Corporate Governance, Product Market Competition, and Equity Prices

Abstract

This paper examines the hypothesis that firms in competitive industries should benefit relatively less from good governance, while firms in non-competitive industries-where lack of competitive pressure fails to enforce discipline on managers-should benefit relatively more.Whether we look at the effects of governance on long-horizon stock returns, firm value, or operating performance, we consistently find the same pattern: The effect is monotonic in the degree of competition, it is small and insignificant in competitive industries, and it is large and significant in non-competitive industries. By implication, the effect of governance (in non-competitive industries) reported in this paper is stronger than what has been previously reported in Gompers, Ishii, and Metrick (2003, "GIM") and subsequent work, who document the average effect across all industries. For instance, GIM's hedge portfolio-provided it only includes firms in non-competitive industries-earns a monthly alpha of 1.47%, which is twice as large as the alpha reported in GIM. The alpha remains large and significant even if the sample period is extended until 2006. We also revisit the argument that investors in the 1990s anticipated the effect of governance, implying that the alpha earned by GIM's hedge portfolio is likely due to an omitted risk factor. We find that while investors were indeed not surprised on average, they underestimated the effect of governance in non-competitive industries, the very industries in which governance has a significant effect in the first place.

Passing Probation: Earnings Management by Interim CEOs and Its Effect on Their Promotion Prospects

“…Governance mechanisms may arise either from internal organizational design or from the external governance environment (Beatty & Zajac, 1994;Bertrand & Mullainathan, 2001;Giroud & Mueller, 2011;Shleifer & Vishny, 1997;Wiersema & Zhang, 2011). We first consider internal governance mechanisms that are related to the characteristics of the board of directors.…”

“…Recent studies have moved beyond the internal governance systems and started paying more attention to external governance mechanisms that also help to keep managers in check (Bertrand & Mullainathan, 2001;Giroud & Mueller, 2011;Wiersema & Zhang, 2011;Yu, 2008). Therefore, a busier board is less effective in its monitoring and more likely tricked by an interim CEO intent on creating a more favourable perspective on the firm through earnings management.…”

Corporate Governance and Innovation: Theory and Evidence

“…He, however, tests for a monotonic relation between innovation and takeover pressure and focuses solely on business combination laws. Giroud and Mueller (2011) examine the differential effects of business combination laws on competitive and noncompetitive industries. Our findings that the relation between innovation and takeover pressure is, in fact, nonmonotonic and that other antitakeover laws in addition to business combination laws affect innovation suggest that Atanassov's empirical tests are misspecified and that his results are likely to be affected by omitted variables.…”

The spatiality of geography teaching and cultures of alternative education: the ‘intuitive geographies’ of the anarchist school in Cempuis (1880–1894)

“…'Even if the planimetry is correct, the terrain relief, both on the Military Staff maps and on the Local Service ones, is absurdly represented by an awful daubing which darkens the drawing and indicates nothing'. 90 This critique of the obscure cartographic symbols immediately brings to mind Reclus's critique of flat maps, which he viewed as an ideological device and a false one which should be avoided in primary education. Thus, according to the anarchist geographer, maps 'ought to be entirely tabooed.…”

“…A military topographic representation of the region was covered with a glass panel on which children could draw and redraw itineraries and check them in the field. During an excursion to Beauvais, the 'map under glass' was 'attached to our wagon' 96 and regularly consulted. During 'the long 1888 trip through Bray, Neufchâtel, Dieppe, and Tréport, every excursionist had a map with an abstract, all chromatographed by one of them; they were generally quarts (quarter sections of maps) from the Military Staff'.…”