Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments

We examine the number of external appointments held by corporate directors. Directors who serve larger firms and sit on larger boards are more likely to attract directorships. Consistent with Fama and Jensen (1983), we find that firm performance has a positive effect on the number of appointments held by a director. We find no evidence that multiple directors shirk their responsibilities to serve on board committees. We do not find that multiple directors are associated with a greater likelihood of securities fraud litigation. We conclude that the evidence does not support calls for limits on directorships held by an individual.     

Why are firms unlevered?

In this paper, we examine why firms have no debt in their capital structure. We reject the hypothesis that zero-leverage policies are driven by entrenched managers attempting to avoid the disciplinary pressures of debt. These firms do not have weaker internal or external governance mechanisms. The debt initiation decisions of these firms are not preceded by shocks to their entrenchment, such as takeover threats or the emergence of activist blockholders. Our evidence supports the hypothesis that these firms are financially constrained. Zero-debt firms are small, young, conserve cash from cash-flow, and are more likely to lease their assets. When they have access to a line of credit, they face stricter covenants and higher all-in costs than comparable control firms. They lose market share in economic downturns, consistent with the financial constraints explanation, but inconsistent with theories of predation which suggest that they may be voluntarily stockpiling debt capacity.     

Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps

Green and Hollifield (1992) argue that the presence of a dominant factor would result in extreme negative weights in mean‐variance efficient portfolios even in the absence of estimation errors. In that case, imposing no‐short‐sale constraints should hurt, whereas empirical evidence is often to the contrary. We reconcile this apparent contradiction. We explain why constraining portfolio weights to be nonnegative can reduce the risk in estimated optimal portfolios even when the constraints are wrong. Surprisingly, with no‐short‐sale constraints in place, the sample covariance matrix performs as well as covariance matrix estimates based on factor models, shrinkage estimators, and daily data.     

Organizational Wrongs,Moral Anger and the Temporality of Crisis

By engaging with multiple narratives of a police killing involving questionable legal procedures, known as a police encounter in India, we attempt to narrate stories of what happens to those who resist organizational wrongdoing by displaying moral anger against unethical actions. The State enables police encounters to occur by arguing that exceptional and alternate methods are required to engage with the crisis of terror and crime that the nation faces. Thus, police encounters are executed in the name of the collective morality of the greater common good. Those who resist police encounters argue from the standpoint of a democratic morality by suggesting that the very efficacy of democratic institutions will be eroded if encounters are normalized. We explore questions of organizational ethics from a temporal perspective while navigating between contending moral positions regarding police encounters.     

Reforming the Bookbuilding Process for IPOs

The controversy over IPOs has raised questions about whether retail investors are being unfairly denied access to shares in IPOs and whether the new Internet auction methods might provide a fairer and more efficient way to allocate shares. This article argues that much of the popular concern may be misdirected. By and large, bookbuilding is well designed to accomplish price discovery in a cost-effective way. And standard auctions, which have been all but abandoned in a number of countries, have generally proved disappointing for equity IPOs (although they have been successful for bond offerings). The authors propose a "hybrid" form of securities issuance that would retain the advantages of bookbuilding while incorporating a public offer "tranche" for retail investors and other measures designed to increase transparency.     

Call options and the risk of underlying securities

Merton (1973) in his seminal article ‘Theory of Rational Option Pricing’ showed that the rationally determined price of a call option is a non-decreasing function of the ‘riskness’ of its associated common stock. In deriving his results, Merton made restrictive assumptions about the way the market prices payoff distributions, and used the Rothschild-Stiglitz (1970) measure to compare the riskiness of securities. I show by means of an example that the Merton result will not in general be true. I then derive a sufficient condition for the option on one stock to have higher market value than the option on another stock, when both the stocks have the same price, and explain why the Merton result is valid in the Black-Scholes environment.     

CAPM for estimating the cost of equity capital: Interpreting the empirical evidence

We argue that the empirical evidence against the capital asset pricing model (CAPM) based on stock returns does not invalidate its use for estimating the cost of capital for projects in making capital budgeting decisions. Because stocks are backed not only by projects in place, but also by the options to modify current projects and undertake new ones, the expected returns on stocks need not satisfy the CAPM even when expected returns of projects do. We provide empirical support for our arguments by developing a method for estimating firms' project CAPM betas and project returns. Our findings justify the continued use of the CAPM by firms in spite of the mounting evidence against it based on the cross section of stock returns.     

Worlds of demonetisation and delegitimising the grief of the marginal

ABSTRACT

In late 2016, the Indian state announced a policy of demonetisation whereby high denomination currency was legally rendered as invalid. The official aim of the policy was to confront the problems of black money and corruption that India faces. However, currency shortage resulting from the withdrawal of nearly 85% cash adversely affected the large informal economy in India. We explore how demonetisation affected marginal actors in one such informal economy space, the scrap market in some cities in south India. By accessing the narratives of these marginal subjects, we hope to show how the consumption of the governmental-corporate discourse of utopia is simultaneously implicated in the injustices and violence being experienced by several people. We contribute to ongoing theoretical conversations about the linkages between marketing and hegemonic practices of development by contending that hegemonic imaginations of development are linked to delegitimising the grief of marginal subjects. Such delegitimisation is linked to the desires of consumer-citizens in making them feel aligned with utopian fantasies and the reproduction of identity-based inequalities against marginal subjects.