a b s t r a c tWe use a sample of large international commercial banks to test hypotheses on the dual role of boards of directors. We use a suitable econometric model (two step system estimator) to solve the well-known endogeneity problem in corporate governance literature, and demonstrate the empirical and theoretical superiority of system estimator over OLS and within estimators. We find an inverted U-shaped relation between bank performance and board size, and between the proportion of non-executive directors and performance. Our results show that bank board composition and size are related to directors' ability to monitor and advise management, and that larger and not excessively independent boards might prove more efficient in monitoring and advising functions, and create more value. All of these relations hold after we control for the measure of performance, the weight of the banking industry in each country, bank ownership, and regulatory and institutional differences.

In recent years, the debate about the efficiency of corporate governance mechanisms has focused on the activity of the corporate boards of directors. This paper analyses the effect of the size of the board, its composition and internal functioning on firm value in a sample of 450 non-financial companies from ten countries in Western Europe and North America. The econometric method combines uniequational regression analysis with simultaneous equations in order to control for the possibility of board size and composition endogeneity. The results show a negative relationship between firm value and the size of the board of directors. This relation holds when we control for alternative definitions of firm size and for board composition, the board's internal functioning, country effect and industry effect. We find no significant relationship between the composition of the board and the value of the firm. These results are consistent with previous relevant papers and show that companies with oversized boards of directors have poorer performance both in countries where internal mechanisms of governance dominate and in countries where external mechanisms are predominant.

This paper seeks to shed further light on the capital budgeting techniques used by Spanish companies. Our paper posits that the gap between theory and practice might be related to the nature of sources of value and to the efficiency of mechanisms aligning managerial and shareholder incentives, rather than to resource restrictions or model misinterpretation. We analyze data from a survey conducted in 2011, the final sample comprising 140 non-financial Spanish firms. Our findings show a behaviour pattern similar to that reported in prior research for firms in other countries. Particularly noteworthy is that payback appears to be the most widely used tool, while real options are used relatively little. Our results confirm that size and industry are related to the frequency of use of certain capital budgeting techniques. Further, we find that the relevance of growth opportunities and flexibility is an important factor explaining the use of real options.

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Relaxation-time effects are included in the transverse dielectric function of a metallic system by analyzing the magnetic susceptibility of the medium. Our results extend the Mermin longitudinal dielectric function to a transverse case. %e use this model to analyze the infrared absorption of small spheres.The electromagnetic properties of condensed-matter surfaces and small particles can be described by using the appropriate dielectric response functions. For an homogeneous metallic system and infinite relaxation time, those functions are the well-known longitudinal, el, and transverse, eT, dielectric functions proposed by Lindhard. ' Sur-faces and small spheres can be analyzed to a good approximation by embedding the medium in an infinite homogeneous system, their properties being defined by er andFor a finite relaxation time, r, Mermin proposed the following longitudinal dielectric function:The main argument used to deduce this equation was based on the conservation of local electronic charge. The transverse dielectric function, er, was proposed by laiewer and Fuchs to be extended for a finite relaxation time as follows: eT 1 [cop jco(c---a+i j~)] && I 1 -~" /[(co+i /~) co ]},where f"are typical oscillator strengths for the transverse response.We believe that eT, as given by Eq. (2) is not an appropriate extension of eT. The main reason is afforded by the equations establishing the equivalence' between the response functions, (er, eT) and (e,p, ), E'= EL 1 -1/p=(co/ck( (eL, -eT ) . 3(a) 3(b)Indeed, from (3b) and (2) we find that @~1 for co~0. This precludes the appearance of any magnetic effect in the static limit.In this report, we propose an alternative way of obtaining eT (or equivalently p). Our main point is that it is convenient to discuss the electromagnetic properties of a metallic system using the (e,p) response functions, and assuming that the particles of the system can have electric and/or magnetic charges. This point of view puts in the same footing e and p, and allows us to use for p the same argument that Mermin did for e. In other words, if we assume that magnetic charges are responding to the electromagnetic field, magnetic charge conservation allows us to introduce the following equation:where p ls given by (p -1 ) jp = (co jck ) (eL -eT ) and el, eT are the Lindhard dielectric functions.Notice that Eq. (5) only includes those effects associated with the electronic currents. Spin magnetism can be easily added by redefining eT as (cojcq) (eT 1)=4m(X, +Xd), -7, and g~being the spin and the orbital susceptibility, respectively, Xd= -(e /mc q ) X IN+(2h /m)~"j[(co+ijr) co ]}, -

This paper analyzes whether the valuation effect of corporate diversification depends on how this strategy is implemented. According to the real options approach, two extreme diversification patterns may be identified: one based on full exercise of available options (an assets-in-place diversification), and another aimed at seeding multiple growth options in subsequent businesses (options-based diversification). We propose an index to approximate the distance to these two diversification patterns and we explore its impact on firms' value for a sample of U.S. firms during 1998-2010.We find that as a firm's diversification approaches an options-based pattern, it becomes a more value-enhancing strategy.JEL classification: L25, G32, D22, C34