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CFGE-6: Ownership and governance
Why are firms with more managerial ownership worth less?
1EPFL, Switzerland; 2Ohio State University; 3Babson College
Using more than 50,000 firm-years from 1988 to 2015, we show that the empirical relation between a firm’s Tobin’s q and managerial ownership is systematically negative. When we restrict our sample to larger firms as in the prior literature, our findings are consistent with the literature, showing that there is an increasing and concave relation between q and managerial ownership. We show that these seemingly contradictory results are explained by cumulative past performance and liquidity. Better performing firms have more liquid equity, which enables insiders to more easily sell shares after the IPO, and they also have a higher Tobin’s q.
Corporate Capture of Blockchain Governance
1London School of Economics; 2Hong Kong University; 3Queen Mary University of London
We develop a theory of blockchain governance. In our model, the proof-of-work system, which is the most common set of rules for validating transactions in blockchains, creates an industrial ecosystem with specialized suppliers of goods and services. We analyze the two-way interactions between blockchain governance and the market structure of the industries in the blockchain ecosystem. Our main result is that the proof-of-work system leads to a situation where the governance of the blockchain is captured by a large firm.
Does corporate governance impact equity volatility? Theory and worldwide evidence
1Queen's University, Canada; 2HEC Montreal
This paper studies the impact of corporate governance on equity volatility. We develop a cor- porate finance model with endogenous financing policies and manager-shareholder agency conflicts. Stronger corporate governance boosts asset valuation and the optimal debt level, but the valuation effect reduces equity volatility more than the additional debt increases it. Thus, equity volatility drops with corporate governance improvements, especially for firms that are financially riskier and more constrained. We confirm our theoretical predictions with a difference-in-difference specifica- tion exploiting the staggered passage of corporate governance reforms on a sample of 33,831 firms from 48 countries over the 1990-2016 period.
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