This paper compares the efficiency of flat and tall hierarchies from the perspective of ‘socialism in internal capital markets’ (SICM) — a recently documented problem of multi-segment firms in which high-profit segments tend to be underinvested and low-profit segments tend to be overinvested. SICM is characterized with the possibility of divisionalization — grouping elementary business segments...

We examine the relation between institutional ownership in acquiring firms and their post takeover stock performance. We find that negative long-run abnormal returns appear to decline (in economic and statistical terms) as the extent and persistence of institutional ownership increase, after accounting for the size, book-to-market and method of payment effects. Given the unusually high uncertai...

We analyze the effect of committee formation on how corporate boards perform two main functions: setting CEO pay and overseeing the financial reporting process. The use of performance-based pay schemes induces the CEO to manipulate earnings, which leads to an increased need for board oversight. If the whole board is responsible for both functions, it is inclined to provide the CEO with a compen...

Though the value of a right should be not lower than zero, negative voting premiums often appear in recent empirical evidence. The present paper highlights some possible measurement errors and contemporary proposes a new measure, the vote segment, which incorporates all dividend privileges. Results from Italian non-voting shares listed in the 1999-2008 period show that the more accurate measure...

Compensation of bank CEOs increases after mergers, suggesting that executives may engage in acquisitions to enjoy size-related personal benefits (Bliss and Rosen, 2001). Alternatively, bank mergers can be viewed as the efficient assignation of merged assets to the managerial team best suited to realize merger gains. Theories of executive compensation based on managerial productivity and optimal...

This paper presents a contracting model of governance based on the premise that CEOs are the main promoters of governance change. CEOs use their power to extract higher pay or private benefits, and different governance structures are preferred by different CEOs as they favor one or the other type of compensation. The model explains why good countrywide investor protection breeds good firm gover...

I investigate the relation between firm risk and firm transparency over the period 1992-2006 and find that the level of firm transparency and the level of firm risk are negatively related. I also find that higher CEO pay-performance sensitivity (delta) works to mitigate this inverse relationship. This result is consistent with Hermalin and Weisbach (2007) who suggest that managers reduce risk t...

Capital expenditures by the top 100 firms make up more than 60% of aggregate investment by publicly traded firms and account for most of the variation in aggregate net fixed private nonresidential investment. Surprisingly, these firms have the highest investment-cash flow sensitivity in the economy, despite being the least financially constrained. Further, contrary to the trend among smaller fi...

Article history: Received 17 July 2014 Received in revised form 18 March 2015 Accepted 2 April 2015 Available online 9 April 2015 This study investigates whether earnings management reduces the level of value relevance and whether good corporate governance restrains earnings management. Using hand-collected data comprising 1012 firm-year observations from all companies listed on the Shanghai SS...

Article history: Received 29 January 2013 Received in revised form 5 November 2013 Accepted 3 January 2014 Available online 15 January 2014 A two-stage stock-financed merger occurs when an acquiring firm first issues shares, and then engages in a cash acquisition shortly afterward. Such deals allow us to test two important hypotheses derived from decoupling: by clienteles via segmentation and b...