Do Corporate Governance Motives Drive Hedge Fund and Private Equity Fund Activities?

We document empirical evidence that both hedge fund (HF) and private equity fund (PE) investments are driven by corporate governance improvements, but address different types of agency conflicts. Whereas HFs focus on firms without a controlling shareholder, in particular family shareholders, PEs invest in firms with low managerial ownership. Both appear to address free cash flow problems differently. Aiming at increasing dividends, HFs tend to use commitment devices that can be implemented over a short horizon. PEs are inclined to longer‐term strategies: they target firms that are particularly well suited for leverage increases because of low expected financial distress costs.     

Dialogue and Relationship Building in Online Financial Communications

The use of social media in investor communications is a fairly new phenomenon. The Securities and Exchange Commission (SEC) in the United States announced that corporations may use social media to disclose mandatory key information required by law. With that ruling, social media communications leaves the sometimes fancy world of creativity and image creation and enters the core of strategic communication linked to corporate viability and success. Investor relations in general are essentially about engaging in dialogues with shareholders. Whereas disseminating information online is quite established, online dialogues offer a greater challenge. Dialogue-oriented and dialogic communication processes are not the same according to speech philosophy; and dialogic communication serves only as one possibility for corporations to build relationships with stakeholders. The research presented here analyzes how listed corporations deal with the highly participatory and fragmented communication environment on the web. The prevalence and intensity of social media dialogues was analyzed in an empirical study that focused on the 150 largest global corporations listed on DJIA (United States), FTSE (United Kingdom), CAC (France), DAX (Germany), and NIKKEI (Japan). A framework has been constructed to analyze dialogue-oriented and dialogic financial communications on the Internet and social web.     

Rhetorical accounts of risk: interprofessional risk assessment in operational planning meetings

In the context of high-risk industries, risk assessment takes place not only through standardized methods for risk analysis, but is frequently negotiated and discussed as an integral part of operational decision-making. This is not least the case in the context of operational planning. Frequent changes in operations require ongoing assessment of risk as tasks are rescheduled and resources reallocated. The current study explores how professionals account for the presence or absence of risk in a setting in which risk analysis is not the primary objective. With data from the offshore petroleum industry, the rhetorical aspects of risk assessments are examined. A series of interprofessional planning meetings were video recorded, transcribed, and analyzed using a rhetorical discourse analytic framework. The data are analyzed at a micro-interactional level in order to study how accounts of risk are presented and negotiated in this particular setting. The meaning and consequences of operational plan changes, and their implications for safety, are seen as negotiated discursively through interprofessional meeting talk. The analysis shows that accounts of risk are characterized by shifting rhetorical strategies that can be heard to echo established risk discourses often referred to as ‘technico-scientific’ and ‘contextualized’ conceptions of risk. Rhetorical devices are used interchangeably and strategically by the participants as they account for risk from their respective institutional positions and their specific areas of expertise and responsibility. The accounts are found to be increasingly persuasive and rhetorical in style as disagreements over risk and prioritizations surface. Accounts of risk, then, are not simply objective presentations of probability and consequence, but rather powerful tools for achieving specific professional outcomes. The study contributes to the understanding of risk assessment at its most concrete and practical level; as it takes place through professional interaction in an operational setting.     

Examining the heterogeneity of treatment patterns in attention deficit hyperactivity disorder among children and adolescents in the Texas Medicaid population: modeling suboptimal treatment response

Objectives: To examine suboptimal responses (SR) in attention deficit hyperactivity disorder (ADHD) among pediatric patients in the Texas Medicaid program receiving osmotic-release oral system methylphenidate (OROS-MPH) or lisdexamfetamine (LDX) and apply an SR prediction model to identify patients most likely to experience an SR to either OROS-MPH or LDX therapies.

Methods: A retrospective cohort study was conducted using Texas Medicaid claims data of ADHD children and adolescents (6–17?years of age) initiating OROS-MPH or LDX. Primary SR endpoints were drug discontinuation, switching, and augmentation 12-months post-ADHD drug initiation. Logistic regression models were developed to predict SR to OROS-MPH and LDX in 1:1 matched groups of children and adolescent cohorts.

Results: A total of 3,633 children and 1,611 adolescents were matched for each cohort. SR was observed among more children (76.4% vs 72.3%; p?p?=?0.002) initiating OROS-MPH compared to LDX. Patient sub-groups with the highest predicted risk of OROS-MPH SR experienced significantly lower observed SR rates (p?Conclusions: This study demonstrated how a personalized medicine approach using administrative claims data can be used to identify sub-groups of child and adolescent ADHD patients with different risks for suboptimal response with OROS-MPH or LDX in a Medicaid population.     

