In this study, we examine the determinants of board monitoring activity and its impact on firm value for a broad panel of firms over a six-year period from 1999 to 2005. During this period, Congress and the exchanges promulgated regulations that increased pressure upon firms for more independent and active boards. Economists have debated whether board activity and externally imposed regulations benefit or harm firms. We develop and examine several proxies for board monitoring and examine the relationship between board monitoring activity, firm characteristics, and firm value in a structural equation framework. One set of our proxies is based on the number of annual board and Audit Committee meetings. We show that prior performance, firm characteristics and governance characteristics are important determinants of board activity. We also show that the board monitoring is driven by corporate events, such as an acquisition or a restatement of financial statements. We find that board activity has a positive impact on firm value. Our results also indicate that the external pressure has had a salutary effect and recent regulations have led to some increase in firm value. A second set of proxies is based on the shift to a fully independent Audit, Compensation and Nominating Committees. We find that firms increased the independence of these Board committees following the enactment of the 2002 Sarbanes-Oxley Act.

This paper investigates the information spillover and learning by observing among countries in the sovereign debt markets. We find that the coupon rate of a bond offering by a borrower-country is positively associated with the average coupon rate of bonds issued by peer countries during the previous three-month period and this is significant among economically similar peers. Our results are stronger among investment-grade than speculative-grade ranked countries, and they are also more significant among countries without an IMF program than those under IMF program. We, however, fail to find evidence of learning among neighboring countries or those with a common language. Our findings suggest that although learning from peers is affected by borrower-countries’ quality, sovereign bond markets learn information from their economically-similar peers, which could ensure greater price stability.

In 1993 and 1994, FreeportMcMoRan Copper and Gold issued two series of gold-denominated depositary shares to finance the expansion of its mining capacity in Indonesia. The pricing of these securities reflected their enhanced credit quality, which arose from the positive correlation between the value of the firm and the value of the securities. This feature of the securities effectively bundles a gold hedge with financing. A bundled hedge avoids wealth transfers to senior bondholders, since junior bondholders can effectively net their bond-related claims on the firm against their hedge-related liability to the firm. Such securities cannot be replicated by conventional hedging strategies, and they also mitigate the asset substitution problem.

We examine firms that reprice their executive stock options and find little evidence that repricing reflects managerial entrenchment or ineffective governance. Repricing grants are economically significant, but there is little else unusual about compensation in repricing firms. Repricers tend to be smaller, younger, rapidly growing firms that experience a deep, sudden shock to growth and profitability. They are also more concentrated in the technology, trade, and service sectors and have smaller boards of directors. Repricers have abnormally high CEO turnover rates, which is inconsistent with the entrenchment hypothesis. Over 40% of repricers exclude the CEO's options when they reprice.

This paper presents a flexible, lattice-based structural credit risk model that uses equity market information and a detailed depiction of a financial institution’s liability structure to analyze default risk. The model is applied to examine the term structure of default probabilities for Lehman Brothers prior to its demise. The results indicate, as early as March, that the firm would likely lose access to external capital within two years. The model can be used as both a diagnostic tool for the early detection of financial distress and a prescriptive tool for addressing the sources of risk in large, complex financial institutions.