dunnettreader + corporate_finance   67

Admati et al - The Leverage Ratchet Effect (WP 2016) | Stanford Graduate School of Business
The Leverage Ratchet Effect
By Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, Paul Pfleiderer
October 11,2016Working Paper No. 3029
Economics, Corporate Governance
Firms’ inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders would instead choose to increase leverage even if debt levels are already high and new debt must be junior to existing debt. These asymmetric forces in leverage adjustments, which we call the leverage ratchet effect, cause equilibrium leverage outcomes to be history-dependent. When forced to reduce leverage, shareholders are biased toward selling assets relative to potentially more efficient alternatives such as pure recapitalizations.

Keywordscapital structure, leverage, agency costs of debt, dynamic capital structure, tradeoff theory of capital structure, capital regulation, bank equity, debt overhang, under-investment, recapitalization, deleveraging, bankruptcy costs
finance_capital  equity-corporate  downloaded  capital_markets  debt-seniority  debt-restructuring  corporate_governance  recapitalization  risk_capital  debt-overhang  leverage  equity  equity_markets  corporate_finance  debt 
april 2017 by dunnettreader
The Leverage Ratchet Effect by Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, Paul C. Pfleiderer (October 2016) :: SSRN
Anat R. Admati, Stanford Graduate School of Business; Peter M. DeMarzo. Stanford Graduate School of Business, NBER; Martin F. Hellwig, Max Planck Institute for Research on Collective Goods, U. of Bonn - Dep of Econ; Paul C. Pfleiderer, Stanford Graduate School of Business -- Max Planck - Collective Goods Bonn 2013/13
credit_booms  recapitalization  corporate_finance  debt-overhang  debt-seniority  leverage  banking  financial_crisis  debt-restructuring  downloaded  capital_markets  financial_regulation  equity-corporate  paper  debt 
november 2016 by dunnettreader
Nicola Gennaioli, Yueran Ma, and Andrei Shleifer - Expectations and Investment (2016) | Andrei Shleifer
Gennaioli, Nicola, Yueran Ma, and Andrei Shleifer. 2016. “Expectations and Investment.” NBER Macroeconomics Annual, Vol. 30 (2015): 379-442.
Abstract
Using micro data from Duke University quarterly survey of Chief Financial Officers, we show that corporate investment plans as well as actual investment are well explained by CFOs’ expectations of earnings growth. The information in expectations data is not subsumed by traditional variables, such as Tobin’s Q or discount rates. We also show that errors in CFO expectations of earnings growth are predictable from past earnings and other data, pointing to extrapolative structure of expectations and suggesting that expectations may not be rational. This evidence, like earlier findings in finance, points to the usefulness of data on actual expectations for understanding economic behavior. -- downloaded via iPhone to DBOX
cognition  rational_choice  microeconomics  behavioral_economics  article  cognitive_bias  investment  cognitive_science  downloaded  rational_expectations  corporate_finance  extrapolation  microfoundations  heuristics 
august 2016 by dunnettreader
Matt Levine - It Costs Money to Sell a Lot of Bonds - Bloomberg View - April 2016
One basic fact about markets is that, if there are 1,000 widgets in the world, and the "fair" price of a widget is $100, and you need to sell 200 widgets in an…
Instapaper  capital_markets  bond_markets  intermediation  markets-structure  liquidity  investment  institutional_investors  market-makers  market-size_of  corporate_finance  equity_markets  from instapaper
april 2016 by dunnettreader
Mike Konczal, J.W. Mason, Amanda Page-Hoongrajok - Ending Short-Termism: An Investment Agenda for Growth - Roosevelt Institute - Nov 2015
The first part of this agenda will directly counter several of the specific trends known to increase short-termism. It will include ideas that are broadly applicable across industries, such as policies to address skyrocketing CEO pay, as well as more targeted solutions. A policy agenda to address corporate short-termism requires a comprehensive approach focused on building countervailing power, which is addressed in the second part of our proposal. The forces that push firms toward shorttermism will persist and find new ways to exert power, but the reforms outlined in this paper embrace wide-scale, long-term changes, such as granting workers power on boards, designed to attract long-term stakeholders. The agenda also includes practical, simple policy changes for regulators.The third part of our agenda contains solutions that point to a new role for the state. Taxes and full employment are two obvious and necessary ways of checking short-termism, and if companies are less interested in investment, government needs to fill in that gap, whether by providing high-speed cable or funding basic research. -- downloaded pdf to Note
US_economy  investment  investors  capital_markets  corporate_finance  corporate_governance  shareholder_value  shareholders  short-termism  financial_system  equity_markets  capital_formation  capital_allocation  executive_compensation  debt  buybacks  tax_policy  Labor_markets  labor_share  unions  investment-government  downloaded 
november 2015 by dunnettreader
J.W. Mason - Understanding Short-Termism: Questions and Consequences - Roosevelt Institute - Nov 2015
addresses the most common objections to the idea that short-termism is a serious problem for the US economy. These objections fall into 3 broad categories: short-termism is not real (because of an apparent increase in business investment), short-termism is not harmful (because increased payouts allocate capital more efficiently), and short-termism is not our problem (because shareholders alone should determine what to do with a corporation’s surplus funds). J.W. Mason provides answers to 12 common questions about short-termism and shareholder payouts. Questions 1 and 2 reflect the first objection, Questions 3 through 7 reflect the second objection, and questions 8 through 12 reflect the third objection. Drawing on the best available data, he concludes that none of these objections hold up under scrutiny.This report is part of the Roosevelt Institute’s comprehensive Rewriting the Rules agenda, which aims to level the playing field and grow the economy. A companion report, “Ending Short-Termism,” develops a policy agenda to respond to this challenge -- downloaded pdf to Note
US_economy  investment  investors  capital_markets  corporate_finance  corporate_governance  shareholder_value  shareholders  short-termism  financial_system  equity_markets  capital_formation  capital_allocation  executive_compensation  debt  buybacks  tax_policy  downloaded 
november 2015 by dunnettreader
Diana Ayala Pena, Milan Nedeljkovic, Christian Saborowski - What Slice of the Pie? The Corporate Bond Market Boom in Emerging Economies | IMF Research - July 2015
This paper studies the determinants of shifts in debt composition among EM non-financial corporates. We show that institutions and macro fundamentals create an enabling environment for bond market development. During the recent boom episode, however, global cyclical factors accounted for most of the variation of bond shares in total corporate debt. The sensitivity to global factors appears to vary with relative bond market size—which we interpret to be associated with liquidity and easy entry and exit—rather than local fundamentals. Foreign bank linkages help explain why bond markets increasingly substituted for banks in channeling liquidity to EMs. Our results highlight the risk of capital flow reversal in EMs that benefited from the upturn in the global financial cycle mostly due to their liquid markets rather than strong fundamentals. -- downloaded pdf to Note
paper  IMF  financial_system  cross-border  emerging_markets  bond_markets  corporate_finance  disintermediation  capital_markets  capital_flows  liquidity  contagion  business_cycles  downloaded 
november 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Market liquidity and financial stability - October 2015
Everyone seems to be worried about market liquidity – the ability to buy or sell a large quantity of an asset with little or no price impact. Some observers… Nice overview of which issues ought to be of concern to keep an eye on, and what recent studies by FRBNY have shown
Instapaper  financial_system  financial_regulation  markets-structure  liquidity  financial_stability  equity_markets  corporate_finance  bond_markets  money_market  asset_prices  firesales  intermediation  broker-dealers  market_makers  HFT  from instapaper
october 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Bond market liquidity: should we be worried? — Money, Banking and Financial Markets
Our bottom line is this: resilience of intermediaries and resilience of markets are mutually reinforcing. With more resilient institutions, someone is more likely to stand ready to make a market in bonds – both Treasuries and corporates – so long as the rewards are adequate. Since the less liquid a market is, the higher the return to market making will be, the more likely it is that someone will step up to trade when price moves are large. Put another way, better regulation has removed the public subsidy to trading activity that banks and others were able to capture prior to the crisis, so making markets has become more expensive and prices may have to move more than before to attract stabilizing traders. But during those periods when liquidity is particularly valuable, the rewards should exceed these higher capital and liquidity costs. We worry less, not more, because enhanced capital and liquidity requirements are making intermediaries more resilient. Tags: Corporate bonds, Bond market, Liquidity, U.S. Treasury bonds, High-frequency trading, Contagion, Systemic risk -- really good on corporate bonds and links to recent studies on the Treasury market, especially after the flash crash in October 2014 -- downloaded pdf to Note
financial_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  markets-structure  HFT  liquidity  capital_adequacy  banking  broker-dealers  intermediation  corporate_finance  Dodd-Frank  downloaded 
august 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Bond market liquidity: should we be worried? - August 2015
Very nice analysis -- the point re illiquid corporates can't be made often enough in response to the whining. And the HFT looks like a potentially bigger problem than higher capital requirements pushing the big boys out of the dealer business. The NY Fed and Treasury are constantly monitoring the primary and secondary markets in the only stuff that matters and have tools to improve things if needed.
