Shareholder valuations are economically and statistically positively correlated with independent directors? power, gauged by social network power centrality. Powerful independent directors? sudden deaths reduce shareholder value significantly; other independent directors? deaths do not. More powerful independent directors Granger cause higher valuations; the converse is not true.
Further tests associate more powerful independent directors with less value-destroying M&A, less free cash flow retention, more CEO accountability, and less earnings management. We posit that more powerful independent directors better detect and counter CEO missteps because of better access to information, greater credibility in challenging errant top managers, or both.
We develop a model of financial media in which some investors only observe firm announcements that are covered by journalists. The introduction of journalists induces more informed trading by readers, but inadvertently incentivizes the manager to...Read more
This paper provides a brief assessment of how ethics, culture and corporate governance have evolved in banking since the financial crisis. It concludes that we need to strengthen capital ratios and equity governance in banking to improve ethics...Read more
This article surveys the recent literature on boards of directors and the interplay between director incentives and CEO incentives. The primary focus is on how the incentives and other characteristics of directors, boards and CEOs interact to...Read more
The last decade has challenged the paradigm of the hedge fund industry as a unique performer. We identify three main factors that have affected the operation of hedge funds: competition from mutual funds, the market environment, and tighter...Read more