We examine whether corporate governance matters more for firms facing financial distress. We theorize that financial crisis changes the relative costs and benefits of governance mechanisms and that more independent and smaller boards become more valuable in distressed firms. We further hypothesize that CEO power becomes increasingly beneficial as concentrated power allows the firm to respond more rapidly to the crisis. Event‐history analysis of the failure of publicly traded Internet firms over the period 2000–2002 confirms our hypotheses. Our results suggest that the association between governance and survival depends on firm and environmental context and that one‐size‐fits‐all prescriptions for governance mechanisms are therefore likely to be ineffective. Copyright © 2011 John Wiley & Sons, Ltd.

This study examines whether long-term performance plans and institutional holdings are associated with the level of R&D spending in firms. This paper contributes to the growing literature on the impact of mechanisms to mitigate the short-term focus of managers and investors. This study, unlike prior work, examines two mechanisms simultaneously, longterm performance plans and institutional investor holdings. We find no evidence that the adoption of long-term performance plans has implications for R&D spending. We do find evidence that holdings by institutional investors are positively associated with the level of R&D spending in the firm. These results indicate that the horizon of institutional investors may influence managers' planning horizons and how they decide on long-term investments, but managers' decisions on R&D investments are not afected by the introduction of performance plans. When examining the influence of R&D spending on institutional holdings, the simultaneous equations show that holdings by banks and insurance companies are lower in firms that have higher R&D. In contrast, holdings by "other" institutions are higher in firms that have higher R&D. the workshop participants at the University of Michigan and the National University of Singapore are also much appreciated. Comments from an anonymous reviewer have been helpful in improving this paper. Frederic W. Cook kindly provided survey reports of compensation schemes of the top 200 industrial companies for our sample. We thank Soo Chen Wong and Kok Choy Fong for their research assistance.All errors remain our responsibility. 117 at FRESNO PACIFIC UNIV on December 27, 2014 jaf.sagepub.com Downloaded from 18. Outliers (those with an absolute value for the studentized residual greater than three or Cook's distance measure greater than one) are deleted from the sample. Eight observations are deleted from the sample. When outliers are not removed from the sample, the coefficients on TOTAL, is -0.003 (t statistic = -2.446), BNK (0.332, t statistic = 1.216), INS (-0.282, tstatistic = -1.154), INV (-0.107, t statistic = -1.241), ADV (-0.033, t statistic = -1.197), OTH (-0.235, t statistic = -1.173).19. None of the variables have a variance inflation factor (VIF) greater than 10, which would have indicated multicollinearity. The variable with the highest VIF is lagged R&D (5.48). Mean VIF values considerably larger than one indicate serious multicollinearity problems (Neter, Wasserman, and Kutner [1989]). The mean VIF value is 2.405. We conclude that although there may be a multicollinearity problem, it is not serious.

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