The Idealized Electoral College voting mechanism and shareholder power

Increasing concern over corporate governance has led to calls for more shareholder influence over corporate decisions, but allowing shareholders to vote on more issues may not affect the quality of governance. We should expect instead that, under current rules, shareholder voting will implement the preferences of the majority of large shareholders and management. This is because majority rule offers little incentive for small shareholders to vote. I offer a potential remedy in the form of a new voting rule, the Idealized Electoral College (IEC), modeled on the American Electoral College, that significantly increases the expected impact that a given shareholder has on election. The benefit of the mechanism is that it induces greater turnout, but the cost is that it sometimes assigns a winner that is not preferred by a majority of voters. Therefore, for issues on which management and small shareholders are likely to disagree, the IEC is superior to majority rule.     

2012年全球经济金融形势研判及对策建议

在回顾2011年发展态势的基础上,文章对2012年全球经济金融形势进行了预测,认为2012年世界经济将延续低速增长局面,全球资本流向不确定性增强,全球主要金融市场将持续动荡,股票市场、大宗商品市场和外汇市场波动将加剧,国际银行业前景不容乐观。在此形势下。我国应灵活应对,积极防范各种风险,促进经济平稳较快增长。     

Testing conditional factor models

Using nonparametric techniques, we develop a methodology for estimating and testing conditional alphas and betas and long-run alphas and betas, which are the averages of conditional alphas and betas, respectively, across time. The estimators and tests can be implemented for a single asset or jointly across portfolios. The traditional Gibbons, Ross, and Shanken (1989) test arises as a special case of no time variation in the alphas and factor loadings and homoskedasticity. As applications of the methodology, we estimate conditional CAPM and multifactor models on book-to-market and momentum decile portfolios. We reject the null that long-run alphas are equal to zero even though there is substantial variation in the conditional factor loadings of these portfolios.     

Do actions speak louder than words? An empirical investigation of corporate environmental reputation

In this study, we investigate the extent to which firms’ environmental performance is reflected in perceptions of their environmental reputation and whether environmental disclosure serves to mediate the negative aspects of poorer environmental performance associated with those assessments. We also examine whether differences in environmental performance and environmental disclosure appear to be associated with membership selection to the Dow Jones Sustainability Index (DJSI), a factor we also believe may be associated with perceptions of environmental reputation. Based on a cross-sectional sample of 92 US firms from environmentally sensitive industries, we find that environmental performance measured using Trucost environmental performance scores is negatively related to both reputation scores and membership in the DJSI. We argue this is due to the more extensive disclosure levels of firms that are worse performers and the finding of a significant positive relation between environmental disclosure and both the environmental reputation measures and DJSI membership. Finally, we show that the DJSI designation positively influences perceptions of corporate reputation. Overall, our results suggest that voluntary environmental disclosure appears to mediate the effect of poor environmental performance on environmental reputation. Perhaps more troubling, our results also suggest that membership in the DJSI appears to be driven more by what firms say than what they do. Thus, like voluntary disclosure, the DJSI may actually be hindering improved future corporate environmental performance.     

Hardening soft accounting information: Games for planning organizational change

This study provides theory and field evidence on the social process of hardening soft accounting information to make it persuasive for planning organizational change. Accounting information intended to support organizational change is often soft, that is, there is lack of interpersonal agreement about its quality. For example, employees can lack agreement about the quality of accounting information (e.g., activity-based costing) because the information is constructed from subjective information obtained from interviews and surveys. This information can contain unintentional errors as well as intentional distortions that are intended to avoid revealing embarrassing inefficiencies and/or to resist painful organizational change. We use concepts from applied game theory and social psychology to identify from the accounting literature four multi-person games that may be played to harden soft accounting information. These hardening games are characterized in terms of payoffs, players, the comparability of soft accounting information, and the rules of the games that are expected to emerge. We interpret the field evidence as indicating that the hardening games that emerge depend on who the players are and the comparability of their soft accounting information. In addition, we provide evidence on how the rules of the games that harden the information emerge from the players’ social interactions. Finally, we provide evidence on how an organization learns by trial-and-error how to harden soft accounting information by changing the players and the comparability of the soft accounting information.     

Going overboard? On busy directors and firm value

The literature disagrees on the link between so-called busy boards (where many independent directors hold multiple board seats) and firm performance. Some argue that busyness certifies a director’s ability and that such directors are value enhancing. Others argue that “over-boarded” directors are ineffective and detract from firm value. We find evidence that (1) the disparate results in prior work stem from differences in both sample composition and empirical design, (2) on balance the results suggest a negative association between board busyness and firm performance, and (3) the inclusion of firm fixed effects dramatically affects the conclusions drawn from, and the explanatory power of, multivariate analyses. We also explore alternative empirical definitions of what constitutes a busy director and find that commonly used proxies for busyness perform well relative to more complex alternatives.     

A two-state analysis of estate taxes and charitable bequests from the most generous decedents

This study uses Censored Quantile Regression (CQR) and probate records for the years 2000–2005 to analyze charitable bequests of the most generous decedents from two states, Virginia and Louisiana. We focus on the most generous decedents because they account for a large portion of total charitable bequests. The most generous decedents' charitable bequest tax price (i.e., one minus the marginal tax rate) elasticity is not significantly greater than one in both our full sample and the subsample of the decedents filing federal estate tax returns. Our finding suggests that allowing charitable bequests to be deductible is not a treasury efficient policy for the most generous decedents. We also find that the tax price and wealth effects for the most generous decedents are overestimated by the Tobit model that has been traditionally utilized by prior studies. Furthermore, filers' charitable bequests are predicted to decrease if the estate tax is repealed.     

Crossing the River by Touching Stones?: The Reform of Corporate Ownership in China

The privatization of Chinese enterprises in a low-legal-protection environment raises the question as to how minority shareholders are assured that their capital will not be expropriated. This paper sheds some light on this issue by examining the influence of controlling shareholders on the corporate performance of listed firms from 1997 to 2006. The first main finding is that firms controlled by local governments are more valuable to minority shareholders, whereas firms controlled by individuals are less valuable. The second main finding is that the post-WTO-accession relinquishment of control from local governments to private shareholders appears to have reduced corporate performance.     

The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers

We examine the long‐standing question of whether firms derive value from investment bank relationships by studying how the Lehman collapse affected industrial firms that received underwriting, advisory, analyst, and market‐making services from Lehman. Equity underwriting clients experienced an abnormal return of around ?5%, on average, in the 7 days surrounding Lehman's bankruptcy, amounting to $23 billion in aggregate risk‐adjusted losses. Losses were especially severe for companies that had stronger and broader security underwriting relationships with Lehman or were smaller, younger, and more financially constrained. Other client groups were not adversely affected.