The popular press and scholarly studies have noted a number of trends in corporate governance. This article addresses, from a theoretical perspective, whether these trends are linked. And, if so, how? The article finds that a trend toward greater board diligence will lead, sometimes through subtle or indirect mechanisms, to trends toward more external candidates becoming CEO, shorter tenures for CEOs, more effort/less perquisite consumption by CEOs (even though such behavior is not directly monitored), and greater CEO compensation. An additional prediction is that, under plausible conditions, externally hired CEOs should have shorter tenures, on average, than internally hired CEOs.

We demonstrate how an auction model can be used in a traditional capital budgeting context to assign a value to the strategic advantage of long‐term forward contracts. Research in the field of industrial organization has pointed to the danger of ex post opportunistic bargaining as a motivation for the use of forward contracts in natural resources and manufactured products, but no operational procedure exists for estimating the value secured by these contracts. Arbitrage methods for valuing forward contracts assume a competitive market in which the factors creating the bargaining problem and motivating the use of long‐term contracts are not present. Use of the model is illustrated in the case of take‐or‐pay contracts for natural gas.

The following explanation of techniques is provided to help you understand markings or patterns which may appear on this reproduction.1.The sign or "target" for pages apparently lacking from the document photographed is "Missing Page(s)".If it was possible to obtain the missing page(s) or section, they are spliced into the film along with adjacent pages.This may have necessitated cutting thru an image and duplicating adjacent pages to insure you complete continuity.2. When an image on the film is obliterated with a large round black mark, it is an indication that the photographer suspected that the copy may have moved during exposure and thus cause a blurred image.You will find a good image of the page in the adjacent frame.3. When a map, drawing or chart, etc., was part of the material being photographed the photographer followed a definite method in "sectioning" the material.It is customary to begin photoing at the upper left hand corner of a large sheet and to continue photoing from left to right in equal sections with a small overlap.If necessary, sectioning is continued again -beginning below the first row and continuing on until complete.4. The majority of users indicate that the textual content is of greatest value, however, a somewhat higher quality reproduction could be made from "photographs" if essential to the understanding of the dissertation.

Peer Reviewed

Data on corporate governance and disclosure practices reveal wide within‐country variation that decreases with the strength of investors' legal protection. A simple model identifies three firm attributes related to that variation: investment opportunities, external financing, and ownership structure. Using firm‐level governance and transparency data from 27 countries, we find that all three firm attributes are related to the quality of governance and disclosure practices, and firms with higher governance and transparency rankings are valued higher in stock markets. All relations are stronger in less investor‐friendly countries, demonstrating that firms adapt to poor legal environments to establish efficient governance practices.

For many benchmark predictor variables, short‐horizon return predictability in the U.S. stock market is local in time as short periods with significant predictability (“pockets”) are interspersed with long periods with no return predictability. We document this result empirically using a flexible time‐varying parameter model that estimates predictive coefficients as a nonparametric function of time and explore possible explanations of this finding, including time‐varying risk premia for which we find limited support. Conversely, pockets of return predictability are consistent with a sticky expectations model in which investors slowly update their beliefs about a persistent component in the cash flow process.

Recent turmoil in international financial markets has raised a set of fundamental questions for the global community: Is the set of international financial arrangements, established after the Great Depression and World War II and modified after the abandonment of the gold standard in 1973, up to the challenges of the twenty-first century? Are minor modifications such as slight changes in the governance of the international financial institutions, increased transparency, or surveillance! all that is required to adapt these institutions to the needs of modern economies, or are more fundamental changes necessary? Today, although much has been proposed, discussed, and argued, no consensus on desirable changes has yet been reached. In the meantime, what can countries, especially the poor, the small, and the less developed, do to protect themselves from the seeming ravages of storms brought on by international financial instability?

There are, of course, a number of

IN A RECENT ARTICLE in this Journal, Brief and Owen [2] indicated how the coeffident of variation might formally enter into the evaluation of risky projects by considering the rate of return as a random variable. They use the coefficient of variation of the distribution of future cash flows as a measure of earnings risk and find a formal mechanism for relating the coefficient to risk in the world of uncertainty. However, if the distribution of future cash flows is asymmetrical, higher moments may have significant values. Thus, in the case of capital budgeting, skewness in the direction of undesirable returns, i.e., less than average, is particularly important in the evaluation of projects. Since Arditti [1] concluded"that the second and third moments of the probability distribution are reasonable risk measures," Brief and Owen's model can be extended to include the third moment. Defining C as the cost of capital, X as the net cash flows before deducting C, r as the rate of return on cost, and s as the rate of return on net cash flows, we have