Emanuele Colonnelli, N. J. Gormsen, Timothy J McQuade
{"title":"Selfish Corporations","authors":"Emanuele Colonnelli, N. J. Gormsen, Timothy J McQuade","doi":"10.2139/ssrn.3738503","DOIUrl":"https://doi.org/10.2139/ssrn.3738503","url":null,"abstract":"\u0000 We study how perceptions of corporate responsibility influence policy preferences and the effectiveness of corporate communication when agents have imperfect memory recall. Using a new large-scale survey of U.S. citizens on their support for corporate bailouts, we first establish that the public demands corporations to behave better within society, a sentiment we label “big business discontent.” Using random variation in the order of survey sections and in the exposure to animated videos, we then show that priming respondents to think about corporate responsibility lowers the support for bailouts. This finding suggests that big business discontent influences policy preferences. Furthermore, we find that messages which paint a positive picture of corporate responsibility can “backfire,” as doing so brings attention to an aspect on which the public has negative views. In contrast, reframing corporate bailouts in terms of economic trade-offs increases support for the policy. We develop a memory-based model of decision-making and communication to rationalize these findings.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127712765","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"What does Wall Street tell us about Main Street?","authors":"Sean Flynn, Andra Ghent","doi":"10.2139/ssrn.3714998","DOIUrl":"https://doi.org/10.2139/ssrn.3714998","url":null,"abstract":"What happens on Wall Street matters for Main Street. We use establishment-level data on the employment composition of US public firms to show that the predictive power of aggregate stock returns for aggregate employment comes despite the industrial composition of publicly traded firms differing markedly from that of all firms, and the representativeness of publicly traded firms declining over time. We then exploit cross-sectional variation in employment growth in US cities and industries to show that at least some of the predictive power of stock returns comes from information about future cash flows rather than time-series variation in discount rates.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126546959","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Everlasting Fraud","authors":"Vivian W. Fang, Nan Li, Wenyu Wang, Gaoqing Zhang","doi":"10.2139/ssrn.3762260","DOIUrl":"https://doi.org/10.2139/ssrn.3762260","url":null,"abstract":"This paper models the interdependent mechanisms of corporate fraud and regulation. Our analyses yield two key insights. First, fraud is a never-ending game of cat and mouse because the strength of detection optimally matches the severity of fraud in equilibrium. Second, anti-fraud regulations can tamp down fraud pro tem by sharply decreasing the most fraudulent firms' net benefits from continuing fraud. However, concentration of regulatory resources on these firms allows other firms to be more aggressive. As such, regulations do not eradicate fraud but synchronize firms' otherwise idiosyncratic fraud decisions and lead to fraud waves. Empirical examinations of these insights provide supporting evidence. These results carry strong policy implications, offering a realistic understanding of fraud as a permanent risk in the financial markets and the limited efficacy of anti fraud regulations.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116972737","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Toehold Acquisitions as Option Games","authors":"José Lacerda, P. Pereira, A. Rodrigues","doi":"10.2139/ssrn.3926134","DOIUrl":"https://doi.org/10.2139/ssrn.3926134","url":null,"abstract":"Abstract This paper studies how a pre-bid minority ownership (toehold) in the target firm can improve the acquirer’s position in the takeover process by reducing the information asymmetry. Using a dynamic real options approach to compare the takeover options (with and without a toehold), the bidder can optimally choose the acquisition mode and the toehold size. Toehold acquisitions are more likely to occur under low market uncertainty, low expected synergies and high synergies uncertainty. These results suggest that managers’ overconfidence, market and synergies uncertainty, and asymmetry of information can help explaining the choice of toeholds when defining the acquisition strategy.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"134 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122905652","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Shareholder Litigation Rights and Firm Productivity","authors":"Alona Bilokha, Sudip Gupta","doi":"10.2139/ssrn.3926241","DOIUrl":"https://doi.org/10.2139/ssrn.3926241","url":null,"abstract":"This paper analyzes the impacts of decreased shareholder litigation risk on firm productivity. Shareholder litigation provides shareholders a mechanism to enforce rights and mitigate agency conflicts. We use a staggered state-level adoption of universal demand (UD) laws as an exogenous shock that suppressed the number of shareholder derivative lawsuits. We show that the resulting deterioration in corporate governance, coupled with increased managerial attention, had mixed effects on productivity. Adverse effects resulting from lower litigation risk are primarily observed in firms facing financial constraints and low takeover threats. Conversely, firms with incentivized management achieved a higher productivity growth.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130617220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Herding on Stars in CEO Compensation","authors":"Swaminathan L. Kalpathy, Vikram Nanda, Yabo Zhao","doi":"10.2139/ssrn.3480720","DOIUrl":"https://doi.org/10.2139/ssrn.3480720","url":null,"abstract":"We study the compensation influence of highly central firms (“stars”) in CEO compensation peer networks. We find that lower-profile firms covertly tie CEO compensation to these influential “stars.” We propose a “Herding on stars” hypothesis: lower-profile, agency-prone firms herd on the same set of stars and avoid shareholder scrutiny. Better governance and reputable compensation consultants diminish herding. Herding-driven excess pay does not elicit negative ISS recommendations or shareholder opposition. Herding emerges after the 2006 SEC rule inadvertently identified firms with the greatest compensation influence. Evidence suggests that such herding contributes to the rapid increase in CEO pay at smaller, less visible firms.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114909437","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Mark A. Chen, Shuting Hu, Joanna (Xiaoyu) Wang, Qinxi Wu
