Dumb money: Mutual fund flows and the cross-section of stock returns

We use mutual fund flows as a measure of individual investor sentiment for different stocks, and find that high sentiment predicts low future returns. Fund flows are dumb money–by reallocating across different mutual funds, retail investors reduce their wealth in the long run. This dumb money effect is related to the value effect: high sentiment stocks tend to be growth stocks. High sentiment also is associated with high corporate issuance, interpretable as companies increasing the supply of shares in response to investor demand.     

Retail investor attention and corporate innovation in the big data era

This paper explores the corporate governance role of retail investor attention from the perspective of corporate innovation. Using a sample of Chinese listed firms from 2011 to 2019, we find that retail investor attention significantly promotes corporate innovation. Thisresult ise robust to a series of robustness checks to address potential endogeneity concerns. I further conclude that the impact of retail investor attention on corporate innovation is mainly through alleviating a firm's financial constraints and deterring agency costs. In addition, such effects are more pronounced in firms with higher media and analyst coverage as well as those with more overconfident CEOs. The results provide empirical evidence of the corporate governance function of individual investors in the current digital era.     

Liquidity,the Value of the Firm,and Corporate Finance*

The theory of corporate finance has been based on the idea that a company's market value is determined mainly by just two variables: the company's expected aftertax operating cash flows or earnings, and the risk associated with producing them. The authors argue that there is another important factor affecting a company's value: the liquidity of its own securities, debt as well as equity. The paper supports this argument by reviewing the large and growing body of evidence showing that differences—and, perhaps even more important, sudden changes—in liquidity can have major effects on the pricing of corporate stocks and bonds or, equivalently, on investors' required returns for holding them. The authors also suggest that the liquidity of a company's securities can be managed by corporate policies and actions. For those companies whose value is likely to be increased by having more liquid securities—which is by no means true of all companies (for example, mature firms with little need for outside equity are likely to benefit from having more concentrated ownership and hence less liquidity)—management should consider actions such as reducing leverage and substituting dividends for stock repurchases as well as measures designed to increase the effectiveness of their disclosure and investor relations program and the size of their retail investor base.     

金字塔控制、关联交易与公司价值——基于我国民营上市公司的实证研究

本文以我国证券市场2002～2004年329家民营上市公司为样本，考察了金字塔控制、关联交易与公司价值之间的关系。发现民营上市公司的金字塔控制不利干公司价值：民营上市公司的最终控制人主要通过关联方担保、关联方资金占用和上市公司与关联方的商品购销活动来侵占小股东的利益，其政策含义是应该鼓励自然人直接持股上市公司，加强对关联交易的监管。更为重要的是必须改营公司外部治理环境、尤其是法律对投资者权益的保护，从而从根本上杜绝民营上市公司及其最终控制人对小股东的侵害行为，改善公司治理，提高公司价值。     

Far Beyond the Quarterly Call: CECP's First CEO‐Investor Forum

The authors begin by describing how the existing structure of corporateshareholder communications encourages short‐term planning and performance evaluation horizons. Then, after summarizing the substantial evidence that corporate management, boards, and investors are concerned about the failure of current corporate‐shareholder communications to reflect longer‐run corporate investment and its expected payoffs, the article holds up the long‐run plans presented by the CEOs of five large public U.S. companies (and the CFO of IBM) at the first ever CECP CEOInvestor Forum as providing a promising model for the future. Such presentations are also evaluated against a set of criteria the authors propose for assessing the effectiveness of those presentations—criteria that were developed through extensive investor and CEO feedback. The article concludes by discussing the three main programs that make up CECP's Strategic Investor Initiative to further the development of such longterm plans. One program is focused on identifying different kinds of investors, with the aim of helping management attract longer‐term shareholders. A second program is designed to improve the ways companies communicate with their non‐investor stakeholder groups, with particular emphasis on The Statement of Material Audiences and its role in identifying the critical stakeholders and their contributions to the long‐run success of the company. Third and last is the development of a common language and tool‐kit for longterm plans, with the aim of bringing about the broad adoption of longterm plans as a mainstream element in corporate‐shareholder communications.     

