CORPORATE GOVERNANCE, ETHICS, AND ORGANIZATIONAL ARCHITECTURE

Effective corporate leadership involves more than developing a good strategic plan and setting high ethical standards. It also means coming up with an organizational design that encourages the company's managers and employees to carry out its business plan and maintain its ethical standards.
In this article, the authors use the term organizational architecture to refer to three key elements of a company's design:

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  the assignment of decision-making authority–who gets to make what decisions;

       

Alternative methods for raising capital: Rights versus underwritten offerings

This paper provides an analysis of the choice of method for raising additional equity capital by listed firms. Examination of expenses reported to the SEC indicates that rights offerings involve significantly lower costs; yet underwriter are employed in over 90 percent of the offerings. The underwriting industry, finance textbooks, and corporate proxy statements offer several justifications for the use of underwriters. However, estimates of the magnitudes of these arguments indicate that they are insufficient to justify the additional costs of the use of underwriters. The use of underwriters thus appears to be inconsistent with rational, wealth-maximizing behavior by the owners of the firm. The paper concludes with an examination of alternate explanations of the observed choice of financing method.     

Using goal programming to determine interest group disutility for public policy choices

Within this paper a framework is developed for incorporating into the process of social choice both interest group preferences for social goals and the efficient allocation of limited resources. The social welfare function is adopted as the foundation for the framework and the goal programming algorithm is used to approximate the utility of the interest groups for their optimal policy choice. A function is defined which measures the disutility experienced by a social unit when a policy other than its optimal choice is selected. A surrogate measure of this disutility involving imposed preference weight changes for social goals is determined and its implications for use in developing the social welfare function are examined.     

What Drives ETF Flows?

The value of exchange traded fund (ETF) assets has increased from $66 billion in 2000 to almost a trillion dollars in 2010. We use this massive expansion in ETF assets to study what drives ETF flows. Using a data set of over 500 ETFs from 2001 to 2010, we show that ETF investors chase returns in the same way as mutual fund investors. While there is an active debate about whether return chasing by mutual fund investors represents the pursuit of superior talent, the existence of return chasing in this passively managed environment should not represent a search for skilled managers. We also show that ETF flows increase following high volume, small spreads, and high price/net asset value ratios. Finally, we find little evidence of superior market timing in ETF flows. Our results suggest that return chasing in both mutual funds and ETFs is more likely the result of naïve extrapolation bias on the part of investors that has contributed to the growth of the ETF industry.     

A brand so bad it’s good: The paradoxical place marketing of Belfast

Abstract

According to O’Driscoll (2008), paradox characterises marketing in the ‘after modern’ epoch. This is certainly true of place marketing, which is often described as a paradox-rich domain (Dinnie, 2011). Drawing upon the results of a novel, culture-based research procedure, this paper describes the paradoxical outcomes of an urban branding exercise in Belfast, one of the world’s most infamous cities. Albeit dismissed by local worthies as a futile attempt to ‘put lipstick on a gorilla’, this paper argues that Belfast’s branding is not only far from futile but a perversely paradoxical form of marketing that’s so bad it’s good.     

ORGANIZATIONAL ARCHITECTURE AND CORPORATE FINANCE

This article is based on remarks I gave at the 2000 meeting of the Southern Finance Association (SFA). I was extraordinarily flattered to be named Distinguished Scholar for 2000 by the SFA; I would like to thank the members and officers of the association for this award. As an SFA board member, I participated in establishing the Distinguished Scholar program. The original idea was to broaden participation in SFA by more of the profession's senior researchers. Last year I believe we chose the ideal person for the inaugural award, Professor Richard Roll of UCLA. But I must admit that I felt somewhat awkward in accepting the award this year. Although I certainly appreciate having my work recognized, I have attended SFA meetings regularly over the last quarter century. They afford a wonderful opportunity to renew valued friendships (some going back to graduate school) and revisit my southern roots. So this award is quite special for me, even if I do not consider myself its ideal recipient.     

The Public Utility Regulatory Policy Act and regulatory behavior

The 1978 Public Utility Regulatory Policies Act set energy conservation and efficient, equitable electricity rates as national goals. The decision on whether to implement innovative rates to meet these goals was turned over to state public service commissions, but not all states implemented the rates. This paper uses economic and political variables to explain state decisions regarding implementation. The results suggest that state commissions were influenced by concerns for economic efficiency, but were also swayed by political pressures.