Pocket  financial_regulation  capital_markets  bond_markets  money_market  capital_adequacy  market-makers  markets-structure  Fed  liquidity  corporate_finance  from pocket
august 2015 by dunnettreader
Financial Market Trends - OECD Journal - Home page | OECD
‌The articles in Financial Market Trends focus on trends and prospects in the international and major domestic financial markets and structural issues and developments in financial markets and the financial sector. This includes financial market regulation, bond markets and public debt management, insurance and private pensions, as well as financial statistics. -- links to the contents of each issue of the journal
journal  website  paper  financial_system  global_economy  global_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  international_finance  banking  NBFI  insurance  markets-structure  risk_assessment  risk_management  sovereign_debt  corporate_finance  corporate_governance  institutional_investors  pensions  consumer_protection  equity-corporate  equity_markets  debt  debt-overhang  leverage  capital_flows  capital_adequacy  financial_economics  financial_innovation  financial_system-government_back-stop  bailouts  too-big-to-fail  cross-border  regulation-harmonization  regulation-costs  statistics 
july 2015 by dunnettreader
Hans Degryse, Liping Lu, Steven Ongena - Informal or formal financing: First evidence on co-funding of Chinese firms | VOX, CEPR’s Policy Portal - 21 August 2013
Non-bank financing originating in the shadow banking system has increasingly become an issue for policymakers. This column argues that informal financing has, in fact, been an essential element of corporate performance in China. Through reviewing the interaction between informal and formal financing, evidence suggests that informal financing simultaneously granted with formal financing (co-funding) is helpful for growth, especially for small firms. -- informal financing may complement the use of formal financing, so that co-funding can better enhance firm growth. We conclude that the informal credit market should not be simply repressed as it may co-exist with the formal banking system and supports firm growth in a proper way. As the risks in the shadow banking system has not been regulated properly in China, it is high time that the Chinese regulators curtail the risks and channel the non-bank lending into a proper track in order to avoid a debt crisis. Informal financiers could then still continue to be a vital player in the Chinese credit market and sustain the high economic growth.
paper  China-economy  shadow_banking  NBFI  intermediation  information-intermediaries  access_to_finance  economic_growth  corporate_finance  financial_regulation 
july 2015 by dunnettreader
Sven Langedijk,et al - The corporate debt bias and the cost of banking crises | VOX, CEPR’s Policy Portal - 04 July 2015
Sven Langedijk, Gaëtan Nicodème, Andrea Pagano, Alessandro Rossi --Strengthening the banking sector through higher equity capital is one of the key elements of policies aiming to reduce the probability of crises. However, the ‘corporate debt bias’ – the tendency of corporate tax systems to favour debt over equity – is at odds with this objective. This column estimates the benefits for financial stability of eliminating the corporate debt bias. Fully removing the debt bias is estimated to reduce potential public finance losses by between 25 and 55% for the six large EU countries sampled.
paper  financial_system  financial_regulation  financial_crisis  banking  capital_adequacy  debt  corporate_finance  leverage  tax_policy  interest_rates  equity-corporate  EU 
july 2015 by dunnettreader
The Influence of Stock Market Listing on Human Resource Management: Evidence for France and Britain by Neil Conway, Simon Deakin, Suzanne J. Konzelmann, Héloïse Petit, Antoine Reberioux, Frank Wilkinson :: SSRN - British Journal of Industrial Relations,
Neil Conway, Birkbeck College -- Simon Deakin, Cambridge - Centre for Business Research; European Corporate Governance Institute; Cambridge - Faculty of Law -- Suzanne J. Konzelmann, Birkbeck College - Social Sciences, School of Management and Organizational Psychology; Cambridge - Social and Political Sciences -- Héloïse Petit -- Antoine Reberioux, Université Paris VII Denis Diderot; University Antilles Guyane - Law and Economics -' Frank Wilkinson, Birkbeck College -- We use data from the Relations Professionnelles et Négociations d'Entreprise survey of 2004 and the Workplace Employment Relations Survey of 2004 to analyse how far approaches to human resource management differ according to whether an establishment is part of a company with a stock exchange listing. In both countries we find that listing is positively associated with teamworking and performance-related pay, while in France, but not in Britain, it is also linked to worker autonomy and training. Our findings are inconsistent with the claim that shareholder pressure operates as a constraint on the adoption of high-performance workplace practices. The pattern is similar in the two countries, but with a slightly stronger tendency for listing to be associated with high-performance workplace practices in France. -- PDF File: 43 -- paywall but a working paper version on SSRN -- didn't download
article  SSRN  UK_economy  France  business_practices  labor  workforce  corporate_governance  corporate_finance  capital_markets 
july 2015 by dunnettreader
Suzanne J. Konzelmann, Marc Fovargue-Davies - Anglo-Saxon Capitalism in Crisis? Models of Liberal Capitalism and the Preconditions for Financial Stability :: SSRN (rev'd September 2011) Cambridge Centre for Business Research Working Paper No. 422
Suzanne J. Konzelmann, Birkbeck College - Social Sciences, School of Management and Organizational Psychology; Cambridge - Social and Political Sciences -- Marc Fovargue-Davies, U of London - The London Centre for Corporate Governance & Ethics -- The return to economic liberalism in the Anglo-Saxon world was motivated by the apparent failure of Keynesian economic management to control the stagflation of the 1970s and early 1980s. In this context, the theories of economic liberalism, championed by Friederich von Hayek, Milton Friedman and the Chicago School economists, provided an alternative. However, the divergent experience of the US, UK, Canada and Australia reveals two distinct ‘varieties’ of economic liberalism: the ‘neo-classical’ incarnation, which describes American and British liberal capitalism, and the more ‘balanced’ economic liberalism that evolved in Canada and Australia. In large part, these were a product of the way that liberal economic theory was understood and translated into policy, which in turn shaped the evolving relationship between the state and the private sector and the relative position of the financial sector within the broader economic system. Together, these determined the nature and extent of financial market regulation and the system’s relative stability during the 2008 crisis. -- PDF File: 61 -- Keywords: Corporate governance, Regulation, Financial market instability, Liberal capitalism, Varieties of capitalism -- downloaded pdf to Note
paper  SSRN  economic_history  20thC  21stC  post-WWII  post-Cold_War  US_politics  UK_politics  political_economy  political_culture  ideology  neoliberalism  economic_theory  economic_sociology  business_practices  business-and-politics  business-norms  business_influence  Keynesianism  neoclassical_economics  Austrian_economics  Chicago_School  capitalism-systemic_crisis  capitalism-varieties  corporate_governance  corporate_finance  capital_markets  capital_as_power  financialization  finance_capital  financial_regulation  Great_Recession  financial_crisis  policymaking  trickle-down  Canada  Australia  downloaded 
july 2015 by dunnettreader
Bernard S. Black, Reinier Kraakman, Anna Tarassova - Russian Privatization and Corporate Governance: What Went Wrong? :: SSRN - Stanford Law Review, Vol. 52, pp. 1731-1808, 2000
Bernard S. Black, Northwestern School of Law & Kellogg School of Management; European Corporate Governance Institute (ECGI); Reinier Kraakman, Harvard Law School, ECGI; Anna Tarassova, U of Maryland, Center on Institutional Reform and the Informal Sector (IRIS) -- In Russia and elsewhere, proponents of rapid, mass privatization of state-owned enterprises (ourselves among them) hoped that the profit incentives unleashed by privatization would soon revive faltering, centrally planned economies. The revival didn't happen. We offer here some partial explanations. First, rapid mass privatization is likely to lead to massive self-dealing by managers and controlling shareholders unless (implausibly in the initial transition from central planning to markets) a country has a good infrastructure for controlling self-dealing. Russia accelerated the self-dealing process by selling control of its largest enterprises cheaply to crooks, who transferred their skimming talents to the enterprises they acquired, and used their wealth to further corrupt the government and block reforms that might constrain their actions. Second, profit incentives to restructure privatized businesses and create new ones can be swamped by the burden on business imposed by a combination of (among other things) a punitive tax system, official corruption, organized crime, and an unfriendly bureaucracy. Third, while self-dealing will still occur (though perhaps to a lesser extent) if state enterprises aren't privatized, since self-dealing accompanies privatization, it politically discredits privatization as a reform strategy and can undercut longer-term reforms. A principal lesson: developing the institutions to control self-dealing is central to successful privatization of large firms. -- PDF File: 79 -- downloaded pdf to Note
article  SSRN  Russia  privatization  Russian_economy  corporate_governance  corporate_law  corporate_finance  corporate_control  corruption  asset_stripping  downloaded 
july 2015 by dunnettreader
Sticky Covenants by Gus De Franco, Florin P. Vasvari, Dushyantkumar Vyas, Regina Wittenberg Moerman :: SSRN ( rev'd Jan 2014)
