Business Commons^™

Pricing Corporate Governance, Albert Choi

Articles

Scholars and practitioners have long theorized that by penalizing firms with unattractive governance features, the stock market incentivizes firms to adopt the optimal governance structure at their initial public offerings (IPOs). This theory, however, does not seem to match with practice. Not only do many IPO firms offer putatively suboptimal governance arrangements, such as staggered boards and dual-class structures, but these arrangements have been gaining popularity among IPO firms. This Article argues that the IPO market is unlikely to provide the necessary discipline to incentivize companies to adopt the optimal governance package. In particular, when the optimal governance package differs …

Initiation Payments, Scott Hirst

Faculty Scholarship

Many of the central discussions in corporate governance, including those regarding proxy contests, shareholder proposals, and other activism or stewardship, can be understood as a single question: Is there under-initiation of corporate changes that investors would collectively prefer?

This Article sheds light on this question in three ways. First, the Article proposes a theory of investor initiation, which explains the hypothesis that there is under-initiation of collectively-preferred corporate change by investors. Even though investors collectively prefer that certain corporate changes take place, the costs to any individual investor from initiating such changes through high-cost proxy contests, or even low-cost shareholder …

Good Governance, Bad Governance: A Refinement And Application Of Key Governance Concepts, Scott L. Mitchell, Mark D. Packard, Brent B. Clark

Marketing & Entrepreneurship Faculty Publications

Understanding what makes governance 'good' or 'bad' has been impeded by construct ambiguity. Contemporary governance research has struggled to define 'governance' and related constructs such as 'ownership', 'agency', and 'management' in a way that clearly separates and distinguishes them. Often, the line between governance and management is so blurred that it is impossible to say what is good or bad 'governance' versus 'management'. Here we provide a systematic classification of key governance concepts in terms of their distinct economic functions. 'Governance', for instance, is the economic function of behavioural constraint. This allows us to state what 'good' governance is and …

The Meme Stock Frenzy: Origins And Implications, Dhruv Aggarwal, Albert H. Choi, Yoon-Ho Alex Lee

Law & Economics Working Papers

In 2021, several publicly traded companies, such as GameStop and AMC, became “meme stocks,” experiencing a sharp rise in their stock prices through a dramatic influx of retail investors into their shareholder base. Analyses of the meme stock surge and its implications for corporate governance have focused on the idiosyncratic creation of online communities around particular stocks during the COVID-19 pandemic. In this Article, we argue that the emergence of meme stocks is part of longer-running digital transformations in trading, investing, and governance. On the trading front, the sudden abolition of commissions by major online brokerages in 2019 reduced entry …

Is "Public Company" Still A Viable Regulatory Category?, George S. Georgiev

Faculty Articles

This Article suggests that the ubiquitous “public company” regulatory category, as currently constructed, has outlived its effectiveness in fulfilling core goals of the modern administrative state. An ever-expanding array of federal economic regulation hinges on public company status, but “public company” differs from most other regulatory categories in that it requires an affirmative opt-in by the subject entity. In practice, firms today become subject to public company regulation only if they need access to the public capital markets, which is much less of a business imperative than it once was due to the proliferation of private financing options. Paradoxically, then, …

Explicating The Influence Of Religion In Forming Corporate Governance: Insights From The Philippines, Leveric T. Ng, John Paolo Rivera

Graduate School of Business Publications

Religion plays a role in shaping personal values and directing an organization’s moral filter. It is an avenue to impose social morality that may impact corporate governance. We examined the influence of religion in the formation and development of good corporate governance through ethical leadership in the Philippines – a country that has strong religious culture. Invalidating scholarly literature on religion and enterprise; we looked into the conception and interpretation of religion and corporate governance through a key informant interview of 30 executive directors from private corporations in the country.We found that corporate governance may arise from religious convictions; where …

Toward A Synthesis Of The Board-Strategy Relationship: A Literature Review And Future Research Agenda, Pieter-Jan Bezemer, Amedeo Pugliese, Gavin Nicholson, Alessandro Zattoni

Research outputs 2022 to 2026

Research Question/Issue

The strategy role of the board of directors is a contentious topic in both theory and practice and the debate on what boards should or should not do around firm strategy has intensified with changes in global corporate governance. Boards face interventionist regulatory developments, calls for changes in their composition, growing owner engagement, and societal questioning on the corporation's very purpose. With this review, we aim to assess how the research agenda in this area has evolved with these developments.

Research Findings/Results

Our analysis of 152 articles published in 45 high-quality journals between 2008 and 2020 reveals that …

Reframing The Dei Case, Veronica Root Martinez

Faculty Scholarship

Corporate firms have long expressed their support for the idea that their organizations should become more demographically diverse while creating a culture that is inclusive of all members of the firm. These firms have traditionally, however, not been successful at improving demographic diversity and true inclusion within the upper echelons of their organizations. The status quo seemed unlikely to move, but expectations for corporate firms were upended after the #MeToo Movement of 2017 and 2018, which was followed by corporate support of the #BlackLivesMatter Movement in 2020. These two social movements, while distinct in many ways, forced firms to rethink …

Board Demographic, Structural Diversity, And Eco-Innovation: International Evidence, Rashid Zaman, Kaveh Asiaei, Muhammad Nadeem, Ihtisham Malik, Muhammad Arif

Research outputs 2022 to 2026

Research question/issue: We examine whether and how board diversity, measured by demographics (i.e., board gender, cultural diversity, tenure, social capital, expertise, and age) and structural diversity (i.e., board independence, size, board seat accumulation-chair, board compensation, and board meeting frequency), influence corporate eco-innovation. Research findings/insights: Utilizing a global sample of publicly listed companies for the period 2004–2019, we find that a one-standard deviation increase in demographic and structural diversity translates into 4.66% and 7.11% higher corporate eco-innovation, respectively. Furthermore, we discover that demographic and structural diversity promotes eco-innovation by offsetting the negative effects of political risk. In an additional analysis, we …