the determinants and performance impact of outside board leadership outside board chairs are more likely in firms that are smaller have greater stock volatility and research and development intensity and have a lower proportion of inside directors and less institutional ownership they are also more likely when chief executive officers have shorter tenure and lower ownership we also find that the existence of an outside chair is associated with geographical and industry norms an outside chair is positively associated with firm performance a finding robust to various estimation methods including event study and multivariate analyses incorporating controls for endogeneity as well as market and accounting measures of performance we note however that the relationship between outside chair and firm performance varies with firm characteristics

global liquidity through the lens of monetary aggregates this paper examines how the financial activities of non financial corporations nfcs in international markets potentially affects domestic monetary aggregates and financial conditions monetary aggregates reflect in part the activities of nfcs who channel capital market financing into the domestic banking system thereby influencing funding conditions and credit availability periods of capital inflows are also those when the domestic currency is appreciating and such periods of rapid exchange rate appreciation coincide with increases in the central bank s foreign exchange reserves increasing the stock of narrow money the paper examines economic significance of cross country panel data on monetary aggregates and other measures of non core bank liabilities non core liabilities that reflect the activities of nfcs reflect broad credit conditions and predict global trade and growth

managerial entrenchment and firm value a dynamic perspective we examine the impact of managerial entrenchment on firm value using a dynamic model with firm fixed effects to estimate the model we employ the long difference technique which is shown by our simulation to deliver the least biased estimates based on a large sample of u s companies we document a significantly negative and causal effect of managerial entrenchment on firm value after taking into account omitted variables reverse causality and highly persistent endogenous variables additional analysis suggests that the causality running from managerial entrenchment to firm value is more pronounced than that for reverse causality

gender diversity and firm performance evidence from india and singapore this study investigates if gender diversity on boards is an effective driver of financial performance for this purpose this study choses two countries one of which has the soft law approach sin

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

creating balance in dynamic competitions abstract we consider incentives for organizing competitions in multiple rounds focusing on situations where there is heterogeneity among the contestants ex ante which discourages effort in a single contest heterogeneity evolves across rounds depending upon the outcomes of previous rounds we present conditions under which balance in such a competition can be created by determining the number of rounds and dividing the prize fund carefully across them so that full rent dissipation entails in the model each round is an all pay auction where contestants differ in their abilities to gain a momentum from winning we also discuss the case when negative prizes are feasible demonstrating that this strengthens the full dissipation result and we consider a case where the size of the winner s momentum is related to the size of the prize attained showing that the stronger this linkage the less of the prize is awarded early on

how to split the pie optimal rewards in dynamic multi battle competitions abstract multi battle competitions are ubiquitous in real life in this paper we examine the effort maximizing reward design in sequentially played multi battle competitions between two players the organizer has a fixed prize budget and rewards players contingent on the number of battles they win in a three battle contest a full spectrum of contest technologies in the tullock family is accommodated we find that the optimal design varies with the discriminatory power of the contest technology in particular when it is in the low range winner take all is optimal for the intermediate range as discriminatory power increases the optimal prize structure evolves continuously from winner take all to the proportional division rule due to the need to mitigate the growing momentum discouragement effect for the high range a wide span of prize structures extracts full surplus and is thus optimal several robustness checks confirm that mitigating the momentum discouragement effect is essential for effort maximizing prize design in dynamic multi battle contests

a framework for integrated risk management in international business treatments of risk in the international management literature largely focus on particular uncertainties to the exclusion of other interrelated uncertainties this paper develops a framework for categorizing the uncertainties faced by firms operating internationally and outlines both financial and strategic corporate risk management responses

racing with uncertainty and strategic interaction between competitors as the race unfolds most of the existing literature examines one or other of these features but not the two combined our aim is to see how the efforts of competitors in a race vary with the intensity of rivalry between them in our principal model whch is of a one dimensional race it is shown that the leader in the race makes greater efforts than the follower and efforts increase as the gap between competitors decreases under certain conditions the same results hold in our second related model which is of a two dimensional race

