Stock market turnover and corporate governance

Alex Edmans, Vivian W Fang, Emanuel Zur, 16 February 2013

The stock market is a powerful tool for controlling corporations’ behaviour. But which is better, a highly liquid market or a number of large blockholders? This column argues in favour of liquidity. Evidence suggests that policymakers should not reduce stock liquidity through greater regulation. While the idea that liquidity encourages short-term trading – rather than long-term governance – sounds intuitive, deeper analysis shows that liquidity is beneficial because it encourages large shareholders to form in the first place, and allows shareholders to punish underperforming firms through selling their stake.

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The stock market is a powerful tool for controlling corporation’s behaviour. But what is best:

Topics: Financial markets
Tags: corporate governance, financial markets, firms, liquidity, stocks

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Brain drain or brain gain? Evidence from corporate boards

Mariassunta Giannetti , Guanmin Liao, Xiaoyun Yu, 3 January 2013

Is the brain drain reversing? This column argues that increasing numbers of foreign-educated and economic emigrants are returning home. Evidence suggests that the best of the bunch bring with them strong corporate governance practises and an appetite for internationalisation. Through this ‘brain gain’, the return of skilled professionals boosts emerging markets’ economies.

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Development economists have long warned about the costs for developing countries of the emigration of the best and brightest that decamp to universities and businesses in the developed world (Bhagwati 1976). This brain drain has attracted a considerable amount of economic research. 

Topics: Development
Tags: brain drain, brain gain, corporate governance

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The impact of corporate governance in financial institutions

Hamid Mehran, Alan Morrison, Joel Shapiro, 6 April 2012

A recent op-ed by a former Goldman Sachs employee has led to an outcry over two important themes which came to the fore during the crisis, ie corporate culture and incentives. This column argues that neither regulation nor market forces has put either of these issues to rest. It adds that bank complexity and the too-big-to-fail policy both serve to undermine market discipline.

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Topics: Financial markets
Tags: banks, corporate governance, too-big-to-fail

The US left behind: The rise of IPO activity around the world

Craig Doidge, George Andrew Karolyi, René M Stulz, 3 August 2011

Over the past two decades, there has been a dramatic change in initial public offering (IPO) activity around the world. The importance of IPOs in the US relative to the world has not kept up with the economic importance of the US. This column analyses nearly 30,000 IPOs from almost 90 countries between 1990 and 2007 to examine why this might be.

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Over the past two decades, there has been a dramatic change in initial public offering (IPO) activity around the world. In particular, IPO activity in the US has fallen compared to the rest of the world. Figure 1 shows the ratio of IPO proceeds to GDP for the both the US and for the world, as well as the difference between the two ratios.

Topics: Institutions and economics
Tags: corporate governance, IPOs, public companies, US

The era of corporate split personalities

Nicolas Véron, 23 May 2011

The quip that “cross-border banks are international in life, but national in death” resonates loudly amongst the empty shells of international banks that have since been bailed out by their home countries. This column argues that such tensions will intensify in the coming years.

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The saga of securities-exchanges consolidation is a vivid illustration of links between companies and nations in a state of flux. The likes of the New York Stock Exchange (NYSE) are national icons of capitalism. But they are also technology-enabled networks that connect market participants and seek a global reach to maximise economies of scale, just like Facebook or eBay.

Topics: Global governance, Institutions and economics, International finance
Tags: corporate governance, financial regulation

Do inefficient stock markets drive bad governance?

Fritz Foley, Sergey Chernenko, Robin Greenwood, 1 June 2010

Why do minority shareholders continue to hold stock despite the risk of expropriation by controlling shareholders? This column provides two decades of evidence from Japan suggesting that many investors do not foresee these conflicts of interest, even when there is plenty of disclosure. Inefficient stock markets allow majority shareholders – often parent companies – to sell overpriced stock only to buy it back at a later date.

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One of the major accomplishments of recent corporate governance research has been to expose the risks confronted by minority shareholders in public companies around the globe. Corporate ownership structures such as pyramids, business groups, and dual class shares leave control in the hands of a limited set of blockholders – exposing minority investors to potential expropriation.

Topics: Microeconomic regulation
Tags: corporate governance, emerging markets, Minority shareholders

Bank dividends in the crisis: A failure of governance

Viral Acharya, Hyun Song Shin, Irvind Gujral, 31 March 2009

Banks’ corporate governance is under fire. Perhaps one of the worst failures of governance has been the continued payment of dividends throughout the financial crisis. This column says that dividends’ erosion of common equity deprived banks of capital when they most needed it. It proposes cutting dividends as the first step in the resolution of future banking crises.

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The accumulated losses in the current crisis (at $1.11 trillion since August 2007) have been very large, but so have the headline figures for the amount of new capital raised ($900 billion) as can be seen in Figure 1.

Topics: Financial markets
Tags: banks, corporate governance, crisis

The future of securities regulation

Luigi Zingales, 28 January 2009

In 1933, US securities regulations were introduced to restore trust in financial markets. Today, a new regulatory focus is needed to address the crisis of confidence. After reviewing the status of financial regulation, this column sketches policy proposals in three key areas of securities markets.

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In the 75 years since the enactment of the US Securities Act, securities markets could not have changed more. Concerns that afflicted investors then – lack of transparency and market manipulation – are not at the forefront today, partly thanks to the success of 1930s legislation.

Topics: Financial markets
Tags: corporate governance, financial integration, financial regulation, regulations

Final Conference of the European Corporate Governance Training Network

11 - 12 September 2008, Barcelona

This conference of the Research Training Network on European Coroporate Governance will conclude the project, funded by the 6th Framework Programme for Research by the European Commission.

Organizer(s):
Marco Becht, José Manuel Campa, Marc Goergen, Xavier Vives
Type:
Conference
Location:
Barcelona
Attendance:
Closed attendance
Contact:
nclarke@cepr.org
Institution:
CEPR and IESE
More information:
http://www.cepr.org/meets/Diary/forthcomingmeetings.asp?mnum=9

Disclaimer: Vox is not responsible for the accuracy of this information.

Topic(s):
Microeconomic regulation
Tags:
corporate governance

Corporate Governance: Economic, Financial and Legal Perspectives

11 - 15 August 2008, Santander

This Summer School will provide an introduction on current corporate governance issues from an economic, financial, and legal perspective. The focus will be on issues associated with external financing of firms, managerial discretion, and small investor protection. The aim of the Summer School is both to develop the general principles of corporate governance, and to provide a comparative institutional perspective of corporate governance arrangements across countries. The lectures will also be based on several case studies. The Summer School is intended for doctoral and post-doctoral students in economics and finance. Participation is compulsory for Early Stage Researchers of the European Corporate Governance Training Network (ECGTN).

Organizer(s):
Marco Becht, Rafael Repullo, Ailsa A Röell
Type:
Course
Location:
Santander
Attendance:
Closed attendance
Contact:
nclarke@cepr.org
Institution:
CEPR and CEMFI
More information:
http://www.cepr.org/meets/Diary/forthcomingmeetings.asp?mnum=8

Disclaimer: Vox is not responsible for the accuracy of this information.

Topic(s):
Microeconomic regulation
Tags:
corporate governance, external financing, investor protection, managerial discretion

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