投资者关系管理及其影响因素分析——基于深圳上市公司的实证检验

基于中国的制度背景,结合公司网站投资者关系的性质,本文从公司管理者开展网站投资者关系管理的内部影响因素和外部影响因素两个方面尝试性地对我国上市公司网站投资者关系水平进行理论分析。在此基础上,我们以深圳主板上市公司网站为样本,对影响公司网站投资者关系水平的因素进行了实证检验。研究表明,公司的再融资计划、公司规模、公司业绩、流通股比重等显著影响到公司网站投资者关系水平。     

Are all investment decisions to subscribe to new stocks mindless?Investor heterogeneity and behavior in the process of subscribing to new stocks

The IPO process is a way for companies to improve their corporate governance and for investors to assess company quality.This paper posits that investor choices...     

Retail minority shareholders and corporate reputation as determinant of dividend policy in Australia

This paper investigates the influence of retail minority shareholders in the determination of corporate dividend policies of Australian companies. While retail investors are typically also minority shareholders and therefore perceived in academic literature to have limited influence on corporate dividend decisions, casual empiricism suggests the contrary. We hypothesise that corporate reputation serves as a device aligning managers' incentives with retail minority shareholder interests, and that the propensity to manage for corporate reputation is positively related to the degree of retail shareholder base. We find empirical evidence of managers of Australian companies catering to the retail investors' preference for dividends when setting dividend policy, even when they are minority shareholders, so long as the proportion of these retail shareholders relative to the total shareholder base is high. Our results are robust when controlled for the factors of size, profitability, financial leverage, signalling, agency costs and franking credits.     

Changes in the marketing and operational capacity of retail sector firms through corporate securitization

Corporate securitization is a structured finance product that retail companies use to raise funds on the back of their operating assets. We investigate whether corporate securitization enhances the retail firm's marketing and operational capacity through a set of structural enhancements including operating covenants. Operating covenants are designed to mitigate the financial and operating risks of a securitized business and improve its marketing potential. Using the case of a retail firm's securitization, the United Kingdom's Mitchell's & Butler's, we find some support for this conjecture. We also find that corporate securitization is more successful where managers have considerable scope for making changes in the retail firm's operating and marketing environment.     

Reappearing Dividends

During the last two decades of the 20th century, the propensity of U.S. companies to pay cash dividends declined significantly. The trend away from dividends accelerated during the late 1990s, leading some economists to conclude that dividend policy was shifting in a very fundamental way. But there was a sharp reversal in this trend starting in 2000.
This article investigates five possible explanations why dividends are reappearing. Given the explosion of new companies during the 1990s, the authors find that part of this rebound can be explained by the "maturity hypothesis"– by the need for such companies to pay out their excess "free cash fiow" to reassure investors that it will not be wasted on value-destroying investments. The authors also report evidence that some companies have chosen to use dividends in part to restore investor confidence about the "quality" of corporate earnings in the wake of concerns over corporate governance. Third, the authors' findings suggest that U.S. companies have responded to the recent dividend tax cut, as one might expect, although the rebound in dividends started well before tax reform became a widely discussed possibility. Finally, the study finds little support for behavioralist explanations in which managers "cater" to irrational investor preferences for dividends. Although the authors hesitate to read too much into the recent rebound, their evidence is consistent with the idea that corporate payout policy has shifted back in favor of conventional cash dividends.     

Robinhood investors and corporate misconduct

Using the data of retail investors' stock holdings, this study examined the effect of corporate misconduct on investor behavior. Our results showed that the number of retail investors investing in fraudulent firms tends to increase throughout the misconduct and during the public announcement. We also found that the increased volatility of stock returns heightens the interest of retail investors in the fraudulent stocks before and during the announcement of corporate misconduct. However, there was no significant change in their number after the announcement. Retail investors did not sell fraudulent stocks that have already lost significant value after the public announcement of corporate misconduct.     

Perceptions and attitudes toward corporate website presence and its use in investor relations in the Jordanian context

This study reports the results of semi-structured interviews conducted to explore the factors affecting Jordanian listed firms' decisions on whether or not to have a corporate website and, if so, whether or not to use it in investor relations activities. Corporate interviewees noted that the decision to have an online presence was motivated by a desire to enhance the company's image and reputation, and the need to re-brand the company was often a key event triggering website adoption. Particularly important here were international influences, whether international partners, shareholders or competitors. However, in all cases, top management support was essential and played a key role in influencing the ways in which companies use their website both in general and for investor relations activities in particular. Results also revealed that the key factor explaining the lack of a corporate website was the attitude or belief of management. Of key importance was their belief that stakeholders, including Jordanian stock market participants, are not yet ready or willing to use the internet to acquire information about the company. Some interviewees similarly concluded that there is no demand for investor relations information on corporate websites because the Jordanian Securities Commission publishes all listed companies' annual reports on its own website. Other factors explaining the lack of a corporate website were management change, absence of competition and having been listed on the Jordanian stock exchange for a long period. This research extends our understanding of disclosure on the internet by considering a different research setting, namely Jordan, and also by extending the theoretical framework used.     

