This study is the first to link managerial turnover to mutual fund managerial structure in a manner that indicates the strong presence of a conflict of interests between investors and fund sponsors in an area of fund governance where we have been led to believe there are strong and well-functioning mechanisms to guard against the exploitation of investors. I utilize the unique characteristics of mutual funds where managers sometimes manage multiple “firms” simultaneously, something not generally observed in industrial firms. I test the governance mechanisms using the mutual fund complexes management structure; unitary and multiple fund management (UFM and MFM). This study shows that UFMs tend to have higher asset growth rates and higher fees than MFMs, suggesting that sponsors can benefit more from keeping them intact. I find that changing managers under the UFM is more costly to sponsors making them more reluctant to fire poor performers. I document that underperforming UFM are −2.77% less likely to be replaced than their underperforming MFM counterparts. In addition, the conflict of interests affect the replacement decision, as high expense ratio fund managers have a lower probability of replacement for a given level of underperformance.

Companies are sometimes accused of misleading the market. The SEC can punish this with enforcement actions. Alternatively, shareholders can seek redress through a shareholder class action (SCA). Thus, using a sample of 416 securities class actions, this paper shows that SCAs are a catalyst to promote disciplinary takeovers, CEO turnover and pay-cuts, and harm CEOs’ future job-prospects.

In their investigation of UK auditors that voluntarily switch from unlimited to limited liability, Lennox and Li (in this volume, The consequences of protecting audit partners' personal assets from the threat of liability. Journal of Accounting and Economics) provide new insights into a fundamental issue related to audit quality. This discussion attempts to place Lennox-Li into the broader auditing literature and to consider what we learn from their analysis.

The employment to population rate of high school–aged youth has fallen by about 20 percentage points since the late 1980s. One potential explanation is increased competition from substitutable labor, such as immigrants. I demonstrate that the increase in the population of less educated immigrants has had a considerably more negative effect on employment outcomes for native youth than for native adults. At least two factors are at work: there is greater overlap between the jobs that youth and less educated adult immigrants traditionally do, and youth labor supply appears more responsive to immigration-induced wage changes.

[This article establishes a role for corporate governance regulation. An externality operating through executive compensation motivates regulation. Governance lowers agency costs, allowing firms to grant less incentive pay. When a firm increases governance and lowers incentive pay, other firms can also lower executive compensation. Because firms do not internalize the full benefit of governance, regulation can improve investor welfare. When regulation is enforced, large firms increase in value, small firms decrease in value, and all firms lower incentive pay. Distinct cross-sectional and cross-country predictions for the number of voluntary governance firms are provided.]

This study uses a unique institutional setting in China to investigate empirically the association between the organizational form of CPA firms (unlimited liability versus limited liability) and the reporting conservatism of auditors. Based on a sample of 5,007 audits of Chinese listed companies from the period of 2000 to 2004, we find that auditors in unlimited liability partnership firms are more likely to issue modified audit opinions than are auditors in limited liability CPA firms. This auditor conservatism stems from distressed firms with going-concern opinions, and we find no statistical evidence that partnerships give more modified opinions for non-distressed firms. In addition, auditors are less likely to issue modified reports after they incorporated the firm in the limited liability form. These analyses support our hypothesis that a limited liability regime induces lower auditor reporting conservatism. Our study contributes to the broader debate on liability reform in the auditing profession.

By signing a Shareholder Tender Agreement (STA) a shareholder pre-commits to tender her shares to a particular bidder, forsaking the right to tender to any subsequent bidder. In a representative sample of tender offers between 1995 and 2010, 60% of the offers contain an STA. STA deals are associated with lower premiums, greater ownership concentration, greater management ownership, and greater information asymmetry. The results support the hypothesis that STAs certify value to uninformed shareholders, thereby increasing the efficiency of the tender offer process. The evidence does not support the view that STAs expropriate value from shareholders of target companies.

[This article investigates the out-of-sample predictability of bond excess returns. We assess the economic value of the forecasting ability of empirical models based on longterm forward interest rates in a dynamic asset allocation strategy. The results show that the information content of forward rates does not generate systematic economic value to investors. Indeed, these models do not outperform the no-predictability benchmark. Furthermore, their relative performance deteriorates over time.]

Why is it difficult to restructure sovereign debt in a timely manner? In this paper, we present a theory of the sovereign debt-restructuring process in which delay arises as individual creditors hold up a settlement in order to extract greater payments from the sovereign. We then use the theory to analyse recent policy proposals aimed at ensuring equal repayment of creditor claims. Strikingly, we show that such collective action policies may increase delay by encouraging free riding on negotiation costs, even while preventing hold-up and reducing total negotiation costs. A calibrated version of the model can account for observed delays and finds that free riding is quantitatively relevant: whereas in simple low-cost debt-restructuring operations, collective mechanisms will reduce delay by more than 60%, in high-cost complicated restructurings, the adoption of such mechanisms results in a doubling of delay.