Corporate Governance Summer School


Summer School

Aims

Students will learn about the roles of shareholders, managers, and boards of directors in the governance of a public corporation.  The course should help students identify research topics in an area that has become a focal point for political regulation and reform in Europe and around the world.

Information

This course surveys leading academic research in selected areas of corporate governance, focusing especially upon boards of directors, institutional investors, and the influence of corporate and securities law upon corporate finance. We will also study governance in organizations such as financial mutuals and non-profits. Some recent working papers will be studied, in order to introduce students to the latest developments in the field and to help identify research topics. We will also investigate the strengths and weaknesses of leading online databases and other research tools.

Materials

The reading list for the course appears below. The most important papers in each section are marked with asterisks (**), and I recommend that you read these papers carefully in advance of the class meetings.

Governance, legal jurisdiction, and firm value

Database: RiskMetrics Governance

** LaPorta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1998, “Law and Finance,” Journal of Political Economy 106, 1113-1155.

Karpoff, J., and P. Malatesta, 1995, “State Takeover Legislation and Share Values: The Wealth Effects of Pennsylvania’s Act 36,” Journal of Corporate Finance 1, 367-382.

Daines, R., 2001, “Does Delaware Law Improve Firm Value?” Journal of Financial Economics 62, 525-558.

Bertrand, M., and S. Mullainathan, 2003, “Enjoying the Quiet Life? Managerial Behavior Following Anti-Takeover Legislation,” Journal of Political Economy 111, 1043-1075.

Stulz, R., and R. Williamson, 2003, “Culture, Openness and Finance,” Journal of Financial Economics 70, 313-349.

** Gompers, P., J. Ishii, and A. Metrick, 2003, “Corporate Governance and Equity Prices,” Quarterly Journal of Economics 118, 107-155.

 

Boards of directors and firm value

Database: RiskMetrics Directors

Rosenstein, S., and J. Wyatt, 1990, “Outside Directors, Board Independence, and Shareholder Wealth,” Journal of Financial Economics 26, 175-191.

** Yermack, D., 1996, “Higher Market Valuation for Firms With a Small Board of Directors,” Journal of Financial Economics 40, 185-211.

Brickley, J., J. Coles, and G. Jarrell, 1997, “Leadership Structure: Separating the CEO and Chairman of the Board,” Journal of Corporate Finance 3, 189-220.

Klein, A., 1998, “Firm Performance and Board Committee Structure,” Journal of Law and Economics 41, 275-303.

Vafeas, N., 1999, “Board Meeting Frequency and Firm Performance,” Journal of Financial Economics 53, 113-142.

Klein, A., 2002, “Audit Committee, Board of Director Characteristics, and Earnings Management,” Journal of Accounting and Economics 33, 375-400.

** Faleye, O., 2007, “Classified Boards, Firm Value, and Managerial Entrenchment,” Journal of Financial Economics 83, 501-529.

Masulis, R., and S. Mobbs, 2011, “Are All Inside Directors the Same? Evidence from the External Directorship Market,” Journal of Finance 66, 823-872.

Cremers, M., L. Litov, and S. Sepe, 2014, “Staggered Boards and Firm Value, Revisited,” unpublished manuscript, available at ssrn.com/abstract=2364165.

Cai, Y., J. Xu, and J. Yang, 2016, “Affiliated Corporate Donations and Director Independence,” unpublished manuscript, Indiana University.

Selection of new directors

** Hermalin, B., and M. Weisbach, 1988, “The Determinants of Board Composition,” RAND Journal of Economics 19, 589-606.

Shivdasani, A., and D. Yermack, 1999, “CEO Involvement in the Selection of New Board Members: An Empirical Analysis,” Journal of Finance 54, 1829-1853.

Fich, E., 2005, “Are Some Outside Directors Better Than Others? Evidence From Director Appointments by Fortune 1000 Firms,” Journal of Business 78, 1943-1971.

DeFond, M., R. Hann, and X. Hu, 2005, “Does the Market Value Financial Expertise on Audit Committees of Boards of Directors?” Journal of Accounting Research 43, 153-194.

** Fich, E., and A. Shivdasani, 2006, “Are Busy Boards Effective Monitors?” Journal of Finance 61, 689-724.

Petry, S., 2009, “Workers on the Board and Shareholder Wealth: Evidence from a Natural Experiment,” unpublished manuscript, Cambridge University.

** Masulis, R., C. Wang, and F. Xie, 2012, “Globalizing the Boardroom: The Effects of Foreign Directors on Corporate Governance and Firm Performance,” Journal of Accounting and Economics 53, 527-554.

** Ahearn, K., and A. Dittmar, 2012, “The Changing of the Boards: The Value Effect of a Massive Exogenous Shock,” Quarterly Journal of Economics 127. 137-197.

Falato, A., D. Kadyrzhanova, and U. Lel, 2014, “Distracted Directors: Does Board Busyness Hurt Shareholder Value?” Journal of Financial Economics 113, 404-426.

Governance, banks, and restructuring

** Gilson, S., 1990, “Bankruptcy, Banks, Boards, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default,” Journal of Financial Economics 27, 355-387.

** Ramirez, C., 1995, “Did J.P. Morgan’s Men Add Liquidity? Corporate Investment, Cash Flow, and Financial Structure at the Turn of the Twentieth Century,” Journal of Finance 50, 661-678.

Gertner, R., and S. Kaplan, 1996, “The Value-Maximizing Board,” unpublished manuscript, University of Chicago.