上市公司自愿性信息披露影响因素研究

自愿性信息披露对于增强投资者系统性保护、提升上市公司治理水平具有重要意义。本文以深市样本公司数据为基础，按上市公司战略性信息、非财务主要信息和财务信息三类信息披露指数，考察公司规模、财务杠杆、经理层持股、公司盈利、外资股、审计费用对于我国上市公司自愿性信息披露的影响。研究表明，我国上市公司在自愿性信息披露方面缺乏充分的内在动机和完善的外在激励机制，自愿性信息披露行为尚侍进一步地系统性规范。     

VALUE MAXIMIZATION AND STAKEHOLDER THEORY: COMPATIBLE OR NOT?

Complicating the current corporate governance controversy is a major disagreement about the fundamental purpose of the corporation. There are two main views on what should constitute the principal goal of the firm. Most economists tend to endorse value maximization—that is, maximization of the value of the firm's debt plus equity—or a version of value maximization known as “value‐based management” (VBM) that aims to maximize shareholder value. The main challenger is “stakeholder theory,” which argues that the corporation exists to benefit not just investors but all its major constituencies—employees, customers, suppliers, the local community, and the federal government, as well as shareholders. Thus, whereas the success of a corporation under VBM could be assessed simply by its long‐run return to shareholders, under stakeholder theory a company's success would be judged by taking account of its contributions to all its stakeholders. Using statistical analysis of various measures of corporate success in satisfying non‐investor stakeholders, the author investigates whether a broader focus on multiple stakeholders is necessarily inconsistent with the pursuit of long‐term shareholder value. His main findings in fact suggest just the opposite—namely, that long‐term value creation appears to be a necessary condition for maintaining corporate investment in stakeholder relationships. More specifically, the author's study shows that companies with higher levels of value creation tend to have stronger reputations for treating stakeholders well while companies that create little value end up shortchanging not just their shareholders but all their constituencies. For profitable companies that have previously failed to devote the optimal level of resources to their non‐investor stakeholders, the message of this article is that investing in stakeholders can add value—and, in fact, it pays for companies to spend an additional dollar on stakeholder relationships as long as the present value of the expected (long‐run) return is at least a dollar.     

投资者保护、终极控制人性质与会计信息可比性

通过测度中国上市公司的会计信息可比性值,实证考察了投资者保护对可比性的影响.结果显示:投资者保护程度与会计信息可比性显著正相关,即在我国投资者保护程度较强的地区,企业管理层能更严格遵守会计准则规定,会计信息可比性较高.进一步检验发现,相对于国有控股公司,投资者保护程度与会计信息可比性的正相关关系在非国有控股公司中更加显著,因此,投资者保护制度对国有控股公司管理层会计行为的约束能力较弱.稳健性检验结果发现,这种正相关关系在中央政府控股公司与地方政府控股公司间不存在显著差别.     

Embedding Sustainability Performance and Long‐Term Strategy in the Earnings Call

The practice of disclosing corporate Environmental, Social and Governance performance information continues to evolve, and the frequency of ESG disclosures in investor‐facing discussions, including Investor Day presentations and non‐deal roadshows, continues to grow. But even with these developments, the corporate‐investor dialogue about ESG and long‐term strategy, and their expected effects on long‐run profitability and value, has continued to lag. This seems particularly evident in the quarterly earnings call. In this article, the authors review the work of NYU's Center for Sustainable Business, in collaboration with Chief Executives for Corporate Purpose (CECP), in encouraging companies to work ESG themes and performance into their quarterly earnings calls. After discussing the reasons for the relatively slow progress in this important disclosure venue, including interviews with sell‐side analysts, the authors propose practical approaches that can guide companies, regardless of industry or market cap, in delivering this content in a way that is valuable to both buy‐side and sell‐side equity analysts.     

