Business Commons^™

Going Overboard? On Busy Directors And Firm Value, George D. Cashman, Stuart L. Gillan, Chulhee Jun

Finance Faculty Research and Publications

Abstract

The literature disagrees on the link between so-called busy boards (where many independent directors hold multiple board seats) and firm performance. Some argue that busyness certifies a director’s ability and that such directors are value enhancing. Others argue that “over-boarded” directors are ineffective and detract from firm value. We find evidence that (1) the disparate results in prior work stem from differences in both sample composition and empirical design, (2) on balance the results suggest a negative association between board busyness and firm performance, and (3) the inclusion of firm fixed effects dramatically affects the conclusions drawn from, and …

Convenience In The Mutual Fund Industry, George D. Cashman

Finance Faculty Research and Publications

Abstract

I examine the role of convenience in the mutual fund industry. I find that investors pay more for relatively convenient funds, and that the flows to convenient funds are less responsive to performance. These findings suggest that investors do not evaluate mutual funds independently, but rather that investors select a primary fund, likely based on beliefs about managerial ability, and then select funds which are relatively convenient to this primary fund.

Highlights

► I find that investors pay a significant premium to invest in convenient mutual funds. ► I find that the flows to convenient funds are indifferent to …

Investors Do Respond To Poor Mutual Fund Performance: Evidence From Inflows And Outflows, George D. Cashman, Daniel N. Deli, Federico Nardari, Sriram V. Villupuram

Finance Faculty Research and Publications

Abstract

We examine the relation between mutual fund performance and gross flows for a large sample of actively managed U.S. mutual funds. Unlike previous studies that have only examined periods of generally increasing net flows, our sample includes periods of both increasing and decreasing net flows. We find that outflows are related to performance, with investors withdrawing money from poor performers. We also find that outflows and inflows respond asymmetrically to performance, outflows increase more aggressively following poor performance, and inflows increase more aggressively following good performance. Additionally, we find a symmetric performance net flow relation.

(Wp 2012-01) Territorial Tax System Reform And Corporate Financial Policies, Matteo Arena, George Kutner

Department of Finance Working Papers

We examine the effect of a permanent change to a country income repatriation tax system on a set of corporate financial policies. In 2009 Japan and UK switched from a worldwide system to a territorial system for the taxation of earnings repatriated by their multinational firms. Due to the relatively high corporate tax rate in Japan and UK, the new system effectively reduced the tax liabilities of most multinational firms when repatriating earnings. We find that after the change Japanese and UK firms accumulate less cash, pay out larger amounts to shareholders through dividends and share repurchases, and invest less …

Mortgage Product Substitution And State Anti-Predatory Lending Laws: Better Loans And Better Borrowers?, Raphael W. Bostic, Souphala Chomsisengphet, Kathleen C. Engel, Patricia A. Mccoy, Anthony Pennington-Cross, Susan M. Wachter

Finance Faculty Research and Publications

Mounting foreclosures and disclosures of abusive lending practices led many states to adopt new anti-predatory lending (APL) laws. Researchers have examined the impact of such laws on credit flows and the cost of credit. This research extends the literature by examining whether the market responded to these laws by substituting different mortgage products for those restricted by APL provisions. The evidence indicates that the laws were effective in restricting loans with targeted characteristics, and that the market substituted other product types to maintain access to credit and affordability in the face of these restrictions. The laws reduced the involvement of …

Firm Location And Corporate Debt, Matteo Arena, Michael Dewally

Finance Faculty Research and Publications

This study examines the influence of a firm’s geographical location on corporate debt and provides evidence that the higher cost of collecting information on firms distant from urban areas has significant implications on a wide array of corporate debt characteristics. We find that rural firms face higher debt yield spreads and attract smaller and less prestigious bank syndicates than urban firms. Rural firms attempt to reduce their informational disadvantage by relying more on relationship banking. Our results on the effect of location on corporate debt are robust to the inclusion of an extensive set of firm and issue characteristics.