Gus De Franco, U of Toronto, Rotman School of Management; Florin P. Vasvari, London Business School; Dushyantkumar Vyas, Rotman School of Management; Regina Wittenberg Moerman, U of Chicago, Booth School of Business -- We examine the determinants of the strength of bond covenants in protecting bondholders’ interests using a unique dataset constructed by Moody’s that allows us to measure the restrictiveness of bond covenant packages beyond the covenant inclusion measures used in the prior literature. We find that the covenant restrictiveness of a bond is highly persistent over time: it is strongly associated with the covenant restrictiveness of the borrower’s previous bond issues. We show that this persistence is driven by the restrictiveness of the covenant packages in previous bonds arranged by the firm’s underwriter or advised by the firm’s and underwriter’s legal counsels, consistent with these debt market intermediaries facing high switching costs in changing bond contractual terms. The restrictiveness of covenants in bonds issued by industry peers is another driver of the persistence, suggesting that covenants are written to facilitate bonds’ comparability. We next document that the bond covenant restrictiveness changes only when the borrower experiences a significant decline in its creditworthiness or when there is a substantial tightening in the credit supply in the economy. We also show that secondary bond market investors discount bond prices when bond covenants’ restrictiveness remains persistent despite a substantial decline in a borrower’s creditworthiness since the previous bond issue. PDF File: 64 -- Covenants, Covenant Restrictiveness, Persistence, Secondary Bond -- saved to briefcase
paper  SSRN  capital_markets  corporate_finance  bond_markets  risk  risk_management  asset_prices  spreads  risk_assessment  credit_ratings  covenants  intermediation  primary_markets  secondary_markets  creditors 
july 2015 by dunnettreader
JW Mason - OECD: Activist Shareholders Are Bad for Investment | Slackwire June 2015
The OECD has just released its new Business and Finance Outlook for 2015. A lot of interesting stuff there. We’ll want to take a closer look at the discussion… Focuses on chapter of report
Instapaper  report  OECD  OECD_economies  investors  corporate_governance  corporate_finance  hedge_funds  investment  asset_prices  asset_stripping  short-termism  from instapaper
july 2015 by dunnettreader
Frederick Tung -Leverage in the Board Room: The Unsung Influence of Private Lenders in Corporate Governance:: SSRN - UCLA Law Review, Vol. 57, 2009 (rev'd 2012)
Boston University School of Law --:The influence of banks and other private lenders pervades public companies. From the first day of a lending arrangement, loan covenants and built-in contingency provisions affect managerial decision making. Conventional corporate governance analysis has been slow to notice or account for this lender influence. Corporate governance discourse has traditionally focused only on corporate law arrangements. The few existing accounts of creditors' influence over firm managers emphasize the drastic actions creditors take in extreme cases - when a firm is in serious trouble - but in fact, private lender influence is a routine feature of corporate governance even absent financial distress. (..) I explain the regularity of lender influence on managerial decision making - "lender governance" - comparing this routine influence to conventional governance arrangements and boards of directors in particular. I show that the extent of private lender influence rivals that of conventional governance mechanisms, and I discuss the doctrinal and policy implications of this unsung influence. Accounting for lender governance requires a new examination of corporate fiduciary duties, debtor-creditor laws, and the regulatory reform proposals that have emerged to address the current financial crisis. I also discuss the implications of private lender influence for future corporate governance research. -- PDF File: 69 -- lender governance, corporate governance, covenants, credit agreement, private lender, private debt, creditor, financial regulation, financial crisis -- saved to briefcase
article  SSRN  corporate_finance  corporate_governance  creditors  banking  relationship_lending  financial_regulation  corporate_law  capital_markets  commercial_law  debtors  debtor-creditor  debt-restructuring  financial_crisis  finance_capital  corporate_control 
july 2015 by dunnettreader
Edward B. Rock - Institutional Investors in Corporate Governance (Jan 2015) :: SSRN - Oxford Handbook on Corporate Law and Governance, 2015, Forthcoming
Penn Law School -- chapter examines the role of institutional investors in corporate governance and the role of regulation in encouraging institutional investors to become active stewards. (..) what lessons we can draw from the US experience for the EU’s 2014 proposed amendments to the Shareholder Rights Directive.(...) survey how institutional investors themselves are governed and how they organize share voting. (...) 2 central questions: (a) why, over the last 25 years, have institutional investors not fulfilled the optimists’ hopes?; and (b) can the core incentive problems that subvert Institutional Investor activism be cured by regulation? The US experience [substantial deregulation led to only modest increases in shareholder activism], suggests (..) institutional investors’ relative passivity is a fundamental lack of incentives. I examine the disappointing results of the SEC’s long experiment with incentivizing mutual funds to vote their shares (...) the EU efforts are likely to be similarly disappointing. I then examine the important role that hedge funds now play in catalyzing institutional shareholders, and consider some of the risks in relying on such highly incentivized actors. -- PDF File: 26 -- saved to briefcase
chapter  books  SSRN  law-and-economics  behavioral_economics  financial_economics  financial_regulation  corporate_governance  corporate_law  corporate_finance  capital_markets  corporate_control_markets  institutional_investors  shareholders  shareholder_voting  mutual_funds  incentives  activist_investors  investors  hedge_funds  proxies  comparative_law  administrative_law  EU-law  regulation-harmonization  regulation-enforcement  fiduciaries  profit_maximization  EU-regulation 
july 2015 by dunnettreader
Xavier Giroud, Holger M. Mueller - Firm Leverage and Unemployment during the Great Recession | NBER April 2015
NBER Working Paper No. 21076 -- We argue that firms’ balance sheets were instrumental in the propagation of shocks during the Great Recession. Using establishment-level data, we show that firms that tightened their debt capacity in the run-up (“high-leverage firms”) exhibit a significantly larger decline in employment in response to household demand shocks than firms that freed up debt capacity (“low-leverage firms”). In fact, all of the job losses associated with falling house prices during the Great Recession are concentrated among establishments of high-leverage firms. At the county level, we find that counties with a larger fraction of establishments belonging to high-leverage firms exhibit a significantly larger decline in employment in response to household demand shocks. Thus, firms’ balance sheets also matter for aggregate employment. -- paywall
paper  paywall  NBER  Great_Recession  financial_crisis  corporate_finance  leverage  unemployment  macroeconomics  economic_models  economic_shocks-propagation  networks-business  demand-side  housing  business_practices  business_cycles 
may 2015 by dunnettreader
William Lazonick - Stock buybacks: From retain-and reinvest to downsize-and-distribute | Brookings Institution - April 2015
Stock buybacks are an important explanation for both the concentration of income among the richest households and the disappearance of middle-class employment opportunities in the United States over the past three decades. Over this period, corporate resource-allocation at many, if not most, major U.S. business corporations has transitioned from “retain-and-reinvest” to “downsize-and-distribute,” says William Lazonick in a new paper.
paper  US_economy  capital_markets  capitalism  investment  R&D  corporate_governance  corporate_finance  buybacks  shareholder_value  short-termism  incentives-distortions  labor_share  productivity  productivity-labor_share  inequality  wages  unemployment  downloaded 
may 2015 by dunnettreader
Steve Perlstein - Social Capital, Corporate Purpose, and the Revival of American Capitalism | Brookings Institution - January 2014
Since the Great Recession of 2008, corporate profits have more than rebounded, and yet the rest of the American economy has struggled to recover. Widening income inequality and an erosion of social capital and economic trust has deprived capitalism of its moral high ground. The public has lost confidence in big businesses--asking what purpose they serve in society writ large. Pearlstein argues we can begin to restoring the economic and moral legitimacy of American capitalism by reconsidering the purpose of corporations in American life. Despite the current dominance of the theory of “maximizing shareholder value,” this idea has little basis in history or law. Shifting to a more balanced form of capitalism will take time, but some possible steps for reform include: #-# Support investment funds dedicated to long-term horizons, including socially responsible investment funds #-# Recalibrate corporate governance law to allow for more flexible decision making #-# Rebalance capital gains taxes to encourage long-term stock holding by investors #-# Explore regulatory options for financial services, like a financial transaction tax to dampen the influence of short-term trading #-# Encourage a wider range of corporate metrics beyond quarterly earnings guidance #-# Reform shareholder voting rights to foster a sense of stewardship -- didn't download it -- Brookings also has video of Perlstein in Charlie Rose
paper  video  corporate_governance  corporate_citizenship  business_practices  corporate_finance  corporate_law  corporate_tax  financial_crisis  investors  institutional_investors  shareholder_value  capital_markets  shareholder_voting  capital_gains  financial_transaction_tax  short-termism  capitalism  capitalism-systemic_crisis 
may 2015 by dunnettreader
Bill Galston and Elaine Karmack - Overcoming corporate short-termism: Blackrock's chairman weighs in | Brookings Institution - April 2015
hen the head of the world’s largest investment fund raises fundamental questions about U.S. corporations, we should all pay attention.

In a letter earlier this week to the Fortune 500 CEOs, BlackRock Chairman Larry Fink criticized the short-term orientation that he believes shapes too much of today’s corporate behavior. “It concerns us,” he declared, that “in the wake of the financial crisis, many companies have shied away from investing in the future growth of their companies. Too many have cut capital expenditure and even increased debt to boost dividends and increase share buybacks.” And he concluded, “When done for the wrong reasons and at the expense of capital investment, [returning cash to shareholders] can jeopardize a company’s ability to generate sustainable long-term returns.”
