Agency Conflicts and Short- vs Long-Termism in Corporate Policies

The paper demonstrates that the optimal incentive contract generates short- or long-termism in corporate policies, defined as short- or long-term investment levels above the levels attainable in the absence of agency frictions. In other words, short- or long-termism can be an optimal response to the dual agency problem over the short and long run. Long-termism…

Please Don’t Call CEO Departures for Cause “Push-Outs”

The use of the term “push-out” reveals the bias of this study, from a program largely funded by CEOs. When CEOs are promptly fired for cause, including poor performance, without multi-million-dollar departure packages. we’ll begin to talk about efficient markets. Research using the Push-out Score analysis model shows that at the start of the year,…

Larker and Tayan Re-Discover the Governance Wheel

Stanford’s David F. Larcker and Brian Tayan have a new paper called Loosey-Goosey Governance: Four Misunderstood Terms in Corporate Governance in which they appear to think they’ve discovered what everyone has understood forever — that there are limits to structural solutions and that checklists of best practices are not especially helpful. We were very clear…

Retail Shareholder Participation in the Proxy Process: Monitoring, Engagement

From: Alon Brav, Matthew D. Cain, and Jonathon Zytnick We study retail shareholder voting using a detailed and nearly universal sample of anonymized retail shareholder voting records over the period 2015-2017. Contrary to public perception, we find that retail shareholders are an influential voting bloc, affecting as many proposal outcomes as the Big Three asset…

Do Corporate Governance Ratings change Investor Expectations? Evidence from Announcements by Institutional Shareholder Services | Review of Finance | Oxford Academic

Paul M Guest and Marco Nerino assess the impact of governance ratings. We continue to be very skeptical of any study focusing on the immediate impact of any particular information as being especially significant, but we believe this analysis is worth reviewing. This paper examines empirically the announcement effect of commercial corporate governance ratings on…

Shareholders Are Not the Problem

Susan Holmberg has a sincere, thoughtful, but occasionally misguided new paper, Economic Inclusion, Finance, and Wealth. The ideology of “shareholder primacy”—the belief that businesses function solely to profit and “maximize value” for shareholders—has had a profound and toxic effect on our economy. Corporate executives used to, in large part, manage companies for the long term,…

How are Shareholder Votes and Trades Related?

Rutgers Assistant Professor Sophia Zhengzi writes: Are shareholder votes a sufficient form of voice that catalyzes trades across the board? Are shareholders’ votes and trades correlated? And do shareholders update their trading patterns based on the information conveyed by other investors’ votes? We address these questions by examining the relation between votes and volume at…

Distracted Shareholders and Corporate Actions

Do institutional shareholders have an unlimited capacity to monitor firms, or are they subject to attention constraints? And if they are, what are the consequences for firm governance? Alberto Manconi, Elisabeth Kempf, and Oliver Spalt find that When our proxy indicates a high level of distraction, fewer questions are asked during earnings conference calls. Further,…