Chesapeake Energy Corporation

This case provides a summary of events reported in the proxy statements filed with the SEC by Chesapeake Energy Corporation from its initial public offering in 1993 through 2011. These actual events provide a vehicle for the discussion of corporate governance issues and the means to effect a change in governance practices. Students are asked to perform two tasks. The first is to identify possible governance issues. The second is to suggest actions a shareholder might take. The objective of the first task is to provide students with experience in critically evaluating the governance structure and related actions taken by an actual board of directors. On completion, students should be better prepared to recognize signs of governance weakness beyond commonly discussed structural elements. The second task asks students to create a list of tactics that could be employed to influence corporate policies. The objective is to highlight the limited options available to most investors and to prompt some students to pursue corporate activism or the defenses against activism. The case is intended for use at the graduate level.     

Do #AllLivesMatter? An Evaluation of Race and Excessive Use of Force by Police

There is anecdotal evidence showing that African-Americans are more likely to be subjected to excessive use of force by police than are people of other races. The counterargument is that these issues are not related to race and there are other factors at work. There have been several high-profile cases, such as those in Ferguson, Cleveland, and Baton Rouge. In this study, we estimate the effect of race on excessive use of force incidents using a new dataset comprising citizen complaints against the Chicago Police Department. Our findings show that not only does race play a role in excessive use of force complaints, but also that race plays a role in which complaints are sustained. Our study also highlights the importance of having data on which to perform rigorous empirical analysis in order to inform policymakers.     

The cross-market information content of stock and bond order flow

In this paper I test the hypothesis that trading activity in the stock and bond markets contains important marketwide pricing information. Using a large sample of actively traded stocks and U.S. Treasury securities, I find that aggregate order imbalances play a strong role in explaining cross-market returns. I interpret this as evidence that aggregate order flow reveals information about the risk preferences, beliefs, and endowments of the investor population that is relevant for pricing securities in both markets. I also find evidence that cross-market hedging is an important source of linkages across the two markets, especially during periods of elevated equity volatility.     

Information,sophistication, and foreign versus domestic investors’ performance

Using an intraday transaction dataset with trader identity, we study foreign and domestic investors’ trading activities and investment performance ahead of open-ending events of Taiwanese closed-end funds. Simply buying the funds at a discount and holding until open-ending generates large abnormal returns. All information required to execute this strategy is made public, so the events set up natural experiments to examine how investors trade, holding constant access to information. Foreign investors are net buyers ahead of the open-endings, more than doubling their positions and earning large abnormal returns. Domestic investors are net sellers while the discounts are still large, and forego large abnormal returns. The results suggest that investor sophistication in interpreting the same information is potentially an important determinant of investment performance differences across foreign and domestic investors.     

Making new franchise systems work

This paper argues that new franchise systems are more likely to survive if they are structured to economize on agency costs. After controlling for industry effects, and firm age and size, this paper shows empirical support for six of nine hypotheses about the linkage between mechanisms for economizing on agency costs and the survival of new franchise systems. © 1998 by John Wiley & Sons, Ltd.     

Why encouraging more people to become entrepreneurs is bad public policy

Policy makers often think that creating more start-up companies will transform depressed economic regions, generate innovation, and create jobs. This belief is flawed because the typical start-up is not innovative, creates few jobs, and generates little wealth. Getting economic growth and jobs creation from entrepreneurs is not a numbers game. It is about encouraging the formation of high quality, high growth companies. Policy makers should stop subsidizing the formation of the typical start-up and focus on the subset of businesses with growth potential. While government officials will not be able to “pick winners,” they can identify start-ups with a low probability of generating jobs and enhancing economic growth. By eliminating incentives to create these low probability companies, policy makers can improve the average performance of new businesses.

Signaling Product Quality by Price

This paper analyzes the role of price as a signal of the quality of a monopoly firm's new product. The quality of the goods is drawn from a continuum and is unknown to consumers. We establish a unique separating equilibrium using equilibrium characterization results for signaling games. The equilibrium price monotonically increases with quality levels and exceeds the complete-information monopoly price for all quality levels but the lowest one. However, the upward distortion decreases as the proportion of pre-informed consumers increases. These results extend both the signaling role of price and characteristics of the separating equilibrium as established in Bagwell and Riordan (1991).     

International opportunity recognition as a critical component for leveraging Internet capabilities and international market performance

Recent research in the field of international entrepreneurship has emphasized the need for a better conceptualization of international opportunity recognition. Further, with advancements in information and communication technologies, such as the Internet, there has been a profound impact on the way in which international business is conducted, for example, enabling entrepreneurial firms to capitalize on the economic opportunities of an Internet environment. In this study, we propose a model, highlighting the importance of international opportunity recognition, as a critical component for leveraging Internet capabilities and international market performance. Through the lens of a resource capabilities approach, a quantitative, online survey was used to collect data from Australian, international entrepreneurial firms. Structural equation modelling results indicate that international opportunity recognition plays a central role in explaining how resources and Internet capabilities combine for the firm’s realization of international opportunities, and subsequent international performance. The findings enrich current understanding of how international entrepreneurial firms realize opportunities in Internet-based environments.     

Shadow wages, allocative inefficiency, and labor supply in smallholder agriculture

This article introduces a method for estimating structural labor supply models in the presence of unobservable wages and deviations of households' marginal revenue product of self‐employed labor from their shadow wage. This method is therefore robust to a wide range of assumptions about labor allocation decisions in the presence of uncertainty, market frictions, locational preferences, etc. We illustrate the method using data from rice producers in Côte d'Ivoire. These data, like previous studies, reveal significant systematic differences between shadow wages and the marginal revenue product of family farm labor. We demonstrate how one can exploit systematic deviations, in the present case related to household characteristics such as the land/labor endowment ratio, to control for both unobservable wages and prospective allocative inefficiency in labor allocation in structural household labor supply estimation.