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.

Motivated by recent changes to corporate governance standards around the world, we use a regulatory shock that substantially altered the governance structure for some firms to shed light on the long-term impact of mandates that are of global interest. Firms affected by this shock had lower values and non-mandated governance practices that were less shareholder friendly before the mandates were in effect when compared to unaffected matched peers. In the post-mandate period, we document a 48% tightening of the relative value gap, and show that this gap relates to the continued use of less shareholder friendly non-mandated governance practices. Our results suggest that governance mandates can tighten, but not eliminate, the value gap between poorly and well governed firms, and that firms affected by the shock continue to have less shareholder friendly governance cultures long after regulatory intervention.

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.

ABSTRACT We analyze institutional allocation in initial public offerings (IPOs) using a new data set of U.S. offerings between 1997 and 1998. We document a positive relationship between institutional allocation and day one IPO returns. This is partly explained by the practice of giving institutions more shares in IPOs with strong premarket demand, consistent with book‐building theories. However, institutional allocation also contains private information about first‐day IPO returns not reflected in premarket demand and other public information. Our evidence supports book‐building theories of IPO underpricing, but suggests that institutional allocation in underpriced issues is in excess of that explained by book‐building alone.

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 study assesses the stock return performance of 131 firms emerging from Chapter 11. Using differing estimates of expected returns, we consistently find evidence of large, positive excess returns in 200 days of returns following emergence. We also examine the reaction of our sample firms' equity returns to their earnings announcements after emergence from Chapter 11. The positive and significant reactions suggest that our results are driven by the market's expectational errors, not mismeasurement of risk. The results provide an interesting contrast, but not a contradiction, to previous work that has documented poor operating performance for firms emerging from Chapter 11.

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.