Moral hazard: the effect of insurance on risk and efficiency

While there is a large body of literature investigating the effect of crop and livestock insurance on input and yield, limited attention has been paid to the effect of insurance on efficiency. This article investigates how insurance affects technical efficiency and whether insurance alters the utilized input quantity to a riskier bundle using the Norwegian salmon farming industry as a case. The results illustrate that insurance has an enhancing effect on production and efficiency and changes the utilized input mix—a well‐insured farmer uses more feed and less capital and labor than a less‐insured farmer. When linking this to each input's risk profile, the results indicate that insurance will induce the use of the risk‐increasing factor (feed) and reduce the use of the risk‐decreasing factors (labor and capital)—thereby increasing production risk and indicating moral hazard.     

Global current account adjustment: trade implications for the euro area countries

Although the euro area is not one of the major players in current global imbalances, the rebalancing of the current global imbalances is coupled with a significant appreciation of the euro against. In this paper, I present estimations of trade equations for individual euro area countries using a vector error correction model. Each euro area member has got a different trade elasticity, in the short as well as in the short run. Results show that exchange rate innovations affect individual euro area countries at different rates, complicating the response of the euro area’s one-size-fits-all monetary policy.

Pasture-Raised Milk: The Market for a Differentiated Product

Pasture-raised (PR) milk is a specialty product that could feasibly be produced by economically challenged dairy farms. Our goal was to profile the milk market using an internet survey to identify potential future consumers of PR milk. There were 611 U.S. respondents that were divided into three categories as types of milk consumers: those who only purchased conventional milk in the past year (CONV), those who only purchased non-conventional milk (such as organic, PR, or natural milk) in the past year (NONCONV), and those who purchased both conventional and non-conventional milk in the past year (MIXED). MIXED and NONCONV agreed or strongly agreed with PR milk benefits substantially more than CONV. PR milk was also valued by NONCONV and MIXED in purchasing intentions, but not nearly as much as organic milk. In addition, CONV valued PR milk in purchasing intentions more than organic milk. Results suggest that PR milk can be successfully positioned to appeal to MIXED and perhaps some CONV, potentially increasing sales or market share.     

Session I: Corporate Purpose and Governance

In this first of five sessions of a recent Columbia Law School symposium devoted to discussion of his new book, Prosperity—and The Purpose of the Corporation, Oxford University's Colin Mayer begins by calling for a “radical reinterpretation” of the corporate mission. For all but the last 50 or so of its 2,000‐year history, the corporation has combined commercial activities with a public purpose. But since Milton Friedman's famous pronouncement in 1970 that the social goal of the corporation is to maximize its own profits, the gap between the social and private interests served by corporations appears to have grown ever wider, helping fuel the global outbreaks of populist protest and indictments of capitalism that fill today's media. In Mayer's reinterpretation, the boards of all companies will produce and publish statements of corporate purpose that envision some greater social good than maximizing shareholder value. To that end, he urges companies to make continuous investments of their financial capital and other resources in developing other forms of corporate capital—human, social, and natural—and to account for such investments in the same way they now account for their investments in physical capital. Although the author appears to prefer that such changes be mandatory, enacted through new legislation and enforced by regulators and the courts, his main efforts are directed at persuading the largest institutional owners of corporations—many of whom are already favorably predisposed to ESG—to support these corporate initiatives. Marty Lipton, after expressing enthusiasm about Mayer's proposals, suggests that mandating such changes is likely neither feasible nor desirable, but that attempts—like his own New Paradigm—to gain the acceptance and support of large shareholders is the most promising strategy. Ron Gilson, on the other hand, after voicing Lipton's skepticism about the enforceability of such statements of purpose, issues a number of warnings. One is about the political risks associated with ever more concentrated ownership of public companies in a world where populist distrust of all concentrations of wealth and power is clearly on the rise. But most troubling for the company themselves is the confusion such proposals could create for corporate boards whose responsibility is to limit two temptations facing corporate managements: short‐termism, or underinvestment in the corporate future to boost near‐term earnings (and presumably stock prices); and what Gilson calls hyperopia, or overinvestment designed to preserve growth (and management's jobs) at all costs.     

Food risk perceptions by different consumer groups in Germany

This paper presents an analysis of the changing food risk perceptions of German consumers over the period 1992 to 2002. We analyse the respondents' general risk attitudes and their specific perceptions of food risks. Using cluster analysis we generate a typology of four consumer types. One group is worried about natural food risks, the second does not worry about any types of food risks, the third is concerned about technical food risks and the fourth is concerned about all food risks. A multinomial logit analysis identifies factors that describe the classification of households in this grouping. General risk attitudes and knowledge about food risk are significant variables in the explanation.     

One cost of the Chilean capital controls: Increased financial constraints for smaller traded firms

There is growing support for taxes on short-term capital inflows in emerging markets, such as the encaje adopted by Chile from 1991 to 1998. This paper assesses whether the Chilean capital controls increased financial constraints for different-sized, publicly-traded firms. It uses an Euler-equation framework and shows that during the encaje, smaller traded firms experienced significant financial constraints. These constraints decreased as firm size increased. Both before and after the encaje, however, smaller firms did not experience significant financial constraints, and there is no relationship between firm size and financial constraints. Although Chilean-style capital controls may yield some benefits, any such benefits should be weighed against this cost of increasing financial constraints for small and mid-sized firms.