

structural models and endogeneity in corporate finance the link between managerial ownership and corporate performance 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 to assess the effectiveness of standard econometric approaches to the endogeneity problem we apply those remedies to panel data generated from the model the unfortunate conclusion is that at least in the ownership performance context proxy variables fixed effects and instrumental variables do not generally provide reliable solutions to simultaneity bias

does increased equity ownership lead to more strategically involved boards according to jay lorsch boards will be increasingly expected to exercise more leadership even strategic leadership in the running of a firm in order to align directors to the best interest of the firm directors are increasingly required to purchase the equity of the companies on whose board they serve and in the majority of cases the minimum shareholding is 1000 shares the rationale for this is that the directors will take the perspective of real owners of the company partly based on a study by the national association of corporate directors in 1995 using behavioral economics this paper makes some counterintuitive predictions about how involved boards are likely to react to an offer for a hostile takeover by studying their reactions the paper inductively analyzes the use of equity ownership as an incentive mechanism

are small firms less vulnerable to overpriced stock offers we show an inverted u relation between targetiveness probability of being targeted and firm size however this pattern describes stock offers and is more pronounced during hot markets characterized by higher stock valuations for cash offers we find a negative and monotonic relation these contrasting patterns suggest that small firms in the bottom nyse size quartile are less vulnerable to overpriced stock offers in addition we find that the stock acquirers of small targets are less overvalued than those of large targets and that the announcement returns are less negative for stock acquirers of small targets than for those of large targets

assessing empirical research in managerial accounting a value based management perspective this paper applies a value based management framework to critically review empirical research in managerial accounting this framework enables us to place the exceptionally diverse set of managerial accounting studies from the past several decades into an integrated structure our synthesis highlights the many consistent results in prior research identifies remaining gaps and inconsistencies discusses common methodological and econometric problems and suggests fruitful avenues for future managerial accounting research

trade patterns under uncertainty with country specific shocks the helpman razin model of international trade under uncertainty is extended to allow for country specific productivi ty shocks it is shown that for the multiple sector multiple factor case there exists a set of interesting sufficient conditions under w hich it is possible to predict the pattern of international trade in securities goods and factor content on the basis of cross country d ifferences in factor endowments it is shown that under these circum stances some well known empirical tests have to be modified copyright 1988 by the econometric society

controlling the conflict of interest in management buyouts a controversial aspect of the management buyouts that were popular throughout the 1980s is the potential for a conflict of interest to arise when a manager bids to acquire the firm he manages this study examines 184 management buyouts and reports three findings first returns to prebuyout shareholders are greater when managers must bid against outside acquirers second bid revisions in the face of competition exceed revisions due to shareholder litigation and negotiations with boards third the incidence of competition is negatively related to the prebuyout share holdings of managers coauthors are ronald f singer anju seth and darla f lang copyright 1994 by mit press

entrenchment governance and the stock price reaction to sudden executive deaths abstract to study managerial entrenchment i use the stock price reaction to unexpected senior executive deaths if a highly effective manager dies unexpectedly the stock price reaction should be negative if however death removes an entrenched manager when the board would or could not the stock price reaction should be positive while individually age and tenure only weakly correlate with the stock price reaction to a sudden death the reaction is strongly positive 6 8 if 1 the executive s tenure exceeds 10 years and 2 abnormal stock returns over the last three years are negative

marginal q revisited two measures of firm investment behaviour used in the empirical research are tobin s q average q and marginal q the marginal q is a more recently introduced measure than tobin s q and is not as well known this article aims to demonstrate the advantages of using marginal q as a performance measure and is a response to an earlier critical article berglund 2011 claiming an elusiveness bias the pro arguments made in response are that the claimed elusiveness is not a problem furthermore many of the evaluation problems inherent in the empirical use of tobin s q like estimation of replacement cost of assets can be avoided from a pure theoretical standpoint it has long been recognized that marginal q is superior to an average measure of investment behaviour such as tobin s q