The extent of corporate governance disclosure and its determinants in a developing market: The case of Egypt

This paper assesses the extent of corporate governance voluntary disclosure and the impact of a comprehensive set of corporate governance (CG) attributes (board composition, board size, CEO duality, director ownership, blockholder ownership and the existence of audit committee) on the extent of corporate governance voluntary disclosure in Egypt. The measurement of disclosure is based on published data created from a checklist developed by the United Nations, which was gathered from a manual review of financial statements and websites of a sample of Egyptian companies listed on Egyptian Stock Exchange (EGX). Although the levels of CG disclosure are found to be minimal, disclosure is high for items that are mandatory under the Egyptian Accounting Standards (EASs). The failure of companies to disclose such information clearly shows some ineffectiveness and inadequacy in the regulatory framework in Egypt. Moreover, the phenomenon of non-compliance may also be attributed to socio-economic factors in Egypt. Therefore, it is expected that Egyptian firms will take a long time to appraise the payback of increased CG disclosure. The findings indicate that that—ceteris paribus—the extent of CG disclosure is (1) lower for companies with duality in position and higher ownership concentration as measured by blockholder ownership; and (2) increases with the proportion of independent directors on the board and firm size. The results of the study support theoretical arguments that companies disclose corporate governance information in order to reduce information asymmetry and agency costs and to improve investor confidence in the reported accounting information. The empirical evidence from this study enhances the understanding of the corporate governance disclosure environment in Egypt as one of the emerging markets in the Middle East.     

Corporate dividend policy in Thailand: Theory and evidence

This paper examines dividend changes in an emerging market: Thailand. We begin by considering the possible effects of the Thai corporate environment on dividend policy. We develop a theoretical model that considers the relationship between the strength of investor power and dividends in an agency cost/free cashflow framework. This allows us to consider the conditions for the outcome (positive relationship) or substitute (negative relationship) models, as discussed by La Porta et al. (2000). Our model also allows us to consider the expropriation hypothesis, in which the presence of large controlling shareholders may actually reduce outside investor power, leading to lower dividends. We then turn to our empirical analysis. Employing a large sample of companies that changed dividends in Thailand during the period 1996–2009, we test for the signaling, free cashflow and life-cycle hypotheses. A further contribution of our analysis is that we consider the impact of investor power and ownership on dividends in Thailand. Overall, we find little support for the signaling hypothesis, but we find considerable support for the free cashflow and life-cycle hypotheses. Our analysis of ownership variables suggests that increasing investor power (for example, high ownership concentration together with the presence of domestic institutional ownership) results in higher dividends, in support of the outcome model, rather than the substitution or expropriation models.     

个人投资者情绪对企业履行社会责任的影响

基于利益相关者理论,运用多元回归模型,依据2010-2018年度企业社会责任相关数据,将中国A股非金融类上市公司分为重污染企业和非重污染企业,考量个人投资者情绪对企业社会责任的影响.结果显示:个人投资者情绪越积极,企业社会责任履行状况越好;个人投资者情绪治理的效果会受污染异质性影响,相对于非重污染企业而言,个人投资者情绪对于重污染企业社会责任履行的影响更显著.鉴于此,应建立投资者情绪监测机制、鼓励社会责任投资等.     

The Icahn Manifesto

The title of this opening chapter in the author's new book on activist investors refers to Carl Icahn's solution to the “agency” problem faced by the shareholders of public companies in motivating corporate managers and boards to maximize firm value. During the 1960s and '70s, U.S. public companies tended to be run in ways designed to increase their size while minimizing their financial risk, with heavy emphasis on corporate diversification. Icahn successfully challenged corporate managers throughout the 1970s and 1980s by buying blocks of shares in companies he believed were undervalued and then demanding board seats and other changes in corporate governance and management. This article describes the evolution of Icahn as an investor. Starting by investing in undervalued, closed‐end mutual funds and then shorting shares of the stocks in the underlying portfolio, Icahn was able to get fund managers either to liquidate their funds (giving Icahn an arbitrage profit on his long mutual fund/short underlying stocks position) or take other steps to eliminate the “value gap.” After closing the value gaps within the limited universe of closed‐end mutual funds, Icahn turned his attention to the shares of companies trading for less than his perception of the value of their assets. As the author goes on to point out, the strategy that Icahn used with such powerful effect can be traced to the influence of the great value investor Benjamin Graham. Graham was a forceful advocate for the use of shareholder activism to bring about change in underperforming—and in that sense undervalued—companies. The first edition of Graham's investing classic, Security Analysis, published in 1934, devoted an entire chapter to the relationship between shareholders and management, which Graham described as “one of the strangest phenomena of American finance.”