Kroszner, R., and P. Strahan, 2001, “Bankers on Boards: Monitoring, Conflicts of Interest, and Lender Liability,” Journal of Financial Economics 62, 415-452.

Güner, A., U. Malmendier, and G. Tate, 2008, “Financial Expertise of Directors,” Journal of Financial Economics 88, 323-354.

Dittmann, I., E. Maug, and C. Schneider, 2010, “Bankers on the Boards of German Firms: What They Do, What They Are Worth, and Why They Are (Still) There,” Review of Finance 14, 35-71.

Corporate voting

Database: calpers-governance.org

Pound, J., 1988, “Proxy Contests and the Efficiency of Shareholder Oversight,” Journal of Financial Economics 20, 237-265.

Zingales, L., 1994, “The Value of the Voting Right: A Study of the Milan Stock Exchange Experience,” Review of Financial Studies 7, 125-148.

Zingales, L., 1995, “What Determines the Value of Corporate Votes?” Quarterly Journal of Economics 110, 1047-1073.

** Hu, H., and B. Black, 2006, “The New Vote Buying: Empty Voting and Hidden (Morphable) Ownership, Southern California Law Review 79, 811-908.

** Christofferson, S., C. Geczy, D. Musto, and A. Reed, 2007, “Vote Trading and Information Aggregation,” Journal of Finance 62, 2897-2929.

Listokin, Y., 2008, “Management Always Wins the Close Ones,” American Law and Economics Review 10, 159-184.

** Cai, J., J. Garner, and R. Walkling, 2009, “Electing Directors,” Journal of Finance 64, 2389-2421.

Agrawal, A., 2012, “Corporate Governance Objectives of Labor Union Shareholders: Evidence from Proxy Voting,” Review of Financial Studies 25, 187-226.

Cunat, V., M. Gine, and M. Guadalupe, 2012, “The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value,” Journal of Finance 67, 1943-1977.

Kalay, A., O. Karakas, and S. Pant, 2013, “The Market Value of Corporate Votes: Theory and Evidence from Option Prices,” Journal of Finance 69, 1235-1271.

Fos, V., K. Li, and M. Tsoutsoura, 2015, “Do Director Elections Matter?” unpublished manuscript, available at ssrn.com/abstract=2609815.

Shareholder activism

Database: Thomson Reuters Institutional Holdings

Teoh, S., I. Welch, and P. Wazzan, 1999, “The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South Africa Boycott,” Journal of Business 72, 35-89.

Karpoff, J., 2001, “The Impact of Shareholder Activism on Target Companies: A Survey of Empirical Findings,” unpublished manuscript, University of Washington.

** Klein, A., and E. Zur, 2009, “Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors,” Journal of Finance 64, 187-229.

Brav, A., W. Jiang, and H. Kim, 2015, “The Real Effects of Hedge Fund Activism: Productivity, Asset Allocation, and Labor Outcomes,” Review of Financial Studies 28, 2723-2769.

Securities litigation

Database: securities.stanford.edu

Chalmers, J., L. Dann, and J. Harford, 2002, “Managerial Opportunism? Evidence from Directors’ and Officers’ Insurance Purchases,” Journal of Finance 57, 609-636.

Lowry, M., and S. Shu , 2002,“Litigation Risk and IPO Underpricing,” Journal of Financial Economics 65, 309-336.

** Fich, E., and A. Shivdasani, 2007, “Financial Fraud, Director Reputation, and Shareholder Wealth,” Journal of Financial Economics 86, 306-336.

Corporate governance and political connections

Database: opensecrets.org

Agrawal, A., and C. Knoeber, 2001, “Do Some Outside Directors Play a Political Role?” Journal of Law and Economics 44, 179-198.

Faccio, M., 2006, “Politically Connected Firms,” American Economic Review 96, 369-386.

** Jayachandran, S., 2006, “The Jeffords Effect,” Journal of Law and Economics 49, 397-425.

** Goldman, E., J. Rocholl, and J. So, 2009, “Do Politically Connected Boards Affect Firm Value?” Review of Financial Studies 22, 2331-2360.

Do, Q., Y. Lee, and B. Nguyen, 2015, “Political Connections and Firm Value: Evidence from Regression Discontinuity Design of Close Gubernatorial Elections,” unpublished manuscript, available at ssrn.com/abstract=2023191.

Governance in other organizations

Tufano, P., and M. Sevick, 1997, “Board Structure and Fee-Splitting in the U.S. Mutual Fund Industry,” Journal of Financial Economics 46, 321-356.

** Core, J., W. Guay, and R. Verdi, 2006, “Agency Problems of Excess Endowment Holdings in Not-for-Profit Firms,” Journal of Accounting and Economics 41, 307-333.

Hartzell, J., C. Parsons, and D. Yermack, 2010, “Is a Higher Calling Enough? Incentive Compensation in the Church,” Journal of Labor Economics 28, 509-540.

Yermack, D., 2015, “Donor Governance and Financial Management in Prominent U.S. Art Museums,” unpublished manuscript, available at ssrn.com/abstract=2586622.

Additional info

PhD candidates, Research Master students and faculty members of ERIM can register for this course via SIN Online Registration.

External (non-ERIM) participants are welcome to this course. To register, please fill in the registration form and e-mail it to miizuka@rsm.nl by 3 weeks prior to the start of the course. Please note that the number of places for this course is limited.

This course is free of charge for ERIM members (faculty members, PhD candidates and Research Master students). For external participants, the course fee is 250 euro per ECTS credit.