negotiated block trades and corporate control we identify negotiated trades of large percentage blocks of stock as corporate control transactions when a block trades and the firm is not fully acquired cumulative abnormal returns average 5 6 and 33 of the chief executives are replaced within a year stock price increases are larger when control passes to the new blockholder when management does not resist the blockholder s effort to influence corporate policy and when the block purchaser eventually fully acquires the firm these findings suggest that the specific skills and expertise of blockholders and not just the concentration of ownership are important determinants of firm value we examine 106 negotiated trades of at least 5 of the common stock of new york stock exchange nyse and american stock exchange amex listed corporations our primary objective is to assess the impact of these transactions on the firms whose shares are traded we also investigate the importance of active block investor s specific managerial expertise and incentives for firm value the emerging literature on concentrated ownership focuses on how the level of ownership affects a blockholder s incentives to undertake a variety of corporate decisions although it has been recognized that a blockholder s identity also can be important less attention has been paid to this issue several recent studies however provide evidence that blockholders incentives and expertise are not homogeneous for example holderness and sheehan 1985 find that the stock market reacts more favorably to initial block accumulations by six controversial investors who are often portrayed in the press as raiders than to initial accumulations by a random sample of investors morck shleifer and vishny 1988 find that firm value tends to be lower when the firm is run by a member of the founder s family than when it is run by an officer unrelated to the founder brickley lease and smith 1988 document that institutional blockholders are less willing to vote against management on antitakeover amendments when they are likely to have business dealings with the firm when a block trades the concentration of ownership typically does not change but the blockholder s identity does

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

china s changing energy intensity trend a decomposition analysis china experienced a dramatic decline in energy intensity from the onset of economic reform in the late 1970s until 2000 but since then the rate of decline slowed and energy intensity actually increased in 2003 most previous studies found that most of the decline was due to technological change but disagreed on the role of structural change to the best of our knowledge no decomposition study has investigated the role of inter fuel substitution in the decline in energy intensity or the causes of the rise in energy intensity since 2000 in this paper we use logarithmic mean divisia index lmdi techniques to decompose changes in energy intensity in the period 1980 2003 we find that 1 technological change is confirmed as the dominant contributor to the decline in energy intensity 2 structural change at the industry and sector sub industry level actually increased energy intensity over the period of 1980 2003 although the structural change at the industry level was very different in the 1980s and in the post 1990 period 3 structural change involving shifts of production between sub sectors however decreased overall energy intensity 4 the increase in energy intensity since 2000 is explained by negative technological progress 5 inter fuel substitution is found to contribute little to the changes in energy intensity

compensation turnover and top management incentives historical evidence the authors find that the rate of top management turnover and the sensitivity of turnover to stock returns for a sample of large industrial firms from 1933 to 1941 was significantly smaller than estimates reported for modern panels they present evidence that management compensation has become more sensitive to firm performance since the 1930s in contrast to the conclusions of michael c jensen and kevin j murphy 1990 and others the authors findings indicate that management incentives under control of the board have become stronger rather than weaker over the past half century these findings are consistent with internal and external control mechanisms functioning as complements copyright 1997 by university of chicago press

the reverse lbo decision and firm performance theory and evidence we investigate the transition from private to public ownership of companies that had previously been subject to leveraged buyouts lbos we show that the information asymmetry problem firms face when they go to public markets for equity as well as behavioral and debt overhang effects will produce a pattern in which superior performance before an offering should be expected with disappointing performance subsequently we find empirical evidence of this phenomenon by studying 62 reverse lbos that went public between 1983 and 1987 the market appears to anticipate this pattern in 1991 56 leveraged buyouts lbos returned to the public equity markets part of a broader phenomenon in which a large fraction of lbos go public again hence becoming reverse lbos kaplan 1991 reports that 45 percent of a sample of large lbos completed between 1979 and 1986 later returned to public ownership moreover reverse lbos tend to be larger than the average initial public offering ipo 1 in sum transitions from the lbo form to public ownership have become a widespread and economically significant phenomenon we find strong evidence that the return to public ownership of reverse lbos coincides with a peak in their operating performance their operating income as a percentage of total assets grew by about seven percentage points in the preoffering year comparison firms in the same industries show a slight decline in the same performance measure moreover in the preoffering year reverse lbos outperform continuing lbos in the year after the

management and ownership effects evidence from five countries despite the growing recognition in the corporate governance literature that the relationship between ownership concentration and profitability is context dependent this issue has not yet been subjected to direct empirical investigation using a single cross national sample this study empirically examines the ownership concentration performance relationship across the nations of canada france germany the united kingdom and the united states essentially we argue that the correlation if any between ownership concentration and firm profitability differs across countries in a systematic way determined by the national system of corporate governance results indicate that important and statistically significant differences do in fact exist across the countries studied 1998 john wiley sons ltd

