Tag Archives: Corporate Governance

The Pollution Premium

By | September 22, 2022

While industrial pollution is widespread in the modern world and affects everyone’s life, whether it influences the returns on stock investors is an important yet underexplored issue. In our recent paper, we attempt to examine why and how industrial pollution affects expected stock returns using both modeling and empirical approaches. Polluting firms may save costs… Read More »

Abnormal Investment and Firm Performance

By | September 15, 2022

In an efficient capital market, firms with better future growth options usually have higher equity valuation. To exercise these growth options, firms with a higher market valuation should have a lower payout ratio and invest more on projects with positive net present value (NPV). However, one study indicates a negative correlation between capital expenditures and… Read More »

The Role of Employees as Information Intermediaries: Evidence From Their Professional Connections

By | September 14, 2022

Information intermediaries provide or transmit useful information to other parties in the capital market, either because (i) it has not been publicly released, or (ii) it has not been widely disseminated. Therefore, information intermediaries influence a firm’s information environment. For example, institutional investors and analysts help incorporate more earnings-related information into prices during the pre-announcement… Read More »

Blockholder and CEO Wealth-Performance Sensitivity

By | September 12, 2022

Firm owners do not run the firm. Instead, they delegate the job to managers with expertise. Such delegation inevitably gives rise to the misalignment of interests between the firm owners and managers, as the latter do not share the benefits of the firm’s success as much. Shareholders, who are the firm owners, thus need to… Read More »

Williamson v. Tucker – A 2022 Interpretation From Colorado

By | August 29, 2022

Williamson v. Tucker, 645 F.2d 404 (5th Cir. 1981) (referred to herein as “Williamson”) stands for the proposition that owner’s interests in joint ventures organized as general partnerships where the general partners participate in the management of the assets involved should not be treated as “securities” for regulation under federal and state law. Many courts… Read More »

Climate-Related Uncertainty and Managerial Short-Termism

By | August 12, 2022

In a new study, we examine whether climate-related uncertainty leads to increased managerial short-termism. “Climate-related uncertainty” refers to managers’ inability to predict the scale and costs of climate change on their firm’s operating environment. Managers, policy makers, and institutional investors have all expressed increased concern about climate-related uncertainty, especially uncertainty stemming from exposure to natural… Read More »

The Effect of Financial Reporting on Strategic Investments: Evidence from Purchase Obligations 

By | August 11, 2022

Firms make investments to increase their future profits because they help reduce production costs, increase capacity, or upgrade their products or services. However, firms do not always make investments to improve production efficiency or customer demand. They often make investments to strategically influence competitors’ behavior. Due to their costly-to-reverse and time-bound nature, investments signal credible… Read More »

Can Increased Competition Among Audit Firms Harm Audit Quality? 

By | July 28, 2022

Understanding how audit market competition affects audit quality is of significant interest to academics, practitioners, and regulators, with important capital market and policy implications. Regulators around the world have expressed concerns that companies have too few choices in the audit market and believe that the lack of choice is resulting in low competition. As a… Read More »

Acquirer Mispricing and Payment Choices 

By | July 22, 2022

Are bidders in mergers and acquisitions (M&A) able to exploit their overvaluation by using overpriced shares as acquisition currency? The question has been debated within the financial economics literature since Shleifer and Vishny (2003) and Rhodes-Kropf and Viswanathan (2004) put forth theories suggesting that misvaluation drives the payment method in M&A deals. These seminal papers… Read More »