does hometown advantage matter the case of institutional blockholder monitoring on earnings management in korea this study uses a large sample of korean firms to examine institutional blockholders influence on corporate earnings management the korean market is an interesting setting to study institutional monitoring because it is dominated by chaebols which are characterized by ineffective internal governance mechanisms we find evidence that institutional blockholders deter opportunistic financial reporting and such activities are the most evident among domestic institutional blockholders foreign institutional blockholders especially those with short term investment objectives lead to more discretionary reporting our findings are robust to various empirical models and endogeneity checks moreover this study offers new insight into the proximity advantage of domestic institutional investors with regard to monitoring information it also highlights institutional investors roles in shaping corporate governance in emerging markets in which sound corporate governance has become increasingly important for firms long term sustainability one important policy implication is that regulatory authorities should aim to promote institutional investors participation in these markets

community religion employees and the social license to operate the world bank recently noted social license to operate has traditionally referred to the conduct of firms with regard to the impact on local communities and the environment but the definition has expanded in recent years to include issues related to worker and human rights world bank 2013 http go worldbank org fz88vmom90 in this paper we examine a factor that can influence the kind of work conditions that can facilitate or obstruct a firm s attempts to achieve the social license to operate slo specifically we examine the empirical association between a company s employee practices and the religiosity of its local community by investigating their fixed and endogenous effects using a large and extensive u s sample we find a positive association between the employee friendly practices of a firm and the religiosity of the local community after controlling for several firm characteristics in addition after mitigating endogeneity with the dynamic panel system generalized method of moment and after employing several other econometric tests we still find a robust positive association between the religiosity of the local community and employee friendly practices since recent research has shown that the firm s treatment of its stakeholders is a key to achieving an slo and since employees constitute a highly significant stakeholder group we interpret our results as supporting the view that religion is an important influence on the kinds of employee practices that can increase the likelihood that a firm will acquire the slo

how much of the diversification discount can be explained by poor corporate governance we investigate whether the diversification discount occurs partly as an artifact of poor corporate governance in panel data models we find that the discount narrows by 16 to 21 when we add governance variables as regression controls we also estimate heckman selection models that account for the endogeneity of diversification and dynamic panel generalized method of moments models that account for the endogeneity of both diversification and governance we find that the diversification discount persists even with these controls for endogeneity however in selection models the discount disappears entirely when we introduce governance variables in the second stage and in dynamic panel gmm models the discount narrows by 37 when we include governance variables

accounting for endogeneity and the dynamics of corporate social corporate financial performance relationship abstract this paper examines the endogeneity problem in studies dealing with corporate social performance and financial performance relationship since randomized controlled experiments in the business research field are often unfeasible researchers rely mostly on observational data to make claims about doing good doing well arguments in response to several strong calls for additional well crafted empirical research that address endogeneity we revisit the csp cfp relationship in the airline industry to understand how endogeneity arises and how to control for it in studies based on observational panel data we exploit various approaches such as ols fixed effects fixed effects iv 2sls dynamic system gmm and gls estimators we show the appropriateness behind the use of the dynamic system gmm estimator and its benefits over the fixed effects estimator in addition we demonstrate that results in models that do not account for endogeneity lead to inflated estimations misleading interpretations and wrong theoretical propositions about the dynamic nature of csp cfp relationship

relative pay and its effects on firm efficiency in a transitional economy abstract in this study we examine the impact of relative pay manager pay divided by average worker pay on a firm s productivity using data from a major transitional economy china we find that relative pay is negatively associated with high productivity our results provide support for the view that workers are alienated when their incomes are far lower than that of top management and this leads to lower productivity this effect is most pronounced in labor intensive firms

endogeneity and the dynamics of internal corporate governance abstract we use a well developed dynamic panel generalized method of moments gmm estimator to alleviate endogeneity concerns in two aspects of corporate governance research the effect of board structure on firm performance and the determinants of board structure the estimator incorporates the dynamic nature of internal governance choices to provide valid and powerful instruments that address unobserved heterogeneity and simultaneity we re examine the relation between board structure and performance using the gmm estimator in a panel of 6 000 firms over a period from 1991 to 2003 and find no causal relation between board structure and current firm performance we illustrate why other commonly used estimators that ignore the dynamic relationship between current governance and past firm performance may be biased we discuss where it may be appropriate to consider the dynamic panel gmm estimator in corporate governance research as well as caveats to its use

