Between 1993 and 2000, at least 18 countries saw publication of guidelines proposing minimum representation of outside directors on corporate boards. Underlying this movement is an apparent presumption that boards with significant outside directors will make different and, perhaps, better decisions than boards dominated by insiders. As the first-mover in this movement, the United Kingdom provides a laboratory for a “natural experiment” to examine this presumption empirically. We find that UK boards that complied with the exogenously imposed standard were more likely to appoint outside chief executive officers (CEOs). Additionally, announcement period stock returns indicate that investors appear to view appointments of outside CEOs as good news. Apparently, boards with more outside directors make different (and perhaps better) decisions.

This study analyzes corporate expenditures for property, plant and equipment (PP&E), and research and development (R&D) for over 2500 US firms from 1988 to 1994. We find no support for the contention that institutional investors cause corporate managers to behave myopically. Indeed, we document a positive relation between industry-adjusted expenditures for PP&E and R&D and the fraction of shares owned by institutional investors. This relation is robust to a variety of empirical tests, including those that account for endogeneity between institutional ownership and firm-level discretionary expenditures.

This paper is an in-depth investigation of 61 publicly-traded firms that chose to liquidate voluntarily on a piecemeal basis during the 1970s and 1980s. In comparison with their industry peers, these firms have lower Tobin's Q, a higher percentage of equity ownership by management and the board, a higher incidence of a member of the corporation's founding family in a key executive position or on the board, and a higher incidence of asset sales and prior attempts to transfer control of the firm. The average excess stock return of 20% around liquidation announcements is positively correlated with the fraction of stock owned by management and the board. These results suggest that firms that make the value enhancing decision to voluntarily liquidate confront low future growth opportunities, but the absence of future growth opportunities is not sufficient to bring about this decision. It is also necessary that decision makers have a vested interest in the outcome, either because of their ownership stake or because of their family affiliation with the business, and that the valuation consequences of the decision are greater, the more closely aligned are managerial and shareholder interests.

Announcements of debt-reducing exchange offers are associated with a negative average stock price reaction. We address two questions: Why do firms undertake debt-reducing exchange offers? And, what is the information conveyed by such offers? The answers are interrelated: Debt-reducing exchange offers are undertaken by financially weak firms in an effort to stave off further financial distress and, thereby, preserve value for shareholders. A successfully completed exchange offer significantly reduces the likelihood that a firm will enter Chapter 11. Announcements of debt-reducing exchange offers apparently contain two pieces of information: (1) the firm is financially weaker than would have been apparent from other publicly available information, and (2) management is attempting to preserve value for shareholders.

The empirically-observed cross-sectional relation between the level of insider share ownership and the level of firm value has often been interpreted to mean that a change in share ownership can lead to a change in firm value. Such an interpretation has been criticized for ignoring potential endogeneity. In this paper, we perform two sets of tests to circumvent this alleged endogeneity. First, we measure changes in value over the 6-day interval around announcements of insider share purchases and find that the cross-sectional variability in changes in value is described by a curvilinear relation between firm value and insider ownership where the value of the firm first increases, then decreases, as insider share ownership increases. Second, we conduct tests to determine (1) whether the insider purchases are a response to changes in firm characteristics that require a new optimal equilibrium ownership level or (2) whether insiders are purchasing shares to signal that the firm is undervalued. We find no evidence to support these interpretations. Overall, our results are consistent with a causal interpretation of the empirical relation between insider ownership and firm value.

Using the positive shift in tone of Fox News coverage of macroeconomic news after the Republican Bush election in 2000, we investigate whether media slant influences the investment decisions of short sellers. We find that firms headquartered in Republican-leaning townships with Fox News availability experienced a relative decrease in short interest post the 2000 election. We further find that the relative decrease is more pronounced for firms that are more subject to investors' home bias. We interpret our findings to mean that short sellers, as sophisticated as they may be, are not immune to the slant in media coverage.

We use increases and decreases in the ranking scores of Fortune's Most Admired Companies to test the proposition that media shocks can increase (decrease) the value of a manager's reputational capital and, thus, enhance (diminish) his power to extract corporate resources for private benefit at the expense of shareholders. Consistent with the proposition increases (decreases) in scores are associated with stock price decreases (increases). And, CEOs whose firms experience increases (reductions) in scores experience increases (reductions) in compensation and in job tenure, and their firms undertake more (fewer) acquisitions and the acquisitions are less (more) value increasing.