institutional_investors  corporate_governance  corporate_citizenship  corporate_finance  CSR  short-termism  capital_markets  shareholder_value  capital_gains  investment  R&D  buybacks 
may 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - The euro area's debt hangover — Money, Banking and Financial Markets - April 2015
You wouldn’t know it from the record low level of government bond yields, but much of Europe lives under a severe debt burden. Nonfinancial corporate debt exceeds 100 percent of GDP in Belgium, Finland, France, Ireland, Luxembourg, Netherlands, Portugal, and Spain. And, gross government debt (as measured by Eurostat) is close to or exceeds this threshold in Belgium, France, Greece, Ireland, Italy, Portugal and Spain. Debt levels this high have important long-run consequences. (...) they are a drag on growth. High debt means that households have more difficulty maintaining consumption when income falls; firms may be unable to keep up production and investment when revenue dips; and governments are in no position to smooth expenditure when revenue falls. More economic volatility means lower growth. Beyond that, high levels of debt reduce the effectiveness of central bank stimulus. (...) So, what is the euro area to do? We see three paths out of this predicament: (1) breathtaking supply reforms that trigger an investment boom; (2) inflation; or (3) a mix of asset sales and debt relief.The first option is the best. The alternatives would threaten the survival of the euro, undermine the fiscal credibility of major governments, or both. [After pointing out the problems with 1 and 2, they look at how much would sovereign_debt have to be reduced to reach debt sustainability targets embodied in Maastricht] For Greece, the write-down is 71% of face value; for Spain, 63%; and for France 50%. Taken as a whole, meeting the 60% Maastricht criterion (while maintaining bank system capital) would require that (..the) combined debt of [Greece, Spain and France of] €9.36 trillion be written down by a total of €5.07 trillion. As extreme as this sounds, it is, in fact, insufficient. Many euro-area governments also face significant unfunded pension liabilities. (...) The sooner they own up to this, the better for their long-term growth prospects. -- copied to Pocket
EU  Eurozone  debt  debt-overhang  debt-restructuring  sovereign_debt  leverage  deleverage  economic_growth  economic_reform  creditors  default  monetary_policy  ECB  central_banks  interest_rates  investment  deficit_finance  debt_crisis  corporate_finance  demand-side  supply-side  capital_markets  Great_Recession  financial_crisis  financial_system  banking  capital_adequacy  Pocket 
april 2015 by dunnettreader
Russell J. Lundholm, George Serafeim, Gwen Yu - FIN Around the World: The Contribution of Financing Activity to Profitability - July 1, 2012 :: SSRN
Russell J. Lundholm, University of British Columbia - Sauder School of Business -- George Serafeim ,Harvard University - Harvard Business School -- Gwen Yu, Harvard Business School -- Harvard Business School Accounting & Management Unit Working Paper No. 2113557 -- We study how the availability of domestic credit influences the contribution that financing activities make to a firm’s return on equity (ROE). Using a sample of 51,866 firms from 69 countries, we find that financing activities contribute more to a firm’s ROE in countries with higher domestic credit. The higher contribution of financing activities is not driven by firms taking greater leverage in these countries, but by firms realizing a higher spread (i.e., a greater difference in operating performance and borrowing cost) when more domestic credit is available. Also, we find that firms partially substitute trade credit for financial credit, with large firms exhibiting the greatest rate of substitution. For small firms, the rate of substitution improves with the country’s available domestic credit, while large firms are insensitive to this friction. The findings suggest that both country and firm-level factors have a significant impact on how financing activities contribute to corporate performance. -- Pages in PDF File: 51 -- Keywords: Domestic Credit, Financial Statement Analysis, Return on Equity, Corporate Performance -- didn't download
paper  SSRN  corporate_finance  profit  interest_rates  financial_sector_development  credit  SMEs  financial_access  trade_finance  leverage  shareholder_value 
april 2015 by dunnettreader
Beiting Cheng, Ioannis Ioannou, George Serafeim - Corporate Social Responsibility and Access to Finance - May 19, 2011 | Strategic Management Journal, 35 (1): 1-23. :: SSRN
Beiting Cheng, Harvard University - Harvard Business School -- Ioannis Ioannou, London Business School -- George Serafeim, Harvard University - Harvard Business School **--** In this paper, we investigate whether superior performance on corporate social responsibility (CSR) strategies leads to better access to finance. We hypothesize that better access to finance can be attributed to a) reduced agency costs due to enhanced stakeholder engagement and b) reduced informational asymmetry due to increased transparency. Using a large cross-section of firms, we find that firms with better CSR performance face significantly lower capital constraints. Moreover, we provide evidence that both of the hypothesized mechanisms, better stakeholder engagement and transparency around CSR performance, are important in reducing capital constraints. The results are further confirmed using several alternative measures of capital constraints, a paired analysis based on a ratings shock to CSR performance, an instrumental variables and also a simultaneous equations approach. Finally, we show that the relation is driven by both the social and the environmental dimension of CSR. -- Pages in PDF File: 43 -- Keywords: corporate social responsibility, sustainability, capital constraints, ESG (environmental, social, governance) performance -- didn't download
article  SSRN  business_practices  business-norms  corporate_finance  corporate_governance  shareholder_value  CSR  environment  sustainability  accounting  accountability  firms-theory  firms-structure  information-asymmetric  disclosure  finance-cost 
april 2015 by dunnettreader
Robert G. Eccles, Ioannis Ioannou, George Serafeim - The Impact of Corporate Sustainability on Organizational Processes and Performance - November 23, 2011 :: SSRN - Management Science, Forthcoming
Robert G. Eccles, Harvard Business School -- Ioannis Ioannou, London Business School -- George Serafeim, Harvard University - Harvard Business School *--* We investigate the effect of a corporate culture of sustainability on multiple facets of corporate behavior and performance outcomes. Using a matched sample of 180 companies, we find that corporations that voluntarily adopted environmental and social policies many years ago – termed as High Sustainability companies – exhibit fundamentally different characteristics from a matched sample of firms that adopted almost none of these policies – termed as Low Sustainability companies. In particular, we find that the boards of directors of these companies are more likely to be responsible for sustainability and top executive incentives are more likely to be a function of sustainability metrics. Moreover, they are more likely to have organized procedures for stakeholder engagement, to be more long-term oriented, and to exhibit more measurement and disclosure of nonfinancial information. Finally, we provide evidence that High Sustainability companies significantly outperform their counterparts over the long-term, both in terms of stock market and accounting performance. The outperformance is stronger in sectors where the customers are individual consumers instead of companies, companies compete on the basis of brands and reputations, and products significantly depend upon extracting large amounts of natural resources. -- Keywords: sustainability, corporate social responsibility, culture, governance, disclosure, performance -- didn't download
paper  SSRN  corporate_governance  corporate_citizenship  corporate_finance  CSR  brands  reputation  incentives  sustainability  long-term_orientation  natural_resources  firms-theory  firms-structure  firms-organization  executive_compensation  business-norms  profit  disclosure 
april 2015 by dunnettreader
GF&Co - Joshua Rosner - Is the CDS Market Manipulated? - Dec 2014
Appalling details re ISDA procedures for determining credit events. The Determination Committee is stacked with the 10 big banks that are the major dealers and have a huge financial interest in the outcome. Since they explicitly have no duty of care, no duty to disclose information on which they base their votes even to the other committee members, no transparency re the basis on which the Committee makes a determination or how members voted, and can defer decisions for several meetings running, that would allow them to adjust their book. The example of the Caesars default, which was clear as possible in the indenture but was delayed being determined as a credit event by weeks, is instructive re how little investors can rely on the actual facts but are at the mercy of the big banks' totally arbitrary discretion. Other examples include Elliott on the committee that determined the Argentine credit event *caused* by Elliott. The amounts in the CDS of a high profile company can distort company operations and financial structure to game the declaration of a credit event with the participation of some of the very banks that will decide when an event is triggered -- see RadioShack. The entire risk management function that in theory justifies CDS and the positions investors take, has been completely annulled by the interests of the financial institutions who make the market. The ISDA has become effectively a credit rating agency with no regulatory oversight or controls. The potential amounts involved are staggering, making the LIBOR scandal look penny ante.
Scribd  international_finance  derivatives  self-regulation  financial_regulation  financial_crisis  markets-structure  market_manipulation  conflict_of_interest  fiduciaries  corporate_finance  bankruptcy 
march 2015 by dunnettreader
Jeff Horn - Economic Development in Early Modern France: The Privilege of Liberty, 1650–1820 (release date for hardback mid-Feb 2015) | European history after 1450 | Cambridge University Press
Privilege has long been understood as the constitutional basis of Ancien Régime France, legalising the provision of a variety of rights, powers and exemptions to some, whilst denying them to others. In this fascinating new study however, Jeff Horn reveals that Bourbon officials utilized privilege as an instrument of economic development, freeing some sectors of the economy from pre-existing privileges and regulations, while protecting others. He explores both government policies and the innovations of entrepreneurs, workers, inventors and customers to uncover the lived experience of economic development from the Fronde to the Restoration. He shows how, influenced by Enlightenment thought, the regime increasingly resorted to concepts of liberty to defend privilege as a policy tool. The book offers important new insights into debates about the impact of privilege on early industrialisation, comparative economic development and the outbreak of the French Revolution. **--** 1. Introduction: profits and economic development during the Old Régime *--* 2. Privileged enclaves and the guilds: liberty and regulation *--* 3. The privilege of liberty put to the test: industrial development in Normandy *--* 4. Companies, colonies, and contraband: commercial privileges under the Old Régime *--* 5. Privilege, liberty, and managing the market: trading with the Levant *--* 6. Outside the body politic, essential to the body economic: the privileges of Jews, Protestants and foreign residents *--* 7. Privilege, innovation, and the state: entrepreneurialism and the lessons of the Old Régime *--* 8. The reign of liberty? Privilege after 1789 -- look for pdf of Intro once released
books  find  political_economy  economic_history  political_history  17thC  18thC  19thC  France  privileges-corporate  economic_culture  economic_policy  development  monarchy  profit  entrepreneurs  guilds  trading_companies  trade-policy  regulation  industrialization  industrial_policy  Colbert  Colbertism  urban_development  urban_elites  commerce  commercial_interest  French_government  Huguenots  Jews  colonialism  French_Empire  colonies  corporate_finance  monopolies  Levant  MENA  Ottomans  liberties  liberty  Ancien_régime  Louis_XIV  Louis_XV  Louis_XVI  French_Revolution  French_Revolutionary_Wars  Napoleonic_Wars  Restoration-France  bourgeoisie  haute_bourgeoisie  markets  markets-structure  foreign_trade  foreign_policy  foreigners-resident 
february 2015 by dunnettreader
Mike Konczal - The 2003 Dividend Tax Cut Did Nothing to Help the Real Economy | Next New Deal January 2015
Pre Obama proposal to reverse part of Bush tax cuts - Berkeley economist Danny Yagan’s fantastic new paper, “Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut” -- He uses a large amount of IRS data on corporate tax returns to compare S-corporations with C-corporations. C-corps are publicly-traded, S-corps are closely held without institutional investors. But they are largely comparable in the range Yagan looks at (between $1 million and $1 billion dollars in size), as they are competing in the same industries and locations. -- S-corps don’t pay a dividend tax and thus didn’t benefit from the big 2003 dividend tax cut, while C-corps do pay them and did benefit. So that allows Yagan to set up S-corps as a control group and see what the effect of the massive dividend tax cut on C-corporations has been. -- [Yagan finds no difference in things we want to encourage] -- The one thing that does increase for C-corps of course, is the disgorgement of cash to shareholders -- an increase in dividends and share buybacks. This shows that these corps are responding to the tax cut; they just happen to be decisions that benefit, well, probably not you. If right now you are worried that too much cash is leaving firms to benefit a handful of investors while the real economy stagnates, suddenly Clinton-era levels of dividend taxation don’t look so bad. -- downloaded pdf to Note
paper  US_economy  US_politics  21stC  taxes  corporate_finance  corporate_tax  capital  dividends  investment  shareholders  investors  GOP  shareholder_value  tax_policy  tax_reform  supply-side  trickle-down  Obama_administration  Bush_administration  distribution-income  distribution-wealth  1-percent  downloaded  EF-add 
january 2015 by dunnettreader
Claus Holm, Morten Balling and Thomas Poulsen - Corporate governance ratings as a means to reduce asymmetric information (2014) | T&A Online
Downloaded to iPhone -- Cogent Economics & Finance - Volume 2, Issue 1, 2014 -- Can corporate governance ratings reduce problems of asymmetric information between companies and investors? To answer this question, we set out to examine the information basis for providing such ratings by reviewing corporate governance attributes that are required or recommended in laws, accounting standards, and codes, respectively. After that, we scrutinize and organize the publicly available information on the methodologies actually used by rating providers. However, important details of these methodologies are treated as confidential property, thus we approach the evaluation of corporate governance ratings as a means to reduce asymmetric information in a more general manner. We propose that the rating process may be seen as consisting of two general activities, namely a data reduction phase, and a data weighting, aggregation, and classification phase. Findings based on a Danish data-set suggest that rating providers by selecting relevant attributes in an intelligent way can improve the screening of companies according to governance quality. In contrast, it seems questionable that weighting, aggregation, and classification of corporate governance attributes considerably improve discrimination according to governance quality.