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

government involvement in the corporate governance of banks on march 18 1976 the swedish parliament voted on a bill that if approved would have substantially increased both the scale and scope of government representation on bank boards since parliament was hung the outcome of the vote was decided by a lottery we exploit this lottery to study the causal effect on shareholder value of government involvement in the corporate governance of banks we find that the rejection of the bill resulted in positive abnormal returns that persisted in the following days our results suggest that unsolicited government involvement in the corporate governance of banks is harmful for owners jel codes g14 g34 g38

the determinants of price discovery evidence from us canadian cross listed shares abstract we examine the determinants of price discovery for canadian firms cross listed on the main us stock exchanges over the period 1996 2011 sampling at a one minute frequency we compute gonzalo and granger component shares cs and employ a system gmm approach to control for persistence in price discovery and endogeneity between cs and its determinants we find that price discovery is highly persistent and that there is strong evidence of simultaneity between cs and its determinants we conclude that lower relative spreads and higher relative trading activity increase an exchange s contribution to price discovery we also document that it is small trades that drive price discovery particularly since the introduction of decimalization

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

persistence of profitability and competition in emerging markets abstract this paper reports on time series analyses of the persistence of profitability of firms in emerging markets its central result is that there is less persistence in developing than in advanced economies the implications for the intensity of competition in emerging markets are examined

multi battle contests abstract we study equilibrium in a multistage race in which players compete in a sequence of simultaneous move component contests players may win a prize for winning each component contest as well as a prize for winning the overall race each component contest is an all pay auction with complete information we characterize the unique subgame perfect equilibrium analytically and demonstrate that it exhibits endogenous uncertainty even a large lead by one player does not fully discourage the other player and each feasible state is reached with positive probability in equilibrium pervasiveness expected effort in the component contests may be non monotonic in the closeness of the race and realized individual effort may exceed the value of the prize by a factor that is proportional to the maximum number of stage victories required

sustainable energy systems and company performance does the implementation of sustainable energy systems improve companies financial performance abstract the main aim of this paper is to analyse whether the adoption of sustainable energy systems improves corporate financial performance to this end we obtained data from a sample of 574 multinational companies from 36 countries in the 2008 2013 period on this data we implement a dynamic system panel data method our findings show that the adoption of sustainable energy systems allows firms to improve their short term corporate financial performance while not leading them to reduce their corporate financial performance in the long term specifically our results indicate that an increase in energy efficiency and the use of renewable energy sources do not significantly affect corporate financial performance neither does the integration of energy efficiency systems and renewable energy sources have any significant influence on corporate financial performance while the level of implementation of sustainable energy management systems has a significant effect on short term but not long term corporate financial performance furthermore other control variables such as research and development expenditure and year are also relevant in explaining firms financial performance the adoption of sustainable energy systems helps to improve corporate financial performance in the short term but has no affect in the long term this might be because the monitoring of energy efficiency using key performance indicators allows firms to detect and correct failures in the production process and hence improve short term financial performance however this measure does not generate competitive advantages for firms and therefore has no effect on long term corporate financial performance from a scientific perspective of energy this paper contributes to the literature by providing a detailed explanation of how the adoption of sustainable energy systems proposed by peura 2013 influences corporate financial performance on the basis of new empirical evidence these explanations provide a strong rationale for improving the efficient use of energy and harvesting low hanging fruits in the short term from a managerial perspective policymakers should encourage firms to align sustainable energy systems with their core business strategy by developing green technologies that allow them to acquire rare and valuable capabilities and abilities which generate competitive advantage and therefore allow firms to increase their long term corporate financial performance

investigating e business models value retention for start ups the moderating role of venture capital investment intensity abstract business models help firms to set a right path to create grow and retain their business value while previous research shows that business model affects the performance of entrepreneurial firms there is still limited understanding about how likely different business model selections of internet of things iot startup firms retain their value and whether the venture capital investment intensity does play any role in the business model s value retention process in this study we suggest that the e business model selections i e novelty efficiency lock in and complementarity of an iot mobile application app may affect its value retention based on contingency theory an organization must match its structure and decisions to its external environments we propose that the venture capitalist s involvement may moderate the strength of the relationship between e business models and an iot mobile app s value retention we have collected data from 470 start ups in china the results show that efficiency centred and complementarities centred e business models increase while lock in centred e business model reduces the iot mobile app s value retention furthermore our findings also indicate that the venture capitalist s involvement does not help all types of e business model s value retention the relationship between novelty centred e business model and value retention is positively only when venture capital investment intensity is high in contrast the relationship between efficiency centred e business model and value retention is positive only when venture capital investment intensity is low theoretical and managerial implications are discussed and some limitations and future research directions are proposed

