We find over 30% of public U.S. non-financial companies have negative net-financial-obligation (NFO) during the sample period of 1965 to 2014. According to the modified DuPont analysis, NFO is defined as total debt minus excess cash and passive investments. The persistence of negative-NFO observations suggests that its occurrence is not random, raising the questions of why these firms hold such...

This paper provides an empirical analysis about the relationship of corporate governance and cash dividend policy in China. The results show that equity structure and the cash dividends are related. Other factors such as executive pay are related to cash dividends. This paper also analyzes the requirement of cash dividends on behalf of the corporate governance or big shareholders "Tunnel behavi...

Most of the existing evidence on the effectiveness of large shareholders in corporate governance has been restricted to a handful of developed countries, notably the UK, US, Germany and Japan. This paper provides evidence on the role of large shareholders in monitoring company value from a developing and emerging economy, India, whose corporate governance system is a hybrid of the outsider-domi...

This paper studies how information disclosure affects the cost of equity capital (i.e., risk premium) and investors welfare in a dynamic setting with overlapping generations of investors. Our analysis demonstrates that a firm’s cost of capital decreases (increases) in the precision of public disclosure if the firm’s growth rate is below (above) a certain threshold. The threshold growth rate is ...

Financial reports should provide useful information to both shareholders and creditors, according to U.S. accounting principles. However, directors of corporations have fiduciary duties only toward equity holders, and those fiduciary duties normally do not extend to the interests of creditors. We examine whether this slant in corporate governance biases financial reports in favor of equity inve...

We develop a model of insider lending in which a borrower can give incentives to a bank manager to misuse his right of control by extending a loan at favorable rates to the borrower at the expense of the equity value of the bank. The model explains why insider loans are often made to borrowing firms that are also large shareholders of the bank. Although in principal every borrower could bribe t...

One important role of corporate governance is to ensure that real options are exercised in the interest of the shareholders. This paper explores whether and how this can be achieved in start-up firms by the venture capitalist retaining a post-IPO equity stake. Our setting is a firm whose future prospects are uncertain and strategic choices remain to be made. The payoff to entrepreneur and share...

We find that annual shareholder meetings conducted online can greatly increase the participation of shareholders, especially retail shareholders. This finding is more evident when the cost of physically attending such a meeting is higher and when the firm’s ownership is more dispersed. We further document significant positive stock returns when firms initiate online annual meetings. We also fin...