paper  corporate_finance  asymmetric_information  capital_markets  disclosure  investors  risk  asset_prices  corporate_governance  ratings  reputation  EMH  accountability  financial_regulation  self-regulation  norms  business_practices  business-ethics  downloaded 
january 2015 by dunnettreader
Garicano, Luis and Rossi-Hansberg, Esteban (2014) - Knowledge-based hierarchies: using organizations to understand the economy - LSE Research Online
Via Economic Principals -- We argue that incorporating the decision of how to organize the acquisition, use, and communication of knowledge into economic models is essential to understand a wide variety of economic phenomena. We survey the literature that has used knowledge-based hierarchies to study issues like the evolution of wage inequality, the growth and productivity of firms, economic development, the gains from international trade, as well as offshoring and the formation of international production teams, among many others. We also review the nascent empirical literature that has, so far, confirmed the importance of organizational decisions and many of its more salient implications. - downloaded to iPhone
paper  lit_survey  economic_theory  economic_growth  productivity  inequality  labor  wages  supply_chains  teams  off-shoring  trade  emerging_markets  corporate_finance  development  MNCs  power  power-asymetric  firm-theory  organization  hierarchy  know-how  technology  innovation  superstars  middle_class  working_class  social_stratification  social_theory  institutional_economics  globalization  economy_of_scale  increasing_returns  IP  downloaded 
january 2015 by dunnettreader
Lucian A. Bebchuk, Robert J. Jackson - Shining Light on Corporate Political Spending - Georgetown Law Journal, Vol. 101, April 2013, pp. 923-967 :: SSRN (last revised August 2014)
Lucian A. Bebchuk - Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI) -- Robert J. Jackson Jr. - Columbia Law School --- The SEC is currently considering a rulemaking petition requesting that the SEC develop rules requiring that public companies disclose their spending on politics. The petition, which was submitted by a committee of ten corporate law professors that we co-chaired, has received unprecedented support, including comment letters from nearly half a million individuals. (...)the petition has also attracted opponents, including prominent members of Congress and business organizations.This Article puts forward a comprehensive, empirically grounded case for the rulemaking advocated in the petition. We present (..) evidence indicating that a substantial amount of corporate spending on politics occurs under investors’ radar screens, and that shareholders have significant interest in receiving information about such spending. We argue that disclosure of corporate political spending is necessary to ensure that such spending is consistent with shareholder interests. We discuss the emergence of voluntary disclosure practices in this area and show why voluntary disclosure is not a substitute for SEC rules. We also provide a framework for the SEC’s design of these rules. Finally, we consider and respond to ten objections that have been raised to disclosure rules of this kind. We show that all of the considered objections, both individually and collectively, provide no basis for opposing rules that would require public companies to disclose their spending on politics. -- downloaded pdf to Note
article  SSRN  US_government  administrative_law  administrative_agencies  financial_system  SEC  disclosure  corporate_law  corporate_governance  corporate_finance  corporate_citizenship  campaign_finance  capital_markets  investors  political_participation  lobbying  downloaded  EF-add 
november 2014 by dunnettreader
Jonathan Nitzan - Global Capital: Political Economy of Capitalist Power (YorkU, Graduate Seminar, Fall Term, 2014-15) | bnarchives
The seminar has two related goals: substantive and pedagogical. The substantive purpose is to tackle the question of capital head on. The course explores a spectrum of liberal and Marxist theories, ideologies and dogmas – as well as a radical alternative to these views. The argument is developed theoretically, historically and empirically. The first part of the seminar provides a critical overview of political economy, examining its historical emergence, triumph and eventual demise. The second part deals with the two ‘materialistic’ schools of capital – the liberal theory of utility and the Marxist theory of labour time – dissecting their structure, strengths and limitations. The third part brings power back in: it analyses the relation between accumulation and sabotage, studies the institutions of the corporation and the state and introduces a new framework – the capitalist mode of power. The final part offers an alternative approach – the theory of capital as power – and illustrates how this approach can shed light on conflict-ridden processes such as corporate merger, stagflation, imperialism and Middle East wars. Pedagogically, the seminar seeks to prepare students toward conducting their own independent re-search. Students are introduced to various electronic data sources, instructed in different methods of analysis and tutored in developing their empirical research skills. As the seminar progresses, these skills are used both to assess various theories and to develop the students’ own theoretical/empirical research projects. -- Keywords: arms accumulation capital capitalism conflict corporation crisis distribution elite energy finance globalization growth imperialism GPE liberalism Marxism military Mumford national interest neoclassical neoliberalism oil ownership peace power profit ruling class security stagflation state stock market technology TNC Veblen violence war -- syllabus and session handouts downloaded pdf to Note
bibliography  syllabus  capital_as_power  international_political_economy  political_economy  economic_theory  liberalism  neoliberalism  neoclassical_economics  Keynesian  Marxist  capital  capitalism  social_theory  power-asymmetric  globalization  financial_system  financial_regulation  risk-systemic  international_finance  finance_capital  financialization  production  distribution-income  distribution-wealth  inequality  MNCs  corporations  corporate_finance  corporate_ownership  corporate_control_markets  economic_growth  economic_models  imperialism  military  military-industrial_complex  IR_theory  ruling_class  class_conflict  energy  energy-markets  MENA  accumulation  accumulation-differential  capital_markets  public_finance  profit  investment  technology  elite_culture  elites-self-destructive  capitalism-systemic_crisis  Veblen  Mumford  downloaded  EF-add 
october 2014 by dunnettreader
Hyeng-Joon Park - Korea’s Post-1997 Restructuring: An Analysis of Capital as Power | forthcoming in Review of Radical Political Economics (2015) pp. 1-44 | bnarchives
This paper aims to transcend current debates on Korea’s post-1997 restructuring, which rely on a dichotomy between domestic industrial capital and foreign financial capital, by adopting Nitzan and Bichler’s capital-as-power perspective. Based on this approach, the paper analyzes Korea’s recent political economic restructuring as the latest phase in the evolution of capitalist power and its transformative regimes of capital accumulation. -- Keywords: differential accumulation dominant capital chaebols transnationalization strategic sabotage -- Subjects: BN State & Government, BN Institutions, BN Power, BN International & Global, BN Region - Asia, BN Business Enterprise, BN Value & Price, BN Crisis, BN Production, BN Conflict & Violence, BN Money & Finance, BN Distribution, BN Comparative, BN Capital & Accumulation, BN Policy, BN Class, BN Labour, BN Growth -- downloaded from author's blog to Note
article  international_political_economy  capital_as_power  globalization  Korea  East_Asia  20thC  21stC  economic_history  1990s  2000s  2010s  Asian_crisis  Asia_Pacific  international_finance  FDI  finance_capital  financialization  emerging_markets  oligopoly  chaebols  crony_capitalism  industry  production  capitalism  capitalism-systemic_crisis  capitalization  accumulation  distribution-income  distribution-wealth  cross-border  trade  productivity-labor_share  class_conflict  labor_share  Labor_markets  unions  violence  economic_growth  sabotage-by_business  business-and-politics  business-norms  power-asymmetric  public_policy  public_goods  corporate_finance  corporate_ownership  investment  banking  political_culture  economic_culture  economic_reform  economic_policy  democracy  opposition  downloaded  EF-add 
october 2014 by dunnettreader
Mark S. Mizruchi - Berle and Means Revisited: The Governance and Power of Large U.S. Corporations | JSTOR: Theory and Society, Vol. 33, No. 5 (Oct., 2004), pp. 579-617
In The Modern Corporation and Private Property (1932), Berle and Means warned of the concentration of economic power brought on by the rise of the large corporation and the emergence of a powerful class of professional managers, insulated from the pressure not only of stockholders, but of the larger public as well. In the tradition of Thomas Jefferson, Berle and Means warned that the ascendance of management control and unchecked corporate power had potentially serious consequences for the democratic character of the United States. Social scientists who drew on Berle and Means in subsequent decades presented a far more benign interpretation of the rise of managerialism, however. For them, the separation of ownership from control actually led to an increased level of democratization in the society as a whole. Beginning in the late 1960s, sociologists and other social scientists rekindled the debate over ownership and control, culminating in a series of rigorous empirical studies on the nature of corporate power in American society. In recent years, however, sociologists have largely abandoned the topic, ceding it to finance economists, legal scholars, and corporate strategy researchers. In this article, I provide a brief history of the sociological and finance/legal/strategy debates over corporate ownership and control. I discuss some of the similarities between the two streams of thought, and I discuss the reasons that the issue was of such significance sociologically. I then argue that by neglecting this topic in recent years, sociologists have failed to contribute to an understanding of some of the key issues in contemporary business behavior. I provide brief reviews of four loosely developed current perspectives and then present an argument of my own about the changing nature of the U.S. corporate elite over the past three decades. I conclude with a call for sociologists to refocus their attention on an issue that, however fruitfully handled by scholars in other fields, cries out for sociological analysis. -- downloaded pdf to Note
article  jstor  economic_history  intellectual_history  20thC  21stC  US_economy  US_politics  political_economy  political_sociology  economic_sociology  law-and-finance  law-and-economics  capitalism  corporations  MNCs  corporate_governance  corporate_finance  capital_markets  shareholder_value  shareholders  principal-agent  management  managerialism  corporate_citizenship  corporate_control_markets  corporate_law  M&A  business-and-politics  business-norms  power  power-asymmetric  status  interest_groups  lobbying  regulation  bibliography  downloaded  EF-add 
september 2014 by dunnettreader
John Groenewegen - European Integration and Changing Corporate Governance Structures: The Case of France | JSTOR: Journal of Economic Issues, Vol. 34, No. 2 (Jun., 2000), pp. 471-479
Speculates that the economic and business cultures of major countries are distinctive enough that the expectation of global convergence on Anglo-Saxon corporate governance norms is too simplistic. It's based implicitly or explicitly on the assumption that liberalization of European capital markets will produce a European-wide market in corporate control that will impose its Anglo-Saxon norms and values via access to and pricing of international capital. He looks at ways that European Integration might reinforce local norms or converge toward a more European set of values and governance practices. Short article, didn't download
article  jstor  France  Eurozone  EU  market_integration  capital_markets  corporate_governance  shareholder_value  corporate_control_markets  busisness-ethics  business-norms  corporate_finance  corporate_citizenship 
september 2014 by dunnettreader
theAIRnet.org - Home
The Academic-Industry Research Network – theAIRnet – is a private, 501(c)(3) not-for-profit research organization devoted to the proposition that a sound understanding of the dynamics of industrial development requires collaboration between academic scholars and industry experts. We engage in up-to-date, in-depth, and incisive research and commentary on issues related to industrial innovation and economic development. Our goal is to understand the ways in which, through innovation, businesses and governments can contribute to equitable and stable economic growth – or what we call “sustainable prosperity”.
