External Networking and Internal Firm Governance

We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.     

Changes in Clientelism and Urban Government: A Comparative Case Study of Naples and Marseilles

This article discusses changes to political clientelism and forms of urban government in Naples and in Marseilles in the period from the 1960s to the 2000s. From a socio-historical, comparative perspective I show that, even in two Southern European cities, the expansion of political clientelism does not depend principally on cultural factors, but rather on politico-institutional processes. The generalization of clientelistic relationships and the increase in policies for redistributing resources on the basis of clientelistic criteria go hand in hand with two historical trends that were evident in the 1960s and 1970s. Those decades were a period both of demographic development and of welfare state expansion at both central and local levels, the latter leading to the distribution of public resources to growing masses of individuals and social groups. In this phase, clientelistic redistribution policies promoted the integration and the upward social mobility of sections of the middle classes and some strata of the working classes in the local and national political system. From the late 1970s and early 1980s onwards, however, these policies were less and less able to promote this upward mobility and social integration. The article ends with a favourable account of some of the new urban management policies conducted by new political leaderships.     

Auctioning Monopoly Franchises: Award Criteria and Rollout Obligations

We study the competition to acquire the exclusive right to operate an utility service, by comparing two specifications for the financial proposals—the fee that the concessionaire will pay to the government and the price that the concessionaire will charge to its customers—and two alternative contractual arrangements, a concession which incorporates the obligation for the franchisee to operate the service immediately after winning the auction, and a contract which simply assigns the right to supply the market. We show that relieving the concessionaire from rollout obligations may either increase or reduce the government’s expected payoff depending on the bidding rule used to allocate the contract. As long as the government is indifferent between maximizing the fiscal revenue and maximizing the consumer surplus, concessioning without imposing rollout time limits and awarding the contract to the bidder offering the highest fee appears to be the best policy option.     

Pricing Model Performance and the Two‐Pass Cross‐Sectional Regression Methodology

Over the years, many asset pricing studies have employed the sample cross‐sectional regression (CSR) R² as a measure of model performance. We derive the asymptotic distribution of this statistic and develop associated model comparison tests, taking into account the impact of model misspecification on the variability of the CSR estimates. We encounter several examples of large R² differences that are not statistically significant. A version of the intertemporal capital asset pricing model (CAPM) exhibits the best overall performance, followed by the Fama–French three‐factor model. Interestingly, the performance of prominent consumption CAPMs is sensitive to variations in experimental design.