{"title":"The Effects of Technological Disruption on Suppliers and Customers: Evidence from Blockchain Laws","authors":"Mark A. Chen, Shuting Hu, Joanna (Xiaoyu) Wang, Qinxi Wu","doi":"10.2139/ssrn.3915895","DOIUrl":"https://doi.org/10.2139/ssrn.3915895","url":null,"abstract":"This study empirically examines the effects of technological disruption on suppliers and customers in vertical production relationships. We use the introduction and passage of state blockchain laws to capture exogenous increases in firms’ ability to develop, adopt, and use smart-contract technology. In supply-chain pairs subjected to these technological shocks, we find that customers and suppliers experience asymmetric effects. Specifically, customer firms experience positive abnormal stock returns around law introductions, while suppliers have negative abnormal returns. After technological disruption, customers exhibit significantly more positive changes in operating performance, profit margins, and sales growth compared to their supplier counterparts. Also, compared to their in-state suppliers, shocked customers show significantly greater increases in their blockchain innovation activities, operating expenses, debt financing, and strategic alliance formation. We also find that those suppliers experiencing a law passage appear to pursue diversification strategies: they decrease their reliance on in-state customers and add more ties to out-of-state customers. Overall, our results suggest that smart-contract technology can have large effects on the balance of power between suppliers and customers, thereby fundamentally reshaping supply-chain relationships.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133059326","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Sales & Marketing Workforce Growth and Firm Performance","authors":"Lorenzo Garlappi, Zhongzhi Song","doi":"10.2139/ssrn.3914408","DOIUrl":"https://doi.org/10.2139/ssrn.3914408","url":null,"abstract":"Using a unique labor dataset of publicly-listed Chinese companies, we document that workforce growth in the sales and marketing function is a strong predictor of firms' revenue growth, profitability, and stock returns. Firms in the highest quintile of growth rate in the sales and marketing workforce earn an annual future return 7.7% higher than firms in the lowest quintile. This return spread cannot be explained by (i) existing return factors, (ii) cash-flow risk, (iii) earnings surprises, or (iv) idiosyncratic risk. Our results suggest that heterogeneity in the professional composition of firms' workforce is important in determining the relationship between labor growth and future performance.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132780670","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"How Behavior Can Affect Performance","authors":"B. Wood","doi":"10.2139/ssrn.3909432","DOIUrl":"https://doi.org/10.2139/ssrn.3909432","url":null,"abstract":"There has been a significant increase in studies about how behavior affects our daily lives. One question about behavior is how it can affect performance of individuals. Behavior is influenced by a variety of factors such as strategy and information. Previous studies have found significant differences in terms of voluntary information disclosures between firms the consistently netted positive performances. (Kashyap et al, 2020, p. 6) In 2004, Lo discovered a relation exists between risk and reward, and it is not very likely to be stable overtime. This study will seek to discover how behavior is influenced and how it affects net performance in a Trade Simulation data set. This is done through a Likert Scale analysis and three categorical groups of Information Condition, Strategy, and the Starting Sentiment of each participant in this study. Behavior was discovered to have an immediate impact on the net performance of the participants in this study.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122618177","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Does Mandated Corporate Social Responsibility Crowd Out Voluntary Corporate Social Responsibility? Evidence from India","authors":"Shivaram Rajgopal, Prasanna Tantri","doi":"10.2139/ssrn.3909219","DOIUrl":"https://doi.org/10.2139/ssrn.3909219","url":null,"abstract":"We investigate the implementation of a government of India mandate that requires firms to spend at least 2% of their profits on corporate social responsibility (CSR). We find that mandated firms that voluntarily engaged in CSR before the mandate reduce their CSR spending significantly after the mandate. The erstwhile voluntary CSR spenders increase advertising expenditure plausibly to offset the lost signaling value of voluntary CSR. The 2% mandate negatively impacts valuations and operating performance. Our results show that regulatory intervention in CSR diminishes its signaling value and leads to a reduction in voluntary CSR spending.","PeriodicalId":224709,"journal":{"name":"Corporate Finance: Governance","volume":"2 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129439023","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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