Abstract Current attempts to reform financial markets presume that shareholder empowerment benefits shareholders. We investigate the wealth effects associated with the Securities and Exchange Commission’s rule to facilitate director nominations by shareholders. Our results are not in line with shareholder empowerment creating value: The average daily abnormal returns surrounding events that increase (decrease) the probability of the proposal’s passage are significantly negative (positive). Furthermore, given an increase in the probability of the proposal’s passage, firms whose shareholders are more likely to use the rule to nominate directors experience more negative abnormal returns.

Abstract This study tests whether belief differences affect the cross-sectional variation of risk-neutral skewness using data on firm-level stock options traded on the Chicago Board Options Exchange from 2003 to 2006. We find that stocks with greater belief differences have more negative skews, even after controlling for systematic risk and other firm-level variables known to affect skewness. Factor analysis identifies latent variables linked to risk and belief differences. The belief factor explains more variation in the risk-neutral skewness than the risk-based factor. Our results suggest that belief differences may be one of the unexplained firm-specific components affecting skewness.

Abstract We analyze 3,547 initial public offerings (IPOs) from 1985 through 2003 to determine the impact of acquisition activity on long-run stock performance. The results show that IPOs that acquire within a year of going public significantly underperform for 1- through 5-year holding periods following the 1st year, whereas nonacquiring IPOs do not significantly underperform over these time frames. For example, the mean 3-year style-adjusted abnormal return is – 15.6% for acquirers and 5.9% for nonacquirers. Our cross-sectional and calendar-time results suggest that the acquisition activity of newly public firms plays an important and previously unrecognized role in the long-run underperformance of IPOs.