CAPITAL STRUCTURE,SHAREHOLDER RIGHTS,AND CORPORATE GOVERNANCE

We show how capital structure is influenced by the strength of shareholder rights. Our empirical evidence shows an inverse relation between leverage and shareholder rights, suggesting that firms adopt higher debt ratios where shareholder rights are more restricted. This is consistent with agency theory, which predicts that leverage helps alleviate agency problems. This negative relation, however, is not found in regulated firms (i.e., utilities). We contend that this is because regulation already helps alleviate agency conflicts and, hence, mitigates the role of leverage in controlling agency costs.     

Governance and Performance Implications of Diversification Strategies: Evidence from Large U.S. Firms

Recent research focuses on explaining the diversification discount. However, there is little direct evidence regarding the relation among ownership structure, corporate governance, and corporate diversification. The results in this paper suggest that agency issues do not account for firms adopting a particular diversification strategy. Also, the performance consequences of the shift in the diversification strategy and the subsequent changes in institutional and block ownership structures are not related to agency issues. In fact, investors seem not to avoid diversified firms per se. We suggest that observed board and ownership differences between diversified and focused firms are due to their being at different stages of corporate evolution.     

An alternative approach to expatriate allowances: An “international citizen”

Competitive advantages for an organization that may be realized through the use of expatriates often are diminished due to excessive compensation and the costs associated with expatriate failure. This article addresses an approach for determining expatriate allowances that uses a worldwide standard as the basis for establishing such allowances. It also provides the philosophy and rationale behind such an approach and differentiates it from traditional “balance sheet” or parent-country equivalency approaches. The relative merits of this approach are systematically assessed using a set of objectives for international compensation. © 1995 John Wiley & Sons, Inc.     

Genetic adverse selection: Evidence from long-term care insurance and Huntington disease

Individual, personalized genetic information is increasingly available, leading to the possibility of greater adverse selection over time, particularly in individual-payer insurance markets. We use data on individuals at risk for Huntington disease (HD), a degenerative neurological disorder with significant effects on morbidity, to estimate adverse selection in long-term care insurance. We find strong evidence of adverse selection: individuals who carry the HD genetic mutation are up to 5 times as likely as the general population to own long-term care insurance. This finding is supported both by comparing individuals at risk for HD to those in the general population and by comparing across tested individuals in the HD-risk population with and without the HD mutation.     

Cry,Laugh, or Fight: The Impact of the Advertising Image and Disease Target Match on Consumers’ Evaluations of Cancer Advertising

Cancer detection and treatment is now a huge part of the health care system, and many cancer charities and organizations advertise heavily in various media. However, from pink ribbons to yellow wristbands, marketing spending and imagery are vastly different between diseases that primarily affect men and those that primarily affect women. Yet, the ways in which consumers react to specific marketing images when used in cancer‐related advertising, and the importance of the congruence between the disease and the ad image have been under‐researched. This paper explores these research questions in two studies and finds significant differences in ad evaluations by image and gender of the disease target.