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The Latest Research in Corporate Governance: Finance. Joseph K. Tanimura, Ph.D., J.D. Top-Tier Finance Journals. Journal of Business Journal of Finance Journal of Financial and Quantitative Analysis Journal of Financial Economics Review of Financial Studies. Current Areas of Research.

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top tier finance journals
Top-Tier Finance Journals
  • Journal of Business
  • Journal of Finance
  • Journal of Financial and Quantitative Analysis
  • Journal of Financial Economics
  • Review of Financial Studies
current areas of research
Current Areas of Research
  • Litigation and corporate governance
  • Firm performance and corporate governance
  • Responses to bad acquisition bids
  • Cash holdings and corporate governance
  • Labor and corporate governance
  • Determinants of corporate governance
litigation and corporate governance
Litigation and Corporate Governance
  • Class-action lawsuits
    • There is broad agreement that financial fraud leads to significant valuation losses for investors
    • What is the role of reputation in the market for directorships as an incentive mechanism for monitoring fraudulent behavior?
class action lawsuits
Class-Action Lawsuits
  • Fich, Eliezer M. and Anil Shivdasani, 2007. Financial Fraud, Director Reputation, and Shareholder Wealth
  • Primary findings
    • Following a financial fraud lawsuit, outside directors do not face abnormal turnover on the board of the sued firm
    • However, they experience a significant decline in the number of other board seats held
class action lawsuits cont
Class-Action Lawsuits (cont.)
  • Helland, Eric, 2006. Reputational Penalties and the Merits of Class-Action Securities Litigation
  • Primary findings
    • There is little evidence of a negative effect associated with allegations of fraud
    • Only in shareholder class actions in the top quartile of settlements, or in which the SEC has initiated a case, do directors appear to suffer a reputational penalty when a board they serve on is accused of fraud
litigation and corporate governance7
Litigation and Corporate Governance
  • SEC and DOJ enforcement actions
    • There is broad agreement that financial fraud leads to significant valuation losses for investors
    • Do managers suffer personal consequences for cooking the books?
sec and doj enforcement actions
SEC and DOJ Enforcement Actions
  • Karpoff, Jonathan M., D. Scott Lee and Gerald S. Martin, 2007. The Consequences to Managers for Financial Misrepresentation
  • Primary findings
    • Most lose their jobs
    • Culpable managers bear substantial financial losses through restrictions on their future employment and SEC fines
    • A sizeable majority face criminal charges and penalties
litigation and corporate governance9
Litigation and Corporate Governance
  • Derivative lawsuits
    • Many legal commentators question whether derivative lawsuits serve a useful purpose
    • Do they have positive effects on corporate governance?
derivative lawsuits
Derivative Lawsuits
  • Ferris, Stephen P., Tomas Jandik, Robert M. Lawless and Anil Makhija, 2007. Derivative Lawsuits as a Corporate Governance Mechanism: Empirical Evidence on Board Changes Surrounding Filings
  • Primary findings
    • Proportion of outside representation on the board increases after a derivative lawsuit
    • Outside representation increases by 6% for successful and by 2% for unsuccessful suits
firm performance and corporate governance
Firm Performance and Corporate Governance
  • Operating performance
    • Is stronger corporate governance associated with higher operating performance?
    • What are the different ways in which to measure corporate governance?
operating performance
Operating Performance
  • Fich, Eliezer M. and Anil Shivdasani, 2006. Are Busy Boards Effective Monitors?
  • Primary findings
    • Firms with busy boards exhibit lower operating performance
    • A significant relation between performance and CEO turnover exists only when a majority of board members are not regarded as busy
operating performance cont
Operating Performance (cont.)
  • Dahya, Jay and John J. McConnell, 2007. Board Composition, Corporate Performance, and the Cadbury Committee Recommendation
  • Primary findings
    • Compliance with the Cadbury Report results in an increase in operating performance
operating performance cont14
Operating Performance (cont.)
  • Core, John E., Wayne R. Guay, and Tjomme Rusticus, 2006. Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors’ Expectations
  • Primary findings
    • Weak shareholder rights are associated with poor operating performance
firm performance and corporate governance15
Firm Performance and Corporate Governance
  • Stock price effects
    • How does the market react to changes in firms’ corporate governance?
    • Does the market forecast the difference in operating performance based on differences in corporate governance?
stock returns event studies
Stock Returns – Event Studies
  • Fich, Eliezer M. and Anil Shivdasani, 2006.
  • Primary findings
    • The departure of a busy outside director that leaves a majority of the remaining outside board members as non-busy leads to an average abnormal return of 2.2%
stock returns event studies cont
Stock Returns – Event Studies (cont.)
  • Dahya, Jay and John J. McConnell, 2007.
  • Primary findings
    • Instances in which companies with fewer than three outside directors announced the addition of enough to get over three are accompanied by a 2-day abnormal return of 0.44%
stock returns market efficiency
Stock Returns – Market Efficiency
  • Core, John E., Wayne R. Guay, and Tjomme Rusticus, 2006.
  • Primary findings
    • Weak shareholder rights are associated with poor operating performance
    • However, analysts’ forecast errors and earnings announcement returns show no evidence that this underperformance surprises the market
responses to bad acquisition bids
Responses to Bad Acquisition Bids
  • CEO turnover
    • Several studies document a relation between firm performance and CEO turnover
    • Does corporate governance affect the relation between bidder returns and the probability of CEO turnover in acquiring firms?
ceo turnover
CEO Turnover
  • Lehn, Kenneth M. and Mengxin Zhao, 2006. CEO Turnover after Acquisitions: Are Bad Bidders Fired?
  • Primary findings
    • An inverse relation exists between bidder returns and the likelihood of CEO turnover
    • However, this relation is not associated with governance structure
responses to bad acquisition bids21
Responses to Bad Acquisition Bids
  • Corrective action
    • Results of existing studies suggest that investors believe that independent boards are good for them
    • Does corporate governance influence the decision to complete value-decreasing bids or to initiate asset restructuring following completed bids?
corrective action
Corrective Action
  • Paul, Donna L., 2007. Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids
  • Primary findings
    • Firms with independent boards are less likely to complete value-decreasing bids
    • Board independence is also associated with unusually high frequencies of asset restructuring for bids that are completed
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