A long-recognized phenomenon in capital markets is the underinvestment in foreign equity securities, known as equity home bias. Our study examines the effect of board independence on the firm's ability to attract foreign equity capital. After accounting for potential endogeneity, we document that U.S. and non-U.S. foreign investors exhibit a strong preference for firms with more independent corporate boards. Further, our analysis indicates that the positive relation between board independence and foreign ownership is significantly stronger in countries with less developed legal institutions and poor external protection of investor rights. We suggest that it is in these countries that firm-determined characteristics such as independent boards can be most beneficial in attracting capital. We also find that institutional investors are more responsive to the impact of independent corporate boards than are other types of investors.

We show that acquirer returns are significantly higher in stock-swap acquisitions of difficult-to-value targets, as measured by R&D intensity and idiosyncratic return volatility. This finding contributes to an explanation of the determinants of, and value gains from, using stock as a method of payment. The effects of target-valuation uncertainty on both the method of payment and the market reaction to acquisitions are more likely to be apparent in samples of private acquisitions, as these effects can be masked in samples of acquisitions of publicly held targets. Nevertheless, our results hold for publicly traded targets in multivariate analysis.

Promotion decisions for professors are critical for any university and this is especially true when promotion also involves the granting of tenure. In this paper, we report the number of publications for Finance professors promoted to Associate or Full Professor at schools similar to the University of Georgia and also at the Top 10 Finance Departments. We also provide evidence on citations of the individuals' research. Our data reveal similarities in terms of the total number of articles published (between 6 and 8 for promotion to Associate Professor), the number of articles published in Finance “A” journals (about 3), and the number of citations between peer and aspirant schools. We find evidence that Associate Professors at Top 10 Departments have slightly more “A” articles and receive more citations to their work than those at lower ranked institutions. We find similar results for those promoted to Full Professor – similar publication records but with more “A” publications and citations for those in Top 10 Departments. Our paper provides up-to-date information on some of the factors considered for promotion of Finance professors. However, the much more difficult part of promotion decisions is determining the impact of past research and the potential for future contributions. In addition, teaching, service, and other departmental contributions are key to the promotion decision.

The authors have been editors of the Journal of Corporate Finance for nineteen years and are now stepping down. Here we offer some observations from our years as editors of the Journal. We hope they are useful to the new editors, the publisher, referees and authors. Thank you to all those who helped us in our task as editors.

We evaluate the costs and benefits of restrictive covenants in bonds issued in 1989 and 1996. Our results indicate that firms with growth opportunities are more likely to seek to preserve flexibility in future financing activities by not including dividend or debt issuance restrictions in their bond contracts. We do not find, however, that the use of other restrictive covenants is significantly lower for firms with high investment opportunities. Instead, the use of these other covenants is primarily driven by the issuing firm's likelihood of financial distress. Our results emphasize that contractual relations between firms and bondholders reflect the specific needs of the contracting parties.

Using an original dataset of fully monetized LBOs initiated from 1990 to 2006, we examine the emergence of an entrepreneurial transaction strategy focused on revenue growth and its incidence relative to more “classic” strategies focused on operating efficiencies. We additionally show how the conventional focus on returns measured at an IPO or acquisition frequently overstates actual realized returns to sponsors. Using this return data, we evaluate how “classic” and “entrepreneurial” strategies are associated with sponsors' equity returns. Among successful LBOs, LBOs that enhance operating efficiencies produce the highest “exit” returns; however, LBO sponsors commonly fail to monetize these returns due to delays associated with liquidating portfolio positions. In contrast, LBOs that focus on growing revenues are associated with higher fully realized equity returns, suggesting more sustainable value-creation for sponsors and their investors.

ABSTRACT We examine the impact of political, institutional, and economic factors on the choice between selling a state‐owned enterprise in the public capital market through a share issue privatization (SIP) and selling it in the private capital market in an asset sale. SIPs are more likely in less developed capital markets, for more profitable state‐owned enterprises, and where there are more protections of minority shareholders. Asset sales are more likely when there is less state control of the economy and when the firm is smaller. Our results suggest the importance of privatization activities in developing the equity markets of privatizing countries.