website  economic_growth  industry  technology  Innovation  green_economy  development  business  business-and-politics  capitalism  global_economy  public-private_partnerships  public_policy  public_health  public_goods  urban_development  health_care  IP  Labor_markets  wages  unemployment  education-training  sustainability  financial_system  corporate_citizenship  corporate_governance  corporate_finance  CSR  firms-theory  management  plutocracy  MNCs  international_political_economy  human_capital  OECD_economies  emerging_markets  supply_chains  R&D  common_good  1-percent  inequality  working_class  work-life_balance  workforce  regulation  regulation-harmonization  incentives  stagnation 
september 2014 by dunnettreader
the UNEP Inquiry into the Design of a Sustainable Financial System | UNEP - Green Economy Initiative
C About

Mobilizing the world’s capital is essential for the transition to a sustainable, low-carbon economy. Today, however, too little capital is supporting the transition, and too much continues to be invested in a high-carbon and resource-intensive, polluting economy. Market participants and others recognize that prevailing rules and incentives governing financial markets can disadvantage long-term, sustainable behavior. Long-term environmental risks are not being effectively counted and green opportunities are inadequately valued. Such distortions can lead to a misallocation of capital and a danger of systemic risks to the economy and the natural environment. The UNEP Inquiry is intended to support such actions by identifying best practice, and exploring financial market policy and regulatory innovations that would support the development of a green financial system. Building on the twin pillars of UNEP’s strong track record through its Green Economy initiative and the UNEP-Finance Initiative, it will assemble the world`s best practice and forward-looking expert knowledge through an advisory council, practitioner dialogue and research. The Inquiry will produce a final options report as well as technical papers throughout its 18-24 month life from January 2014. The Inquiry`s current set up phase will ensure it is designed with guidance from practitioners and experts, and establish a network of world-class advisors and researchers. Engaging with existing initiatives will ensure that it can effectively convene and catalyze broad debate that supports the crystallization of options for advancing a more systematic approach to developing a green financial system. -- summary downloaded pdf to Note
UN  UNEP  green_economy  green_finance  financial_system  international_political_economy  global_governance  financial_regulation  financial_sector_development  financial_innovation  banking  capital_markets  incentives  investment  investors  corporate_finance  public_finance  sustainability  civil_society  risk  insurance  intermediation  downloaded  EF-add 
september 2014 by dunnettreader
The 21st Century Investor: Ceres Blueprint for Sustainable Investing — Ceres
Unprecedented risks to the global economy make this a challenging time for the 21st century investor—institutional asset owners and their investment managers—most of which have multi-generational obligations to beneficiaries. Climate change, resource scarcity, population growth, energy demand, ensuring the human rights of workers across global supply chains, and access to fresh water are some of the major issues challenging our ability to build a sustainable economy, one that meets the needs of people today without compromising the needs of future generations. -- This Blueprint is written for the 21st Century investor— institutional asset owners and their investment managers—who need to understand and manage the growing risks posed by climate change, resource scarcity, population growth, human and labor rights, energy demand and access to water—risks that will challenge businesses and affect investment returns in the years and decades to come. -- section of Ceres website devoted to investor related initiatives - proxy voting guides, etc - and corporate and public finance isuues, such as sustainability risk disclosure, listing srandards, Climate Bonds Principles -- downloaded pdf of executive summary of report
report  climate  energy  water  ocean  demography  supply_chains  global_economy  global_governance  sustainability  financial_system  capital_markets  institutional_investors  corporate_governance  corporate_finance  public_finance  investors  disclosure  asset_management  political_economy  international_political_economy  Labor_markets  human_rights  downloaded  EF-add 
september 2014 by dunnettreader
ESMA Technical Advice on the feasibility of a network of small and medium-sized CRAs (November 2013) | ESMA
Technical Advice to the European Commission on the feasibility of a network of small and medium sized credit rating agencies in order to increase competition in the market -- The report provides quantitative and qualitative information on small and medium-sized CRAs in the EU, based on the analysis of the periodic reporting obligations of CRAs to ESMA via the central repository CEREP. It also covers possible barriers to entry for companies that wish to conduct rating activity in the EU. The main findings are: • The 22 registered CRAs are established in 11 EU Member States; • None of the small and medium-sized CRAs cover the whole range of the 5 rating classes considered (corporates non-financial, financials, insurance, sovereign and public finance, and structured finance). Whilst 2 CRAs cover 4 and 3 classes respectively, all the remaining small and medium-sized CRAs cover 1 or 2 rating classes only. Fitch, Moody’s and S&P issue ratings for all 5 rating classes; • Small and medium-sized CRAs are mainly active in corporate ratings. Within this rating type, 4 CRAs issue a relatively high number of corporate ratings or financial and insurance ratings; • Only 6 of the small and medium-sized CRAs provide sovereign ratings, whilst only one (DBRS) issues structured finance ratings; • As of end 2012 the majority of small and medium-sized CRAs issued solicited ratings only. 8 issued unsolicited ratings only. 3 small and medium-sized CRAs issued both solicited and unsolicited ratings, as was the case also for Fitch, Moody’s and S&P; <snip> ESMA is not aware of any private networks of small and medium-sized CRAs currently in place -- didn't download
report  EU  ESMA  financial_system  financial_regulation  capital_markets  debt  debtors  corporate_finance  sovereign_debt  competition-financial_sector  rating_agencies 
september 2014 by dunnettreader
Home -- European Securities and Markets Authority - ESMA [formerly CESR]
ESMA’s mission is to enhance the protection of investors and reinforce stable and well functioning financial markets in the European Union. ESMA, as an independent EU Authority, achieves this mission by building a single rule book for EU financial markets and ensuring its consistent application and supervision across the EU. ESMA contributes to the supervision of financial services firms with a pan-European reach, either through direct supervision or through the active co-ordination of national supervisory activity. -- successor agency as of January 2011 to the Committee of European Securities Regulators
website  government_agencies  administrative_agencies  administrative_law  EU  Europe  capital_markets  financial_regulation  regulation-harmonization  rating_agencies  equity-corporate  derivatives  markets-structure  market_integration  clearing_&_settlement  cross-border  corporate_finance  NBFI  disclosure  accounting  corporate_governance 
september 2014 by dunnettreader
Network for Sustainable Financial Markets | Home
The Network for Sustainable Financial Markets is an International, non-partisan network of finance sector professionals, academics and others who have an active interest in long-term investing. We believe that the recurring crises recently experienced in our financial markets are not isolated incidents. Rather, this instability is evidence that the financial market system is in need of well thought-out reform so that it can better serve its core purpose of creating long-term sustainable value. Our primary concern today is not that reform efforts will result in the adoption of too much or too little regulation. Rather, we see the greatest peril as inappropriate regulation and governance reforms that fail to address the real causes of financial market instability. While increased transparency, better risk management, additional liquidity and other surface fixes might address the current symptoms, they are not enough to resolve underlying systemic problems. Delay will only make things worse since failure to deal with these deep-rooted design flaws can only mean repetitive, deepening crises with growing economic and social destabilisation. The time to act is now. The Network’s goal is to foster interdisciplinary collaboration on research and advocacy projects between market professionals, academics and other opinion-leaders. We seek to fill the gaps between existing initiatives, to engage on problems which have received attention but have not still been solved and also to involve many more opinion-shapers than has previously been the case. We also intend that the Network be time-limited – our ultimate goal is to embed the Network’s guiding principles into the approaches used by other entities involved in research and public policy, then dissolve. -- connected to Climate Bond Initiative
website  financial_system  financial_crisis  financial_regulation  financial_innovation  financial_sector_development  reform-finance  green_finance  investors  corporate_governance  corporate_finance  capital_markets  banking  international_finance  international_monetary_system  risk-systemic  standards-sustainability  disclosure  accounting 
september 2014 by dunnettreader
Edward D. Kleinbard - 'Competitiveness' Has Nothing to Do With It (Tax Notes, Forthcoming) :: SSRN August 27, 2014
USC Gould School of Law -- USC CLASS Research Papers Series No. CLASS 14-26 - USC Legal Studies Research Papers Series No. 14-34 -- The recent wave of corporate tax inversions has triggered interest in what motivates these tax-driven transactions now. Corporate executives have argued that inversions are explained by an "anti-competitive" U.S. tax environment, as evidenced by the federal corporate tax statutory rate, which is high by international standards, and by its "worldwide" tax base. This paper explains why this competitiveness narrative is largely fact-free, in part by using one recent articulation of that narrative (by Emerson Electric Co.’s former vice-chairman) as a case study. The recent surge in interest in inversion transactions is explained primarily by U.S. based multinational firms’ increasingly desperate efforts to find a use for their stockpiles of offshore cash (now totaling around $1 trillion), and by a desire to "strip" income from the U.S. domestic tax base through intragroup interest payments to a new parent company located in a lower-taxed foreign jurisdiction. These motives play out against a backdrop of corporate existential despair over the political prospects for tax reform, or for a second "repatriation tax holiday" of the sort offered by Congress in 2004. '- Number of Pages in PDF File: 32 -- didn't download
paper  SSRN  US_economy  taxes  tax_havens  tax_collection  Congress  US_politics  globalization  global_economy  business-and-politics  corporate_finance  corporate_governance  corporate_citizenship 
september 2014 by dunnettreader
Steve Denning - From CEO 'Takers' To CEO 'Makers': The Great Transformation - Forbes - August 2014
CEOs, through the pervasive use of share buybacks, have become takers, not makers. Instead of creating value for their organizations and society, they are extracting value. Pervasive share buybacks are an economic, social and moral disaster: they contribute to loss of shareholder value, crippled capacity to innovate, runaway executive compensation, destruction of jobs, rapidly increasing inequality and sustained economic stagnation. Yet share buybacks have become “an unhealthy corporate obsession,” even “an addiction.” The situation is one of fundamental institutional failure. CEOs are extracting value from their firms. Business schools are teaching them how to do it. Institutional shareholders are complicit in what the CEOs are doing. Regulators pursue individuals but remain indifferent to systemic failure. Rating agencies reward malfeasance. Analysts applaud short-term gains and ignore obvious long-term rot. Politicians stand by and watch. In a great betrayal, the very leaders who should be fixing the system are complicit in its continuance. Unless our society reverses course, it is heading for a cataclysm. The solution to fundamental institutional failure goes beyond passing a few regulations or changing the behavior of a few CEOs. It involves changes in behavior in a whole set of institutions and actors: -- Change won’t happen merely by pointing out that shareholder primacy is a bad idea. Bad ideas don’t die just because they are bad. They hang around until a consensus forms around another idea that is better. Fortunately, a consensus is emerging around a better idea. The idea isn’t new. It’s Peter Drucker’s foundational insight of 1973: the only valid purpose of a firm is to create a customer. It’s through providing value to customers that firms justify their existence. Profits and share price increases are the result, not the goal of a firm’s activities
business  busisness-ethics  norms-business  corporate_governance  corporate_finance  investment  investors  management  financialization  finance_capital  capital_markets  inequality  1-percent  Drucker_Peter  Friedman_Milton  shareholder_value  profit 
august 2014 by dunnettreader
Alfred Marshall - Industry and Trade (Vol 2) [1919] | Google Books
Vol 2 appears to be available only as a commercial ebook (price c $4) - Vol 1 is a full Google Books copy added to my Google_Books library -- Vol 2 looks interesting in his treatment of the English economy from at least the Black Death -- remarks on "mercantilism" and the economic policies of the British government in the mid 18thC (following Adam Smith characterized as"bad" and "selfish") -- Though the bulk of his work was completed before the turn of the 20th century, the global ramifications of World War I prompted him to reconsider his theories on international economics, and in 1919 he published the two-volume Industry and Trade. Here, in Volume II, he discusses. . how monopolies and competition impact prices . trusts and cartels in the American and German economies . the decline of class differences and advantages in industrial systems . unions, co-opts, and business federations . and much more.
