This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common law countries generally have the best, and French civil law countries the worst, legal protections of investors, with German and Scandinavian civil law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

Law and Finance

This paper examines legal rules covering protection of corporate shareholders and creditors, the origin of these rules, and the quality of their enforcement in 49 countries. The results show that common-law countries generally have the strongest, and Frenchcivil-law countries the weakest, legal protections of investors, with German- and Scandinavian-civil-law countries located in the middle. We also find that concentration of ownership of shares in the largest public companies is negatively related to investor protections, consistent with the hypothesis that small, diversified shareholders are unlikely to be important in countries that fail to protect their rights.

This paper surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world.

A Survey of Corporate Governance

This article surveys research on corporate governance, with special attention to the importance of legal protection of investors and of ownership concentration in corporate governance systems around the world. CORPORATE GOVERNANCE DEALS WITH the ways in which suppliers of finance to corporations assure themselves of getting a return on their investment. How do the suppliers of finance get managers to return some of the profits to them? How do they make sure that managers do not steal the capital they supply or invest it in bad projects? How do suppliers of finance control managers? At first glance, it is not entirely obvious why the suppliers of capital get anything back. After all, they part with their money, and have little to contribute to the enterprise afterward. The professional managers or entrepreneurs who run the firms might as well abscond with the money. Although they sometimes do, usually they do not. Most advanced market economies have solved the problem of corporate governance at least reasonably well, in that they have assured the flows of enormous amounts of capital to firms, and actual repatriation of profits to the providers of finance. But this does not imply that they have solved the corporate governance problem perfectly, or that the corporate governance mechanisms cannot be improved. In fact, the subject of corporate governance is of enormous practical impor

/pdf/a-survey-of-corporate-governance-36f3yobhy4.pdf

https://faculty.fuqua.duke.edu/~jgraham/website/SurveyPaper.PDF

The theory and practice of corporate finance: Evidence from the field

We examine the use of currency derivatives in order to differentiate among existing theories of hedging hehavior. Firms with greater growth opportunities and tighter financial constraints are more likely to use currency derivatives. This result suggests that firms might use derivatives to reduce cash flow variation that might otherwise preclude firms from investing in valuahle growth opportunities. Firms with extensive foreign exchange-rate exposure and economies of scale in hedging activities are also more likely to use currency derivatives. Finally, the source of foreign exchange-rate exposure is an important factor in the choice among types of currency derivatives. LAKGE U.S. CORPORATIONS INCREASINGLY tum to derivatives to reduce tbeir exposures to a variety of risks. Tbe motives for tbis bebavior are not well understood, and tbe empirical evidence on tbe cbaracteristics of derivatives users is limited. However, tbeoretical researcb provides several explanations for optimal bedging that result from difTerent types of capital market imperfections. To distinguish among tbese explanations, we examine tbe use of currency derivatives for a sample of firms tbat bave ex ante exposure to foreign excbange-rate risk. We also consider bow tbe magnitude of tbis exposure affects tbe level of benefits tbat can be realized from reducing risk and tbe costs associated witb risk reduction. Our sample represents 372 of tbe Fortune 500 nonfinancial firms in 1990. All of our sample firms bave potential exposure to foreign currency risk from foreign operations, foreign-denominated debt, or a bigb concentration of foreign competitors in tbeir industries. Approximately 41 percent of tbese firms use currency swaps, forwards, futures, options, or combinations of tbese instruments. We find tbat firms witb greater growtb opportunities and tighter financial constraints are more likely to use currency derivatives. Tbis result is consistent with tbe notion that firms use derivatives to reduce the variation in

/pdf/why-firms-use-currency-derivatives-xa6gxsvjzd.pdf

Why Firms Use Currency Derivatives

Appointments of outsiders to Japanese boards: Determinants and implications for managers

We document that cash flow volatility is associated with lower levels of investment in capital expenditures, R&D, and advertising. Thus, firms do not turn to external capital markets to fully cover cash-flow short falls. Consistent with this conclusion, we document that the sensitivity of investment to cash flow volatility is greater for firms with higher costs of capital market access. In addition, cash flow and earnings volatility are associated with these higher costs. Thus, volatility not only increases the likelihood that a firm will need to access capital markets, it also increases the costs of doing so.

/pdf/the-impact-of-cash-flow-volatility-on-discretionary-1mk5cx31qy.pdf

The Impact of Cash Flow Volatility on Discretionary Investment and the Costs of Debt and Equity Financing

https://leeds-faculty.colorado.edu/bhagat/CashflowVolatilityInvestment.pdf

The impact of cash flow volatility on discretionary investment and the costs of debt and equity financing

We study CEO turnover – both internal (board driven) and external (through takeover and bankruptcy) – from 1992 to 2007 for a sample of large US companies. Annual CEO turnover is higher than that estimated in previous studies over earlier periods. Turnover is 15.8% from 1992 to 2007, implying an average tenure as CEO of less than 7 years. In the more recent period since 2000, total CEO turnover increases to 16.8%, implying an average tenure of less than 6 years. Internal turnover is significantly related to three components of firm stock performance – performance relative to industry, industry performance relative to the overall market, and the performance of the overall stock market. The relations are stronger in the more recent period since 2000. We find similar patterns for both forced and unforced turnover, suggesting that some, if not most, turnover labeled as unforced is actually not voluntary. The turnover-performance sensitivity is modestly related to block shareholder ownership and board independence.

https://papers.ssrn.com/sol3/Delivery.cfm/irfi1135.pdf?abstractid=2031867&mirid=4

Bernadette A. Minton

Papers

Why Firms Use Currency Derivatives

Appointments of outsiders to Japanese boards: Determinants and implications for managers

The Impact of Cash Flow Volatility on Discretionary Investment and the Costs of Debt and Equity Financing

The impact of cash flow volatility on discretionary investment and the costs of debt and equity financing

How Has CEO Turnover Changed