This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

A Survey of Corporate Governance

This article surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. CORPORATE GOVERNANCE DEALS WITH the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. How do the suppliers of finance get managers to return some of the profits to them? How do they make sure that managers do not steal the capital they supply or invest it in bad projects? How do suppliers of finance control managers? At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterward. The professional managers or entrepreneurs who run the firms might as well abscond with the money. Although they sometimes do, usually they do not. Most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance. But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved. In fact, the subject of corporate governance is of enormous practical impor

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We investigate the relation between founding-family ownership and firm performance. We find that family ownership is both prevalent and substantial; families are present in one-third of the S&P 500 and account for 18 percent of outstanding equity. Contrary to our conjecture, we find family firms perform better than nonfamily firms. Additional analysis reveals that the relation between family holdings and firm performance is nonlinear and that when family members serve as CEO, performance is better than with outside CEOs. Overall, our results are inconsistent with the hypothesis that minority shareholders are adversely affected by family ownership, suggesting that family ownership is an effective organizational structure. FOUNDING-FAMILYOWNERSHIPAND CONTROL in public U.S. firms is commonly perceived as a less efficient, or at the very least, a less profitable ownership structure than dispersed ownership. Fama and Jensen (1983) note that combining ownership and control allows concentrated shareholders to exchange profits for private rents. Demsetz (1983) argues that such owners may choose nonpecuniary consumption and thereby draw scarce resources away from profitable projects. Shleifer and Vishny (1997) observe that the large premiums associated with superiorvoting shares or control rights provide evidence that controlling shareholders seek to extract private benefits from the firm. More generally, firms with large, undiversified owners such as founding families may forgo maximum profits because they are unable to separate their financial preferences with those of outside owners.1 Families also often limit executive management positions to family

https://www.jstor.org/stable/pdfplus/3094581.pdf

Founding-Family Ownership and Firm Performance: Evidence from the S&P 500

Corporate governance, chief executive officer compensation, and firm performance

Audit committee, board of director characteristics, and earnings management

﻿A bona fide currency functions as a medium of exchange, a store of value, and a unit of account, but bitcoin largely fails to satisfy these criteria. Bitcoin has achieved only scant consumer transaction volume, with an average well below one daily transaction for the few merchants who accept it. Its volatility is greatly higher than the volatilities of widely used currencies, imposing large short-term risk upon users. Bitcoin’s daily exchange rates exhibit virtually zero correlation with widely used currencies and with gold, making bitcoin useless for risk management and exceedingly difficult for its owners to hedge. Bitcoin prices of consumer goods require many decimal places with leading zeros, which is disconcerting to retail market participants. Bitcoin faces daily hacking and theft risks, lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than a currency.

/pdf/is-bitcoin-a-real-currency-an-economic-appraisal-12ritr3g2x.pdf

Is Bitcoin a Real Currency? An Economic Appraisal

I study incentives received by outside directors in Fortune 500 firms from compensation, replacement, and the opportunity to obtain other directorships. Previous research has only shown these relations to apply under limited circumstances such as financial distress. Together these incentive mechanisms provide directors with wealth increases of approximately 11 cents per $1,000 rise in firm value. Although smaller than the performance sensitivities of CEOs, outside directors' incentives imply a change in wealth of about $285,000 for a 1 standard deviation (SD) change in typical firm performance. Cross-sectional patterns of director equity awards conform to agency and financial theories. WHAT CAUSES OUTSIDE DIRECTORS to monitor managers, rather than collude with them? Fama and Jensen (1983) posit the existence of a market for outside directors' services, conjecturing that "Our hypothesis is that outside directors have incentives to develop reputations as experts in decision control... They use their directorships to signal to internal and external markets for decision agents that they are experts... The signals are credible when the direct payments to outside directors are small, but there is substantial devaluation of human capital when internal decision control breaks down..." (p. 315). To date, most studies of the market for outside directors have focused on directors' accumulation of seats on additional boards, finding some evidence that fewer offers for new directorships are made to board members of firms that perform poorly. However, little research into outside directors has examined the most direct incentives-compensation and replacement-that form the backbone of rewards for company executives. Exceptions such as Gilson (1990) and Harford (2003) tend to focus on extreme circumstances, such as financial distress or hostile takeovers. For the vast majority of firms that do not face these crises, we have little evidence that outside directors face significant performance incentives. This paper investigates the range of incentives received by outside directors, studying a panel of 734 directors elected to the boards of Fortune 500 firms

/pdf/remuneration-retention-and-reputation-incentives-for-outside-19dwz5dsas.pdf

Remuneration, Retention, and Reputation Incentives for Outside Directors

We study benefits received by target chief executive officers (CEOs) in completed mergers and acquisitions. Certain target CEOs negotiate large cash payments in the form of special bonuses or increased golden parachutes. These negotiated cash payments are positively associated with the CEO's prior excess compensation and negatively associated with the likelihood that the CEO becomes an executive of the acquiring company. Regression estimates suggest that target shareholders receive lower acquisition premia in transactions involving extraordinary personal treatment of the CEO. Target CEOs experience very high turnover rates both at the time of acquisition and, for those who remain employed, for several years thereafter. Copyright 2004, Oxford University Press.

What’s In It For Me? CEOs Whose Firms Are Acquired

Though widely used in executive compensation, inside debt has been almost entirely overlooked by prior work. We initiate this research by studying CEO pension arrangements in 237 large capitalization firms. Among our findings are that CEO compensation exhibits a balance between debt and equity incentives; the balance shifts systematically away from equity and toward debt as CEOs grow older; annual increases in pension entitlements represent about 10% of overall CEO compensation, and about 13% for CEOs aged 61 to 65; CEOs with high debt incentives manage their firms conservatively; and pension compensation influences patterns of CEO turnover and cash compensation.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID975236_code44459.pdf?abstractid=717102&mirid=1

Pay Me Later: Inside Debt and its Role in Managerial Compensation

Though widely used in executive compensation, inside debt has been almost entirely overlooked by prior work. We initiate this research by studying CEO pension arrangements in 237 large capitalization firms. Among our findings are that CEO compensation exhibits a balance between debt and equity incentives; the balance shifts systematically away from equity and toward debt as CEOs grow older; annual increases in pension entitlements represent about 10% of overall CEO compensation, and about 13% for CEOs aged 61–65; CEOs with high debt incentives manage their firms conservatively; and pension compensation influences patterns of CEO turnover and cash compensation.

http://people.stern.nyu.edu/rsundara/papers/DebtCompensation_JF_FINAL.pdf

David Yermack

Papers

Is Bitcoin a Real Currency? An Economic Appraisal

Remuneration, Retention, and Reputation Incentives for Outside Directors

What’s In It For Me? CEOs Whose Firms Are Acquired

Pay Me Later: Inside Debt and its Role in Managerial Compensation

Pay Me Later: Inside Debt and Its Role in Managerial Compensation