books  etexts  Google_Books  economic_history  British_history  UK_economy  Germany  Prussia  mercantilism  merchants  international_political_economy  international_economics  trading_companies  trade-policy  trade  trade-agreements  17thC  18thC  19thC  20thC  Industrial_Revolution  industrialization  German_unification  monopolies  corporations  corporate_finance  labor  Labor_markets  wages  unions  imperialism  empire-and_business  US_economy  protectionism  Hamilton  Smith  free_trade  laisser-faire  institutional_economics  institution-building  firms-theory  EF-add 
june 2014 by dunnettreader
Seth Ackerman - Piketty’s Fair-Weather Friends | Jacobin May 2014
Re Piketty not fitting in MIT-liberal economics -- Piketty “misreads the literature by conflating gross and net returns to capital,” Summers wrote. “I know of no study suggesting that measuring output in net terms, the elasticity of substitution is greater than 1, and I know of quite a few suggesting the contrary.” A reader at this point could be forgiven for feeling confused. Didn’t Piketty gather his own data? He did, of course. --As Piketty makes clear, those data — which he’s made freely available on the internet for anyone to check — are indeed “explained” by a net elasticity of 1.3-1.6, which would indicate an extremely weak force of diminishing returns to capital. Yet it’s also true that this figure is far higher than any found in the existing literature — probably more than twice as high as the highest typical estimates. -- Piketty’s estimate of the elasticity of substitution can’t really be compared with those in the literature. His is based on economy-wide data covering decades and centuries while estimates in the literature typically cover only a few years, and often just a few industries. Moreover, his pertain to all private wealth, while the literature focuses narrowly on production capital. -- But most importantly, given the flawed marginalist theory behind it, and its even more flawed basis of measurement... the elasticity of substitution simply cannot be regarded as a meaningful measure of an economy’s technology (or anything else), or as providing any clue to its future. What’s essential, rather, is Piketty’s empirical demonstration that the rate of return on wealth has been remarkably stable over centuries — and, contra Summers, with no visible tendency to vary in any consistent way against the “supply of capital.”
books  reviews  Piketty  economic_history  economic_theory  economic_models  macroeconomics  heterodox_economics  productivity  capital  labor  profit  wages  technology  economic_growth  savings  inheritance  1-percent  inequality  meritocracy  wealth  supermanagers  corporate_governance  corporate_finance  political_economy  economic_culture  economic_sociology  EF-add 
june 2014 by dunnettreader
Suresh Naidu - Capital Eats the World | Jacobin May 2014
A first step could be a multisector model with both a productive sector and an extractive, rent-seeking outlet for investment, so that the rate of return on capital has the potential to be unanchored from the growth of the economy. This model could potentially do a better job of explaining r > g in a world where capital has highly profitable opportunities in rent-seeking ....More fundamentally, a model that started with the financial and firm-level institutions underneath the supply and demand curves for capital, rather than blackboxing them in production and utility functions, could illuminate complementarities among the host of other political demands that would claw back the share taken by capital and lower the amount paid out as profits before the fiscal system gets its take. This is putting meat on what Brad Delong calls the “wedge” between the actual and warranted rate of profit. -- We need even more and even better economics to figure out which of these may get undone via market responses and which won’t, and to think about them jointly with the politics that make each feasible or not. While Piketty’s book diagnoses the problem of capital’s voracious appetite, it would require a different kind of model to take our focus off the nominal quantities registered by state fiscal systems, and instead onto the broader distribution of political power in the world economy.
books  reviews  kindle-available  Piketty  political_economy  economic_theory  heterodox_economics  neoclassical_economics  economic_models  economic_growth  wealth  capital  finance_capital  capitalism  labor  Labor_markets  unemployment  markets_in_everything  tax_havens  investment  investors  savings  inheritance  profit  corporate_governance  corporate_citizenship  inequality  technology  1-percent  rent-seeking  rentiers  class_conflict  oligarchy  taxes  productivity  corporate_finance  property  property_rights  neoliberalism 
june 2014 by dunnettreader
Martin Wolf - AstraZeneca is more than investors’ call - FT.com - May 8 2014
The questions any normal person would ask are three. Would a takeover increase competition? Would it increase investment in life-transforming research? Would assurances given by the bidder about future production and research be credible? The answer to all is “no”. Yet the merger is likely to go ahead, because the only people whose interests count are shareholders, whether they have owned their shares for 10 years or 10 seconds. AstraZeneca can be sold and bought like a sack of potatoes. Does this make sense? Until recently I believed it to be the least bad arrangement. Now I am not so sure, as I shall argue in a conference on Inclusive Capitalism in London later this month. We need to rethink ownership and control of limited liability companies
UK_Government  corporate_governance  corporate_finance  corporate_citizenship  shareholders  investors  Innovation  M&A  pharma  R&D 
may 2014 by dunnettreader
JW Mason - The Slack Wire: Wealth Distribution and the Puzzle of Germany - April 2014
In other words, one reason household wealth is low in Germany is because German households exercise their claims on the business sector not via financial assets, but as workers. -- It’s not a coincidence that Europe’s dominant economy has the least market wealth. The truth is, success in the world market has depended for a long time now on limiting dependence on asset markets, just as the most successful competitors within national economies are the giant corporations that suppress the market mechanism internally. Germany, as with late industrializers like Japan, Korea, and now China, has succeeded largely by ensuring that investment is not guided by market signals, but through active planning by banks and/or the state. There’s nothing new in the fact that greater real wealth in the sense of productive capacity goes hand hand with less wealth in the sense of claims on the social product capitalized into assets. Only in the poorest and most backward countries does a significant fraction of the claims of working people on the product take the form of asset ownership. The world of small farmers and self-employed artisans isn’t one we can, or should, return to. Perhaps the world of homeowners managing their own retirement savings isn’t one we can, or should, preserve.
economic_history  economic_growth  political_economy  20thC  21stC  development  wealth  inequality  investment  capital_markets  labor  wages  profit  SMEs  Germany  EU  corporate_governance  corporate_finance  working_class  EF-add 
may 2014 by dunnettreader
Determining Materiality | Sustainability Accounting Standards Board
SASB’s Materiality Map™ creates a unique materiality profile for different industries. In order to comply with the SEC’s view of materiality, our approach is designed to provide a view into the information needs of the reasonable investor. The Map relies heavily on evidence of investor interest and evidence of financial impact, and it allows for adjustments based on financial impact and long-term sustainability principles. The quantitative model is designed to prioritize the issues that are most important within an industry, to keep the standards to a minimum set of issues that are likely to be material. Sustainability accounting standards are then developed based on both the quantitative results from the Map and a qualitative research process informed by SASB’s research team. The Map looks at 40+ sustainability issues and analyzes their importance in the context of the 80+ industries in SICS. -- Issues are classified under five categories: Environmental Capital, Social Capital, Human Capital, Business Model & Innovation, and Leadership & Governance. Traditionally, sustainability issues are classified under the common ESG structure; however, SASB uses a finer grained analysis in order to surface potential impacts on the company’s ability to create long-term value.
