“I Do”: Does Marital Status Affect How Much CEOs “Do”?

This paper explores whether a CEO's marital status reveals unobservable risk preferences which influence their firm's investment and compensation policies. Using biographical data for CEOs of large domestic companies, we find that corporate deal‐making activity (e.g., mergers, joint ventures, major capital expenditures, etc.) and overall firm riskiness both increase significantly with personal life restructuring (e.g., marriages and divorces). This relation is supported by an instrumental variables analysis and also an investigation surrounding CEO turnover. Finally, the link between a CEO's marital status and preference for option‐based compensation further suggests that personal restructuring may be an indicator of executive risk appetites.     

Are specialist funds “special”?

In this paper, I explore the relation between portfolio overlap and performance diversity. Using data on actively managed U.S. equity mutual funds, I find that the pairwise portfolio overlap between individual funds has increased over time and is significant compared to various randomized benchmarks. These findings motivate the main question of this paper, namely whether specialist funds (those with low levels of portfolio overlap with other funds) differ significantly from funds with high levels of overlap. Here, I find that these specialists differ with regard to certain portfolio‐ and fund‐specific characteristics, but they do not appear to outperform other funds.     

What's in a “China” Name? A Test of Investor Attention Hypothesis

We study whether a firm's name affects investor attention and firm valuation. Some Chinese firms listed on US stock exchanges have the word “China” included in their company names (“China‐name stocks”), while others do not (“non‐China‐name stocks”). During the 2007 China stock market boom, we find that China‐name stocks significantly outperform non‐China‐name stocks. This is not due to differences in firm characteristics, risk, or liquidity. The “China‐name effect” is largely consistent with the investor attention hypothesis that price pressure caused by increased investor attention on China‐name stocks during the boom period drives up China‐name stocks more than non‐China‐name stocks.     

Can Taxes Shape an Industry? Evidence from the Implementation of the “Amazon Tax”

For years, online retailers have maintained a price advantage over brick‐and‐mortar retailers by not collecting sales tax at the time of sale. Recently, several states have required that online retailer Amazon collect sales tax during checkout. Using transaction‐level data, we document that households living in these states reduced their Amazon purchases by 9.4% following the implementation of the sales tax laws, implying elasticities of –1.2 to –1.4. The effect is stronger for large purchases, where purchases declined by 29.1%, corresponding to an elasticity of –3.9. Studying competitors in the electronics field, we find some evidence of substitution toward competing retailers.     

Chapter 15 Recognition in the United States: Is a Debtor “Presence” Required?

A recent appellate decision in the USA (In re Barnet) confuses the foreign debtor with the foreign insolvency representative. Notwithstanding the focus of US bankruptcy law on a foreign proceeding as the object of an ancillary case under Chapter 15, with the foreign representative as its emissary, the decision dismayed the international insolvency community by ruling that section 109(a) of the Bankruptcy Code applies to recognition under Chapter 15. The result is to require that the debtor in a foreign proceeding has some minimum jurisdictional presence in the USA as a condition of Chapter 15 recognition. Such a presence might include a domicile, a place of business, or property. While there might be a “backdoor” device avoiding this result, the decision creates serious confusion and a potential obstacle to full international recognition. Copyright © 2015 INSOL International and John Wiley & Sons, Ltd     

Do U.S. Insurance Firms Offer the “Wrong” Incentives to Their Executives?

We examine the relation between executive compensation and market‐implied default risk for listed insurance firms from 1992 to 2007. Shareholders are expected to encourage managerial risk sharing through equity‐based incentive compensation. We find that long‐term incentives and other share‐based plans do not affect the default risk faced by firms. However, the extensive use of stock options leads to higher future default risk for insurance firms. We argue that this is because option‐based incentives induce managerial risk‐taking behavior, which seeks to maximize managerial payoff through equity volatility. This could be detrimental to the interests of shareholders, especially during a financial crisis.     

“Too big to fail”? The Agrokor case and its impact on West Balkan economies

From about April 2017, Agrokor became the main economic topic in the Balkans. Once the greatest pride of the Croatian economy, it became a serious problem for its government. Its systemic importance for the country and the region required an immediate legislative solution. The Government had Parliament pass a special law intended to save this company. The special law on the procedure of extraordinary administration in companies of systemic importance adopted in April 2017 is an interesting example, because it introduced a new insolvency procedure titled “extraordinary administration” clearly following the example of the Italian Legge Marzano, which was adopted in order to save the Parmalat group in 2003. It also represents an example of a collision of legislation in the case of cross‐border insolvency proceedings inside and outside of the European Union, where different jurisdictions have diverging standpoints on the question of its recognition as a foreign insolvency procedure. However, once the rescue proceedings began, numerous (and some dubious) interests of the different stakeholders came to the light. The government tried not only to rescue the company and its assets throughout the Balkans region but also to acquire control of it. This was especially visible through the prerogatives of the extraordinary commissioner, formally appointed by the court, but in fact a government official. Creditors at risk, mainly Russian and Italian banks, filed lawsuits to prevent the selling of the debtor's assets. At the end, the majority creditors called to vote on the settlement agreement became the new owners of the company. However, Agrokor is still far from the end of the crisis. It has more than 60,000 employees in the region and their destiny depends on the outcome of the crisis. In more recent times, the case also revealed major political scandals.     

