Stock returns and the Miller Modigliani valuation formula: Revisiting the Fama French analysis

Fama and French (2006) use the dividend-discount model to develop the role of expected profitability, expected investment, and the book-to-market ratio as predictors of stock returns. One reported empirical result is anomalous. The valuation model establishes that the comparative static relation between expected returns and expected investment is negative, yet it appears to be positive and insignificant. We show that the posited valuation relations apply at the firm level, and not at the per share level at which they were tested. Once the variables are measured at the firm level, all the Fama French predictions are validated.     

Small firms and the value of improvements in corporate governance mechanisms

Since 2002, many firms have been required to alter their board of directors and committees to increase management monitoring. Kinney and McDaniel (1989) and Chhaochharia and Grinstein (2007) provide empirical evidence suggesting that investments in corporate governance may differ based on firm size, and that under-investing in monitoring may be more pronounced in smaller firms. To further test whether the benefits of recent changes in companies' governance mechanisms accrue to smaller firms that have underinvested in governance, we examine the stock market reaction to changes in board structure over the twenty-four months following the passage of the Sarbanes–Oxley Act. We construct a new composite measure of board structure and regress buy-and-hold abnormal returns on changes that occur in the Board Structure Index, finding that improvements in corporate governance quality result in economically significant abnormal returns accruing only to the smaller firms with weak initial board structures.     

Monitoring and Motivation in Principal-Agent Relationships: Some Issues in the Case of Local Authority Services

This paper examines a number of issues concerning the effects of monitoring on principals and agents involved in the provision of local authority services subject to competition. It examines, and then extends, existing theoretical work indicating the potential for sub-optimal outcomes which result from the principal introducing monitoring schemes which focus upon the measurable aspects of the agent's performance. The paper then departs from the received principal-agent paradigm in order to consider whether monitoring and competitive regimes more generally have negative effects on the welfare and performance of principals and agents in both theory and practice.     

Kappa as a measure of pattern in sequential data

The kappa statistic is suggested as a means to index the degree to which particular patterns occur in social interaction. It is suggested that the value of the kappa statistic for each interaction be used as a dependent measure. Particular formulas for kappa are derived for undirectional dependence, bidirectional dependence, other additive patterns, and for dominance.     

Foreign Direct Investment,Economic Growth,and the Human Capital Threshold: Evidence from US States*

The United States has experienced a dramatic increase in foreign direct investment (FDI) in recent years. While foreign firms bring immediate benefits of high‐paying jobs, data limitations have prevented detailed study on FDI's long‐term effects on the states receiving it. By creating a new stock measure of FDI based on employment, we are able to capture these long‐term effects. Results demonstrate that FDI has a greater impact on per capita output growth than domestic investment for US states that meet a minimum human capital threshold. Ironically, the most active states in the recruitment of FDI tend to fall below this threshold.     

Market efficiency,purchasing power parity,and black markets: Evidence from latin american countries

Zusammenfassung Markteffizienz, Kaufkraftparit?t und Schwarzm?rkte: Evidenz aus lateinamerikanischen L?ndern. - Die Arbeit verwendet den von Rogalski/Vinso und Roll entwickelten theoretischen Rahmen, um das Verhalten der W?hrungen von Kanada und den USA sowie von ausgew?hlten lateinamerikanischen L?ndern auf dem dortigen Schwarzmarkt zu untersuchen. Abweichungen von der Kaufkraftparit?t werden analysiert, ebenso die Beziehungen zwischen diesen Abweichungen, den Wechselkursen und Inflationsdifferentialen, um die Vereinbarkeit der Kaufkraftparit?t mit der Konzeption der effizienten M?rkte und mit dem monet?ren Ansatz zu prüfen. Die Ergebnisse stützen im allgemeinen die Hypothese der effizienten M?rkte und liefern interessante Informationen über eine normalerweise vernachl?ssigte Gruppe von Wechselkursen.

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Résumé Efficacité de marché, parité de pouvoir d’achat et marchés noirs: Evidence des pays latino-américains. - Les auteurs utilisent le cadre théorique développé par Rogalski/ Vinso et Roll pour analyser la performance des monnaies de marché noir des pays latinoaméricains sélectionnés ainsi que des monnaies des E. U. et de Canada. Le comportement des déviations de la parité du pouvoir d’achat (PPA) est examiné aussi bien que les relations entre ces déviations, les taux de change et les différences d’inflation pour analyser la compatibilité de la PPA avec la conception des marchés efficients et l’approche monétaire. Les résultats supportent généralement l’hypothèse de marché efficient et offrent des informations intéressantes sur un groupe des taux de change généralement négligé.

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Resumen Mercados eficientes, paridad del poder adquisitivo y mercados negros: Evidencia de países latinoamericanos. - En este trabajo se utiliza el marco teórico desarrollado por Rogalski/Vinso y por Roll para analizar el funcionamiento de mercados negros seleccionados en Latinoamérica, los EEUU y Canadá. Se examina el comportamiento de las desviaciones de la paridad del poder adquisitivo (PPA) como también las relaciones entre las desviaciones, los tipos de cambio y las diferencias entre las tasas de inflatión con el fin de investigar la compatibilidad del PPA con los enfoques de mercados eficientes y monetario. Los resultados obtenidos apoyan en general la hipótesis de mercodos eficientes e iluminan aspectos interesantes de tipos de cambio habitualmente obviados.

     

Board diversity in the United Kingdom and Norway: an exploratory analysis

This paper examines the evolving pattern of gender diversity of the boards of directors of leading Norwegian and British companies on a longitudinal basis. The period covered by the study covers the run up to proposed affirmative action legislation in Norway and, as such, affords an insight into corporate actions in this emerging institutional context. The findings demonstrate that, while board diversity has grown substantially in both countries in recent years, it has done so considerably more rapidly in Norway than in the United Kingdom. The analysis highlights the sectoral variation between the countries in the pattern and growth of board diversity and suggests that the vast majority of the overall growth in board diversity is the result of changing firm behaviour rather than sectoral shift in the United Kingdom or Norwegian economies. It is also shown that as diversity has increased there has been no fall in how experienced female directors are; neither is there evidence of a rise in the number of boards that female directors sit on. This suggests that the rapid growth in board diversity has been achieved without any fall in the quality of female directors.