uncertainty and liquidity in corporate bond market abstractwe examine the uncertainty liquidity connection in the corporate bond market using monthly corporate bond data from 2005 to 2010 we construct proxies for parameter uncertainty by using firm level parameters generated from a structural model of corporate debt we find that uncertainty about firm parameters decreases trading volume but increases bid ask spreads and price bouncing in the cross section and across time in addition the panel var results show that parameter uncertainty has negative forecasting power for future bond liquidity with greater uncertainty in the current month leading to lower trading volume higher bid ask spreads and higher price fluctuations on subsequent months we conclude that parameter uncertainty is one of the underlying factors giving rise to the high level of illiquidity in the corporate bond market

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

orchestrating rent seeking contests contests have different sometimes quite complex organisational structures in particular while most of the existing literature focusses on simultaneous contests multistage contests are also quite frequently encountered this paper seeks to provide a rationale for the latter by endogenising the choice of a contest structure which is made by an organiser of a contest interested in maximising the efforts expended by the contenders

political uncertainty and corporate debt financing empirical evidence from china we examine the influence of political uncertainty on corporate debt financing under the chinese highly specialized political system a new reasonable and effective alternative indicator official t

larger board size and decreasing firm value in small firms1 abstract several studies hypothesize a relation between board size and financial performance empirical tests of the relation exist in only a few studies of large u s firms we find a significant negative correlation between board size and profitability in a sample of small and midsize finnish firms finding a board size effect for a new and different class of firms affects the range of explanations for the board size effect

corruption types of corruption and firm financial performance new evidence from a transitional economy using a nationwide survey of provincial institutional quality and a sample of private manufacturing small and medium scale enterprises the smes this paper contributes to the literature by considering for the first time the effects of corruption on the financial performance of vietnamese private smes interestingly contrary to previous findings we find that corruption when measured by a dummy variable does not affect firms financial performance after controlling for heterogeneity simultaneity and dynamic endogeneity however the intensity of bribery and the majority of the forms of corruption were found to have negative impacts on firms financial performance hence a typical approach using only a dummy variable for bribery might not adequately evaluate the impact of bribe intensity or even ignores the negative impacts of some types of bribes on firms financial performance the findings suggest that anti corruption measures are vital for the development of the vietnamese private smes

globalization of corporate risk taking we explore how the interconnected nature of global finance affects corporate risk taking we show that a common global factor known to be associated with fluctuations in cross border banking is also strongly associated with common co movements in corporate risk taking across a diverse universe of international firms our study contributes to the international business literature as the first comprehensive investigation of how global financial conditions induce greater synchronization of risk taking across regions and sectors

from custer to thermopylae last stand behavior in multi stage contests abstract in a multi stage contest known as a two player race players display two fundamental behaviors 1 the laggard will make a last stand in order to avoid the cost of losing and 2 the player who is ahead will defend his lead if it is threatened last stand behavior in particular contrasts with previous research where the underdog simply gives up the distinctive results are achieved by introducing losing penalties and discounting into the racing environment this framework permits the momentum effect typically ascribed to the winner of early stages to be more thoroughly examined i study the likelihood that the underdog will catch up i find that neck and neck races are common when the losing penalty is large relative to the winning prize while landslide victories occur when the prize is relatively large closed form solutions are given for the case where players have a common winning prize and losing penalty

