There is a general perception that the large trading volume in initial public offerings is mostly due to “flippers” that are allocated shares in the offering and immediately resell them. On average, however, flipping accounts for only 19% of trading volume and 15% of shares offered during the first two days of trading. Institutions do more flipping than retail customers and hot IPOs are flipped much more than cold IPOs. Institutions do not quickly flip cold IPOs to take advantage of price support activities by the underwriter. Explicit penalty bids are rarely assessed against flippers.

In 1992, the Amex launched the Emerging Company Marketplace (ECM) to trade the stocks of small but growing companies. Bid–ask spreads decreased dramatically for listing firms, and news coverage increased. Executives of listing firms were quite satisfied. Yet few firms chose to list on the ECM, and it closed in 1995. What went wrong? Most Amex stakeholders had little to gain from the success of the ECM, and a series of scandals damaged the reputation of the exchange. Similar small-firm markets have also failed, largely because successful firms quickly depart for traditional markets, leaving only unsuccessful firms behind.

This study examines the kinds of events that cause large shifts in the volatility of emerging stock markets. We first determine when large changes in the volatility of emerging stock market returns occur and then examine global and local events (social, political, and economic) during the periods of increased volatility. An iterated cumulative sums of squares (ICSS) algorithm is used to identify the points of shocks/sudden changes in the variance of returns in each market and how long the shift lasts. Both increases and decreases in the variance are identified. We then identify events around the time period when shifts in volatility occur. Most events tend to be local and include the Mexican peso crisis, periods of hyperinflation in Latin America, the Marcos-Aquino conflict in the Philippines, and the stock market scandal in India. The October 1987 crash is the only global event during the period 1985–1995 that caused a significant jump in the volatility of several emerging stock markets.

Abstract We identify the unique role of the government bond lending market in collateral transformation during periods of market stress. Using a novel database, we provide evidence that safe assets in the lending market have higher demand, higher borrowing cost, and higher usage of noncash collateral relative to nonsafe assets during stressed market conditions. Moreover, we find that market participants are able to obtain safe assets using relatively low-quality noncash collateral, allowing for collateral transformation. We show that policy interventions by central banks can help reduce safe-asset shortages by returning sought-after safe assets to the market.

This paper asks whether dissent votes in uncontested director elections have consequences for directors. We show that contrary to popular belief based on prior studies, shareholder votes have power and result in negative consequences for directors. Directors facing dissent are more likely to depart boards, especially if they are not lead directors or chairs of important committees. Directors facing dissent who do not leave are moved to less prominent positions on boards. Finally, we find evidence that directors facing dissent face reduced opportunities in the market for directors. We also find that the effects of dissent votes go beyond those of proxy advisor recommendations.

What motivates investors to hold American Depositary Receipts (ADRs) rather than the underlying stock of US listed foreign firms? We analyze the investment allocation decision of actively-managed emerging market mutual fund managers. Although legal provisions are typically assumed to affect ADR and its underlying domestic shares equally, investors holding ADRs may have a higher level of legal protection as these securities are issued and traded in the US. We find that ADRs are the preferred mode of holdings if the local market of the issuer has weak investor protection, low liquidity and high transaction costs.

This paper examines the investment allocation choices of actively-managed US mutual funds in emerging market equities after the market crises of the 1990s. We analyze both country- and firm-level disclosure and institutional policies that influence mutual funds’ allocation choices relative to major stock market indices. At the country level, we find that US funds invest more in open emerging markets with stronger accounting standards, shareholder rights, and legal frameworks. At the firm level, US funds are found to invest more in firms that adopt discretionary policies such as greater accounting transparency and the issuance of an ADR. Our results suggest that steps can be taken both at the country and the firm level to create an environment conducive to foreign institutional investment.

We examine whether institutional investors affect corporate governance by analyzing portfolio holdings of institutions in companies from 23 countries during the period 2003–2008. We find that firm-level governance is positively associated with international institutional investment. Changes in institutional ownership over time positively affect subsequent changes in firm-level governance, but the opposite is not true. Foreign institutions and institutions from countries with strong shareholder protection play a role in promoting governance improvements outside of the U.S. Institutional investors affect not only which corporate governance mechanisms are in place, but also outcomes. Firms with higher institutional ownership are more likely to terminate poorly performing Chief Executive Officers (CEOs) and exhibit improvements in valuation over time. Our results suggest that international portfolio investment by institutional investors promotes good corporate governance practices around the world.

We construct a firm-level governance index that increases with minority shareholder protection. Compared with U.S. matching firms, only 12.68% of foreign firms have a higher index. The value of foreign firms falls as their index decreases relative to the index of matching U.S. firms. Our results suggest that lower country-level investor protection and other country characteristics make it suboptimal for foreign firms to invest as much in governance as U.S. firms do. Overall, we find that minority shareholders benefit from governance improvements and do so partly at the expense of controlling shareholders. The Author 2008. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: [email protected]., Oxford University Press.