financial_regulation  accountability  accounting  corporate_governance  corporate_finance  corporate_citizenship  CSR  risk  sustainability  climate  investment  capital_markets  industry 
may 2014 by dunnettreader
Vision and Mission | Sustainability Accounting Standards Board
Facts About SASB *--* The Sustainability Accounting Standards Board is an independent 501(c)3 non-profit. *--* Through 2016 SASB is developing sustainability accounting standards for more than 80 industries in 10 sectors. *--* SASB standards are designed for the disclosure of material sustainability issues in mandatory SEC filings, such as the Form 10-K and 20-F. -**- SASB is accredited to establish sustainability accounting standards by the American National Standards Institute (ANSI). Accreditation by ANSI signifies that SASB’s procedures to develop standards meet ANSI’s requirements for openness, balance, consensus, and due process. *--* SASB is not affiliated with FASB, GASB, IASB or any other accounting standards boards. --- For more information about the principles, processes and definitions relevant to SASB’s standards setting process, please read our Conceptual Framework. (Pdf downloaded to Note)
financial_regulation  accountability  accounting  corporate_governance  corporate_finance  corporate_citizenship  CSR  risk  sustainability  climate  investment  capital_markets  industry  downloaded  EF-add 
may 2014 by dunnettreader
An Insider’s Guide to The SASB Experience | Sustainability Accounting Standards Board - May 2014
After a year of research, stakeholder engagement, feedback and refinement, SASB celebrated the reveal of its latest research results with evocative discourse about the Services Industry and its role in non-financial reporting. With over 190 participants representing 120 companies, the May Delta Series, which is the research process capstone, brought together its Industry Working Group participants as well as other integral stakeholders, to discuss the outcomes of their sector-specific research. -- panelists discussed experience getting buy in from different parts of organization and Board -- how using the quarterly 10-K form provided a familiar focus for measurement and reporting -- links to CSR and risk management, not just profitability measures, were especially important for directors
financial_regulation  accountability  accounting  corporate_governance  corporate_finance  corporate_citizenship  CSR  risk  sustainability  climate  investment  capital_markets  industry 
may 2014 by dunnettreader
Heterodox Economics - Readings | HMiRN
Extensive list of books, chapters, journal articles, periodically updated since 2011 -- Contents --
1. History and Methodology of Heterodox Microeconomics
2. Critiques of Mainstream Microeconomics
3. Principles of Heterodox Microeconomic Theory
4. Theory of the Business Enterprise
5. Structure of Production and Costs of the Business Enterprise
6. Costing, Pricing, and Prices
7. Investment, Finance, and Employment
8. Households, Consumption, and Market Demand
9. Industry and Market
10. Competition
11. Corporate Governance, Market Governance, and Market Regulation
12. Social Welfare
13. Heterodox Microfoundations and Modeling the Economy
bibliography  economic_theory  economic_history  economic_models  economic_sociology  firms-theory  Labor_markets  capital  corporate_governance  corporate_finance  M&A  regulation  consumers  consumer_demand  monopolies  finance_capital  taxes  competition  investment  prices  wages  heterodox_economics  microeconomics  macroeconomics  neoclassical_economics  EF-add 
february 2014 by dunnettreader
A Multiple Network Approach to Corporate Governance - Fausto Bonacina, Marco D'Errico, Enrico Moretto, Silvana Stefani, Anna Torriero (Submitted on 17 Jan 2014)
A Multiple Network Approach to Corporate Governance
Fausto Bonacina, Marco D'Errico, Enrico Moretto, Silvana Stefani, Anna Torriero
(Submitted on 17 Jan 2014)

In this work, we consider Corporate Governance ties among companies from a multiple network perspective. Such a structurenaturally arises from the close interrelation between the Shareholding Network and the Board of Directors network. Inorder to capture the simultaneous effects on both networks on Corporate Governance, we propose to model the Corporate Governance multiple network structure via tensor analysis. In particular, we consider the TOPHITS model, based on the PARAFAC tensor decomposition, to show that tensor techniques can be successfully applied in this context. After providing some empirical results from the Italian financial market in the univariate case, we will show that a tensor-based multiple network approach can reveal important information. -- downloaded pdf to Note -- interesting discussion of how to analyze networks where edges may represent multiple types of relations, how to adjust weights, how centrality emerges etc
paper  arxiv  corporate_governance  corporate_finance  shareholders  management  networks  networks-business  firms-theory  Italy  downloaded  EF-add 
january 2014 by dunnettreader
Why free markets die: An evolutionary perspective - Eduardo Viegas, Stuart P. Cockburn, Henrik Jeldtoft Jensen, Geoffrey B. West -Jan 2014
Why free markets die: An evolutionary perspective -- Eduardo Viegas, Stuart P. Cockburn, Henrik Jeldtoft Jensen, Geoffrey B. West (Submitted on 21 Jan 2014) -- downloaded pdf to Note -- Company mergers and acquisitions are often perceived to act as catalysts for corporate growth in free markets systems: it is conventional wisdom that those activities lead to better and more efficient markets. However, the broad adoption of this perception into corporate strategy is prone to result in a less diverse and more unstable environment, dominated by either very large or very small niche entities. We show here that ancestry, i.e. the cumulative history of mergers, is the key characteristic that encapsulates the diverse range of drivers behind mergers and acquisitions, across a range of industries and geographies. A long-term growth analysis reveals that entities which have been party to fewer mergers tend to grow faster than more highly acquisitive businesses.
paper  arxiv  business  firms-theory  M&A  corporate_finance  corporate_governance  downloaded  EF-add 
january 2014 by dunnettreader
Valuing Private Equity - Morten Sorensen, Neng Wang, Jinqiang Yang | NBER Nov 2013
NBER Working Paper No. 19612
Issued in November 2013 -- downloaded pdf to Note

We investigate whether the performance of Private Equity (PE) investments is sufficient to compensate investors (LPs) for risk, long-term illiquidity, management and incentive fees charged by the general partner (GP). We analyze the LP's portfolio-choice problem and find that management fees, carried interest and illiquidity are costly, and GPs must generate substantial alpha to compensate LPs for bearing these costs. Debt is cheap and reduces these costs, potentially explaining the high leverage of buyout transactions. Conventional interpretations of PE performance measures appear optimistic. On average, LPs may just break even, net of management fees, carry, risk, and costs of illiquidity.
financial_system  financial_innovation  finance_capital  investment  risk  profit  equity  Innovation  corporate_finance  leverage  downloaded  EF-add 
november 2013 by dunnettreader
Daniel Little Why the corporation? « Understanding Society Sept 2012
Recently I posted about C. Wright Mills and his analysis of power elites in America (post). A major theme in Mills’s book is the new power associated with the American corporation following World War II. Charles Perrow’s Organizing America: Wealth, Power, and the Origins of Corporate Capitalism (2002) offers an historical account of how this system of power came into being. Perrow is a historical sociologist, and he focuses his analysis on the structural features of the organizations he considers; the historical and social factors that favored the emergence of these kinds of organizations; and the role that they now play within the complex social and political system of modern America.
books  kindle-available  reviews  economic_history  social_history  US_economy  US_politics  US_history  19thC  20thC  business  corporate_governance  corporate_finance  capitalism  capital  firms-theory  organizations  profit  infrastructure  historical_sociology  political_economy  EF-add 
november 2013 by dunnettreader
Eileen Appelbaum, Rose Batt, Ian Clark - Financial Capitalism and Employment Relations: Evidence from Breach of Trust and Implicit Contracts in Private Equity Buyouts - 2013 - | Wiley Online Library
British Journal of Industrial Relations
Across Boundaries: The Global Challenges Facing Workers and Employment Research 50th Anniversary Special Issue
Volume 51, Issue 3, pages 498–518, September 2

An increasing share of the economy is organized around financial capitalism, where capital market actors actively manage their claims on wealth creation and distribution to maximize shareholder value. Drawing on four case studies of private equity buyouts, we challenge agency theory interpretations that they are ‘welfare neutral’ and show that an alternative source of shareholder value is breach of trust and implicit contracts. We show why management and employment relations scholars need to investigate the mechanisms of financial capitalism to provide a more accurate analysis of the emergence of new forms of class relations and to help us move beyond the limits of the varieties of capitalism approach to comparative institutional analysis.
article  Wiley  21stC  finance_capital  financialization  private_equity  firms-theory  corporate_governance  corporate_finance  Labor_markets  labor 
september 2013 by dunnettreader
Financial Innovation: The Bright and the Dark Sides by Thorsten Beck, Tao Chen, Chen Lin, Frank M. Song :: SSRN October 2012
Beck, Thorsten and Chen, Tao and Lin, Chen and Song, Frank M., Financial Innovation: The Bright and the Dark Sides (January 25, 2012). Available at SSRN: http://ssrn.com/abstract=1991216 or http://dx.doi.org/10.2139/ssrn.1991216 -- Date posted: January 25, 2012 ; Last revised: October 7, 2012 -- downloaded pdf to Note -- The financial turmoil from 2007 onwards has spurred renewed debates on the “bright” and “dark” sides of financial innovation. Using bank-, industry- and country-level data for 32, mostly high-income, countries between 1996 and 2006, this paper is the first to explicitly assess the relationship between financial innovation in the banking sector and (i) real sector growth, (ii) real sector volatility, and (iii) bank fragility. We find evidence for both bright and dark sides of financial innovation. On the one hand, we find that a higher level of financial innovation is associated with a stronger relationship between a country’s growth opportunities and capital and GDP per capita growth and with higher growth rates in industries that rely more on external financing and depend more on innovation. On the other hand, we find that financial innovation is associated with higher growth volatility among industries more dependent on external financing and on innovation and with higher idiosyncratic bank fragility, higher bank profit volatility and higher bank losses during the recent crisis.

Number of Pages in PDF File: 69

Keywords: Financial Innovation, Financial R&D Intensity, Bank Risk Taking, Financial Crisis, Industrial Growth, Finance and Growth
paper  SSRN  financial_system  financial_innovation  economic_growth  development  risk  banking  capital_markets  financial_regulation  financial_crisis  financialization  Innovation  industry  corporate_finance  downloaded  EF-add 
september 2013 by dunnettreader

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