workforce diversity and religiosity workforce diversity has received increasing amounts of attention from academics and practitioners alike in this article we examine the empirical association between a firm s workforce diversity hereafter diversity and the degree of religiosity of the firm s management by investigating their unidirectional and endogenous effects employing a large and extensive u s sample of firms from the years 1991 2010 we find a positive association between a measure of the firm s commitment to diversity and the religiosity of the firm s management after controlling for various firm characteristics in addition after controlling for endogeneity with the dynamic panel generalized method of moment we still find a positive association between the firm s diversity and management s religiosity we interpret these results as supportive of the religious motivation explanation that views the firm as a human community and considers religion as a factor that influences managers to more positively embrace diversity our results however provide no support for the resource constraint hypothesis that views the firm as a nexus of contracts and sees managers as aiming to maximize shareholder returns under resource constraints that force them to invest only in projects that have a positive net present value npv and reject diversity initiatives since these do not have a positive npv

best of three all pay auctions abstract we study a best of three all pay auction it is shown that with values of winning and without values of losing this auction is less productive the players total expected effort is smaller than the one stage all pay auction however with different values of losing over the contest s stages it may be more productive than the one stage all pay auction

profit persistence in the very long run evidence from survivors and exiters one of the main shortcomings of the profit persistence literature is the fact that it looks only at surviving companies this paper uses a unique dataset to analyse profit persistence in two different samples of stationary series 85 surviving us companies from 1950 1999 and 72 exiters while the exiters perform more competitively than the survivors there is still significant evidence for profit persistence in both samples concentration and growth of the industry as well as size and volatility of profits seem to play an important role in explaining persistence

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

do energy efficiency policies save energy a new approach based on energy policy indicators in the eu member states abstract over the last two decades the european union and its member states have introduced policies aimed at improving energy efficiency the energy service directives esd introduced the concept of measurement of energy savings attributed to policies two different and complementary methodologies for the evaluation of energy savings have been developed under the esd the bottom up bu approach based on a technical analysis of each measure and the top down td approach based on the analysis of how energy intensity changes over time bu methods can hardly take into account policy induced behavioural changes whereas td methods have difficulties in disentangling policy induced savings from other savings econometric models have been proposed as a viable alternative to deal with both drawbacks the purpose of this article is to present an econometric model aimed at estimating the energy savings induced by energy efficiency policies in the eu member states in the period 1990 2013 we introduce an explicit measure of energy policy intensity based on the mure database which is used as explanatory variable in a dynamic panel model for 29 european countries our results suggest that energy consumption in 2013 in europe would have been about 12 higher in the absence of energy efficiency policies

bidding in hierarchies this paper reconsiders the comparison between hierarchical contests and single stage contests a condition is given that characterizes whether and when the aggregate equilibrium payoff of contestants is higher in the single stage contest and when the single stage contest is more likely to award the prize to the contestant who values it most highly the outcome depends on inter and intra group heterogeneity and is not driven by free rider incentives

tests of the rational expectations hypothesis this paper reviews evidence on the structure of anticipation from a number of empirical studies jack muth s rational expectations hypothesis is compared with a variety of alternative models including ferber s law the implicit expectations model of edwin mills and muth s new errors in the variables model the cumulative evidence is of such strength as to compel the suspension of belief in the concept of rational expectations this implies that it is a mistake to proceed under the maintained hypothesis that expectations are rational instead it is necessary to test the sensitivity of empirical and theoretical results to alternative assumptions about the structure by which anticipations are generated copyright 1986 by american economic association

finance and the sources of growth the authors evaluate whether the level of development in the banking sector exerts a causal impact on economic growth and its sources total factor productivity growth physical capital accumulation and private saving they use 1 a pure cross country instrumental variable estimator to extract the exogenous component of banking development and 2 a new panel technique that controls for country specific effects and endogeneity they find that banks do exert a large causal impact on total factor productivity growth which feeds through to overall gdp gross domestic product growth the long run links between banking development and both capital growth and private savings are more tenuous

board independence and operating performance analysis on french company and individual data this article studies the relationship between board independence and firm operating performance in french listed companies we take advantage of an original database with a time series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues in addition this database can be disaggregated at the individual director level this design enables us to introduce firm fixed effects and individual fixed effects in firm performance equations thereby controlling for heterogeneity at the firm and individual levels our main result is to document a significant negative relationship between independence and accounting performance this result suggests that in the french context the costs of independence i e the informational gap supported by independent directors compared to insiders and affiliated directors outweigh the benefits of independence i e the reduction in agency costs