EFA Keynote Speech: “Corporate Governance and Corporate Social Responsibility: What Do Investors Care about? What Should Investors Care about?”

This article is the keynote address from the Eastern Finance Association meeting in New Orleans in March 2007 with updated references and examples. In this keynote address, I discuss what we can learn about institutional investors' views on corporate governance and corporate social responsibility from research and surveys.     

房价上涨对P2P网络借贷成本的影响分析——来自“人人贷”的经验证据

本文利用中国P2P行业代表企业“人人贷”网络贷款平台的交易数据和中国70个大中城市的房价数据,实证研究了房价上涨对P2P网络借贷市场上的借款利率所产生的影响。实证结果表明,房价上涨显著增加了P2P借贷市场上的借款利率。进一步分析发现,房价上涨对P2P借贷市场上生产经营类、买房类和其他消费类借款项目的借款利率均具有显著的正向影响,且这一增加效应在生产经营类和买房类借款项目中体现得更为明显。此外,基于异质性的分析还发现,相比于一二线城市,房价上涨对三四线城市借款项目的借款利率影响更大。本文的研究发现,房价上涨对新兴互联网信贷市场的影响机制存在,这为相关部门制定房价调控和互联网金融监管政策提供了参考和补充。     

A Special Breed?– A Longitudinal and Cross‐Sectional Study of Norwegian Budgeting and Financial Civil Servants

Abstract: This paper focuses on civil servants in the central Norwegian civil service whose main tasks are budgeting, supervision and accounting. The main research questions are: (a) What is their typical demographic profile? (b) How has their demographic profile changed over time? (c) What are the effects of having budgeting, supervising and accounting as a main task on civil servants’ attitudes and behaviour? The main findings are that they have a specific profile. There are significant differences between ministries and central agencies as well as changes over time and also marked differences with other civil servants regarding their attitudes and behavior.     

Company duplication – plain fraud or a ‘poor man's’ bankruptcy? A case study in the financial distress of small businesses

Two possible solutions to corporate financial distress are traditionally considered: commencing a formal bankruptcy proceeding or arranging an out‐of‐court capital restructuring. Corporate bankruptcy scholarship has largely ignored a third solution occasionally undertaken by small businesses, that is, resorting to self‐help measures. The purpose of this paper is to start filling the gap using a unique case study. The paper describes and analyses an existing phenomenon among small firms in Israel experiencing financial distress – company duplication. A typical scenario unfolds as follows. An entrepreneur who controls the financially distressed Company A registers a new Company B in an attempt to avoid a complete shutdown of her creditors' disturbed business. The assets of Company A are transferred to Company B in what appears to be fraudulent conveyance. Company B serves as a vehicle through which the original business is kept running. If necessary, the entrepreneur will also register Company C and repeat the process. Israeli law regulates company duplication in an ambivalent manner. On the one hand, conventional wisdom considers company duplication to be tantamount to fraud against Company A's unaware creditors. Accordingly, company duplication has been recently denounced by the Israeli Supreme Court as an illegitimate way of conducting business. The Court held that notwithstanding the principle of limited liability, an entrepreneur resorting to company duplication is personally liable to pay any debt of Company A that was not serviced by it. On the other hand, company duplicators do not face criminal charges. To the extent that company duplication is practiced by insolvent entrepreneurs, deterrence is therefore suboptimal, as insolvent duplicators are not sanctioned at all. Against this backdrop, this paper advances two normative arguments. First, a more sympathetic explanation should be considered to account for company duplication. An entrepreneur resorting to company duplication might actually be arranging for a ‘home‐made’ bankruptcy proceeding (i.e. buying time which could help the business establish its viability and regenerate). According to this narrative, the duplication mimics the role of a formal bankruptcy stay on unsecured creditors' collection efforts, thus suggesting that company duplication serves as ‘a poor man's’ bankruptcy proceeding. Second, this new explanation of company duplication, combined with the current level of suboptimal deterrence, mandates a re‐evaluation of this business pattern to assess its relative efficacy. I argue that at least in the Israeli context because of its special features, company duplication should be tolerated with regard to small businesses, assuming that the entrepreneur is not defrauding creditors or attempting to rescue a business that has failed due to economic rather than merely financial factors. To that end, company duplicators should be held personally liable to debts of the duplicated companies and be pursued with criminal sanctions only selectively, as explained in the paper. Copyright © 2011 John Wiley & Sons, Ltd.     

Business risk auditing: A regressive evolution?—A research note

Business risk auditing (BRA) has been much publicised as revolutionary. The essence of the phenomenon, and the actual impact on practice, however, are unclear. This note revisits some pre-BRA interview evidence investigating auditor engagement with business risk. The evidence suggests that, pre-BRA, big-six auditors were already familiar with concepts of business risk although they were uncertain as to how precisely business risk informed the audit process. This suggests that BRA was evolutionary, rather than revolutionary, change and that the engagement of recent international standards with business risk is not significantly different from that of big-six auditors pre-BRA. The BRA era in audit methodology might be conceptualized as one of regressive evolution.