residential energy consumption in urban china a decomposition analysis abstract residential energy consumption rec is the second largest energy use category 10 in china and urban residents account for 63 of the rec understanding the underlying drivers of variations of urban rec thus helps to identify challenges and opportunities and provide advices for future policy measures this paper applies the lmdi method to a decomposition of china s urban rec during the period of 1998 2007 at disaggregated product activity level using data collected from a wide range of sources our results have shown an extensive structure change towards a more energy intensive household consumption structure as well as an intensive structure change towards high quality and cleaner energy such as electricity oil and natural gas which reflects a changing lifestyle and consumption mode in pursuit of a higher level of comfort convenience and environmental protection we have also found that china s price reforms in the energy sector have contributed to a reduction of rec while scale factors including increased urban population and income levels have played a key role in the rapid growth of rec we suggest that further deregulation in energy prices and regulatory as well as voluntary energy efficiency and conservation policies in the residential sector should be promoted

capital labor and the firm a study of german codetermination under the german corporate governance system of codetermination employees are legally allocated control rights over corporate assets through seats on the supervisory board that is the board of nonexecutive directors the supervisory board oversees the management board the board of executive directors approves or rejects its decisions and appoints its members and sets their salaries we empirically investigate the implications of this sort of labor participation in corporate decision making we find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31 stock market discount as compared with companies where employee representatives fill only one third of the supervisory board seats we show that under equal representation management board compensation provides incentives that are not conducive to furthering shareholders interests possibly because labor maximizes a different objective function than shareholders we document that under equal representation companies have longer payrolls than their one third representation peers have finally we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm jel g32 g34

firm ownership and productivity a study of family and non family smes motivated by a lack of consensus in the current literature the objective of this paper is to reveal whether family firms are more or less productive than non family firms as a first step this paper links family business research to the theoretical notion that family involvement has an effect on the factors of production from a productivity standpoint second by using a cobb douglas framework we provide empirical evidence that family labour and capital indeed yield diverse output contributions compared with their non family counterparts in particular family labour output contributions are significantly higher and family capital output contributions significantly lower interestingly differences in total factor productivity between family and non family firms disappear when we allow for heterogeneous output contributions of family production inputs these findings imply that the assumption of homogeneous labour and capital between family and non family firms is inappropriate when estimating the production function

the entrepreneurial orientation performance relationship in private family firms the moderating role of socioemotional wealth drawing on socioemotional wealth sew literature this paper revisits the established entrepreneurial orientation eo performance relationship in a family business context the main idea in entrepreneurship literature is that eo leads to increased firm performance we question this logic in a family business context because family related non financial goals like sew may prevent the firm to reap the fruits of their entrepreneurial efforts specifically we argue that sew engenders inefficiencies that place constraints on the realization of the benefits of entrepreneurship therefore we propose that a high level of sew preservation hinders the transmission of the family firm s eo into positive performance effects to test this hypothesis an empirical study was developed using a sample of 232 belgian private family firms robust linear regression analysis reveals that the positive effect of eo on financial performance decreases as the level of sew preservation increases

an analysis of the stock price reaction to sudden executive deaths implications for the managerial labor market abstract certain characteristics of managerial employment arrangements and of the managerial labor market make shareholder wealth dependent on an executive s continued employment these wealth effects are investigated by examining the common stock price reaction to unexpected deaths of senior corporate executives abnormal stock price changes are documented for a sample of fifty three events these abnormal stock price changes are associated with the executive s status as a corporate founder and with measures of the executive s talents and decision making responsibility and of the transaction costs associated with renegotiating or terminating the employment agreement

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

does home bias affect firm value evidence from holdings of mutual funds worldwide this study finds strong evidence that home bias affects firm valuation at both country and firm levels at the country level increasing the bias of domestic investors toward home equity lowers the market valuation of home equity at the firm level firm value increases as the compositions of local equities held by domestic and foreign investors tend toward the firms global market capitalization weights but decreases as their weights deviate from global weights overall the evidence is consistent with the optimal global risk sharing hypothesis that the greater risk sharing between domestic and foreign investors in international capital markets reduces the cost of capital and hence enhances market valuation