Optimal ownership structure is an important issue in corporate governance debates. This study uses piece-wise regression analysis to examine the impact of ownership structure on the risk of CEO compensation. We show that when the CEO and the board of directors control low levels of voting stock (i.e., below 13% of total shares) increases in ownership are positively related to CEO compensation risk. For ownership levels above 13% but below 22%, increases in ownership are negatively related to CEO compensation risk. This evidence provides a partial explanation for the non-monotonic relationship between Tobin's Q and management ownership observed by Morck et al. (1988) [Morck, R., Shleifer, A., Vishny, R., 1988. Management ownership and market valuation: an empirical analysis, Journal of Financial Economics 20 (1988) 293–316.].

An active market for corporate control has prompted corporate managers to lobby for measures that protect their positions. It has been argued that corporate managements have worked to entrench themselves at the expense of outside shareholders and have pressured institutional investors (including banks) to vote on corporate matters in a manner supportive of managements' proposals. One source of potential pressure arises when bank fiduciaries manage employee savings plans, pension funds, and engage in other fee generating corporate trust activities for firms whose shares they vote. In addition, banks often extend commercial credit to firms whose shares the trust division votes. Finally, director interlock between banks and corporations is likely to bias voting behavior. Fiduciary loyalty may be compromised by bankers' concern that failure to support management can threaten business relationships. The objective of this study is to investigate the effects of conflicting relationships on the voting behavior of banks as fiduciaries. The empirical results indicate that where director interlock and income-related relationships exist, banks tend to vote in favor of management antitakeover proposals; however, where these business relationships do not exist banks tend to vote against such proposals.

Some argue that managers effectively control corporate voting: hence the process is meaningless. Others contend that shareholder voting motivates managers to maximize firm value. We provide evidence on this debate by analyzing the results from a large sample of management-sponsored anti-takeover amendments. Our results do not support the extreme form of either hypothesis. The evidence suggests that shareholder voting is important and indicates the circumstances where voting is most likely to constrain managers. Our results also have implications for the use of voting in political and other non-corporate contexts.

This paper investigates whether gender-diverse bank boards can play a role in preventing costly misconduct episodes. We exploit the fines received by European banks from US regulators to reduce endogeneity issues related to supervisory and governance mechanisms. We show that greater female representation significantly reduces the frequency of misconduct fines, equivalent to savings of $7.48 million per year. Female directors are more influential when they reach a critical mass and are supported by women in leadership roles. The mechanism through which gender diversity affects board effectiveness in preventing misconduct stems from the ethicality and risk aversion of the female directors, rather than their contribution to diversity. The findings are robust to alternative model specifications, proxies for gender diversity, reverse causality, country and bank controls, and sub-sample analyses.

Signaling undervaluation is often considered a primary motive for repurchasing stock, but insider trading activity by repurchasing firms is not always consistent with undervaluation. Net insider buying and selling are both more frequent in quarters when firms are repurchasing non-trivial amounts of stock, with the odds of observing a repurchase the highest in quarters with net insider selling. In multinomial logit models, share repurchases associated with net insider selling are positively related to illiquidity, option exercises by insiders, and pre-repurchase returns and negatively correlated with industry-adjusted book to market ratios when compared to other repurchases. Hence, repurchases when insiders are selling stock are more likely done to support share prices or avoid dilution and are less likely undervaluation signals. We find that insider trades either validate or mitigate the undervaluation signal of the repurchase. Abnormal returns of repurchasing firms with net insider buying versus net insider selling in a given quarter are significantly higher for the quarter immediately after the repurchase and the three subsequent years. For repurchases accompanied by net insider selling, abnormal returns are negligible after only one year.

We investigate termination fee size in mergers. Although the deal premium does not significantly affect fee size, smaller targets and targets with lower institutional ownership offer larger fees. Low or moderate fees do not eliminate post-announcement competing bids, while large fees do. Fee size is generally positively correlated with deal completion. However, large fees are negatively correlated with the consummation of high-premium deals. Fee size is generally unrelated to announcement-date cumulative abnormal returns. However, returns are significantly lower for deals including fees larger than 5%. Overall, the study provides evidence that low- or moderate-size fees serve as efficient contractual devices, while large fees are less beneficial to shareholders and therefore tend to suggest agency conflicts.

We analyze the influence of firm and managerial characteristics on executive compensation. Consistent with theory, we find monitoring difficulties result in greater use of options while CEO and blockholder ownership result in less. Risky investment is positively related to options and negatively related to cash bonus and restricted stock, suggesting that firms use options to encourage managers to take risks. We find a negative (positive) relation between options and leverage (convertible debt) consistent with minimizing the agency costs of debt. Finally, we provide new evidence on managerial horizon and incentives, documenting a concave relation between cash bonus and CEO age.

This study focuses on changes in incentives at the William E. Simon Graduate School of Business Administration in the early 1990s to redirect effort from academic research to classroom teaching. We find a substantial and almost immediate jump in teaching ratings following the changes in incentives. Longer-run learning and turnover effects are present. Evidence also suggests that research output fell. This case illustrates the power of organizational incentives to redirect effort in a multitask environment, even in the presence of apparent human–capital constraints.

This paper analyses the determinants of venture capital for a sample of 21 countries. In particular, we consider the importance of initial public offerings (IPOs), gross domestic product (GDP) and market capitalization growth, labor market rigidities, accounting standards, private pension funds, and government programs. We find that IPOs are the strongest driver of venture capital investing. Private pension fund levels are a significant determinant over time but not across countries. Surprisingly, GDP and market capitalization growth are not significant. Government policies can have a strong impact, both by setting the regulatory stage, and by galvanizing investment during downturns. Finally, we also show that different types of venture capital financing are affected differently by these factors. In particular, early stage venture capital investing is negatively impacted by labor market rigidities, while later stage is not. IPOs have no effect on early stage venture capital investing across countries, but are a significant determinant of later stage venture capital investing across countries. Finally, government funded venture capital has different sensitivities to the determinants of venture capital than non-government funded venture capital. Our insights emphasize the need for a more differentiated approach to venture capital, both from a research as well as from a policy perspective. We feel that while later stage venture capital investing is well understood, early stage and government funded investments still require more extensive research.

We examine the relationship between ownership structure and corporate crime. Our approach draws upon two lines of research: (1) the theory of the firm which poses ownership as a critical incentive mechanism and (2) the economic theory of corporate crime, which emphasizes the role played by top management in affecting crime in the corporation. We find that crime occurs less frequently among firms in which management has a larger ownership stake. Our results imply that penalizing `corporations' (shareholders) deters crime, and that corporate crime tends not to benefit shareholders, ex ante. Rather than being something shareholders have encouraged, corporate crime appears to reflect an agency cost limited but not optimally eliminated through the costly efforts of top management. The evidence is consistent with the notion that ownership structure plays an important role in aligning the hidden actions of top management with the shareholder interest.