Global Corporate Governance Colloquia (GCGC) 2016
- 10 - 11 June 2016
- Stockholm, Sweden
The aim of the conference series is to attract current research papers of the highest scholarly quality in the field of corporate governance. The conferences are primarily ‘academic to academic’ events with some participants from industry and the public sector including the practitioner partners of GCGC and other invited panelists. The current practitioner partners are the European Investment Bank (EIB), Zurich Insurance Group, and Japan Exchange Group (JPX).
Attendance at this event was by invitation only. Researchers were invited to submit recent papers or extended abstracts and selected papers were presented at the conference. In addition, there were two panel discussions involving participants from industry and the public sector.
10 June - Day 1
Registration & coffee
Introduction - Conference Chairman: Professor Mike Burkart
Session 1: Contracts - Session Chairman: Professor Mike Burkart
Commitment And Entrenchment In Corporate Governance
Commitment And Entrenchment In Corporate Governance
Over the past twenty years, a growing number of empirical studies have provided evidence that governance arrangements protecting incumbents from removal promote managerial entrenchment, reducing firm value. As a result of these studies, “good” corporate governance is widely understood today as being about stronger shareholder rights.
This Article rebuts this view, presenting new empirical evidence that challenges the results of prior studies and developing a novel theoretical account of what really matters in corporate governance. Employing a unique dataset that spans from 1978 to 2008, we document that protective arrangements that require shareholder approval—such as staggered boards and supermajority requirements to modify the charter—are associated with increased firm value. Conversely, protective arrangements that do not require shareholder approval—such as poison pills and golden parachutes—are associated with decreased firm value. This evidence suggests that limiting shareholder rights serves a constructive governance function as long as the limits are the result of mutual agreement between the board and shareholders. We argue that this function commits shareholders to preserve a board’s authority to exploit competitive private information and pursue long-term wealth maximization strategies.
By documenting that committing shareholders to the longer-term matters as much as, if not more than, reducing entrenchment for good corporate governance, our analysis sheds much needed light on issues such as the optimal allocation of power between boards and shareholders, managerial accountability, and stakeholder interests. We conclude by outlining the implications of our analysis concerning the direction corporate governance policies ought to take.
Contracts versus Institutions: A Critique of Corporate Governance Theory
While there is no accompanying paper to this presentation, this critique of Corporate Governance theory focuses on some of the following headings:
Introduction: What has been Happening?
Carl Fürstenberg‘s view
Conventional Economics: Contract Theory and Governance
The Conventional Approach to Corporate Governance
Contract Theory and Governance
A Real World Example: Union Bank of Switzerland
A management-focussed interpretation
Why then the Ascendancy of “Market Discipline“
Why in the nineties?
Does it Matter? Challenges for Economic Theory
Challenges for Descriptive Analysis
Implications for Investment Allocations
The role of permanence
Mechanisms of governance
The Politics of Corporate Governance
Session 2: Takeover Defenses - Session Chairman: Professor Bala Dharan
Price and Probability: Decomposing the Takeover Effects of Anti-Takeover Provisions
This paper decomposes the expected takeover premium from adopting an anti-takeover provision into three components (a causal effect on the takeover probability; a causal effect on the premium paid; and a selection effect) and provides causal evidence on each of those, thus being able to ascertain the contribution of each to shareholder value creation from takeovers.
Using data on shareholder-sponsored proposals to remove an anti-takeover provision voted on in annual meetings of S&P 1500 firms between 1994 and 2013, we extend the regression discontinuity design using the approach in Angrist and Rokkanen (2014) to provide causal estimates that do not rely only on firms around the discontinuity. In order to account for selection in observed mergers we estimate sharp bounds for the causal effect of anti-takeover provisions on the takeover premium (Lee, 2009).
For an average firm, voting to remove an anti-takeover provision leads to a 4.5% higher probability of being taken over and a 2.8% higher expected unconditional takeover premium. We also find evidence that increased competition in takeover contests is one driver of the estimated increased premium for firms that remove an anti-takeover provision. Finally, we show that 53% of the shareholder gains come from the increased probability of a takeover, with also significant shares for selection and premium effects.