Alternative corporate governance paradigm and corporate financing: Capital structure decisions in employee-governed firms

Assuming an alternative corporate governance paradigm that puts employees in the firm’s governance structures, as well as understanding their objective functions, we investigate capital structure decisions in employee-governed firms. Examining corporate capital structure decisions in 12 European countries, we provide strong empirical evidence of employees’ conservatism in capital structure choice. We find that employee-governed firms operate with significantly lower leverage and that employee-governed firms are significantly less levered at the same amount of earnings volatility than firms governed by other stakeholders. We also find evidence that employee-governed firms, at least in some countries, rely on internal resources to a larger extent. However, we did not find evidence that employee-governed firms have to pledge more collateral to obtain debt financing. In addition to this, we find evidence that employee-governed firms choose debt of shorter maturity and, somewhat surprisingly, that employee-governed firms in some countries are faced with lower cost of debt compared to firms governed by other stakeholders and not higher cost of debt as expected because of credit rationing and limited borrowing capacity

Share Pledging and Firm Cash Holdings: Evidence from Chinese A-share Listed Firms

This paper examines the relation between share pledging and cash holdings of Chinese A-share listed-firms. We find that during the years 2005 through 2015, the level of share pledging is negatively associated with cash holdings. We establish causality through a variety of econometric techniques, including a difference-in-differences approach based on a regulatory change that permits security companies to lend money to borrowers pledging their shares as collaterals. In addition, we find that the main effect is more prominent for financial constrained firms, and share pledging is associated with lower cash/investment-cash flow sensitivities and more cash dividend payouts. Overall, our findings indicate that share pledging can alleviate financial constraints of listed firms and reduce their tendencies of holding cash for precautionary motives

Access to financing, rents, and organization of the firm

This paper provides a theory for the choice of an organizational structure by the headquarters of a unitary structure concerned about overload. The headquarters can avoid overload by delegating operational decisions to divisions, i.e., moving the firm to a multidivisional structure. We show that, under moral hazard, these divisions receive rents for incentive purposes, and that the multidivisional structure is able to invest more. Thus, there is a trade-off between increasing investment and paying rents. We also show that this trade-off applies to situations where firms consider engaging in acquisitions and joint ventures, or where entrepreneurs consider resorting to venture capitalists.Unitary-form; Multidivisional-form; Agency rents; Credit rationing

A narrowing of meaning:loss of narrative unity and the nature of design change

This paper seeks to explore where design might best focus its efforts with respect to contemporary concerns about sustainability, particularly in view of the magnitude and nature of change required. The discussion traces the long entrenchment, over several centuries, of assumptions, conventions and outlooks that resulted in a shift in worldview from traditional to modern/late-modern. This shift is not only associated with unprecedented environmental damage, but also with a narrower perspective, a loss of narrative unity, and a loss of meaning. The argument is made that, by focusing on rationalistic, techno-scientific solutions design restricts its contribution to a variety of incremental changes that actually support the continuance of a fundamentally unsustainable system. Instead, design can widen its purview and be a catalyst for more substantive change by restoring a more balanced approach to products and processes in context; thereby contributing to a recovery of narrative unity and meaning

Shareholder rights and non-price loan contract terms

This thesis analyzes the impact of shareholder rights on non-price loan contract terms. Using a large sample of syndicated loans borrowed by U.S. firms between 1991 and 2006, I find that stronger shareholder rights significantly enhance the stringency of loan contract design. The likelihood of having collateral significantly increases with the strength of shareholder rights. Loan maturity of firms with strongest shareholder rights is 13.1% shorter. The loan size of the same borrowing firms is 8.4% smaller. These results are robust to different proxies of shareholder rights and are robust to the instrumental variable approach controlling for simultaneous determination of loan contract terms, such as collateral and maturity. This study complements the existing literature on the impact of shareholder rights on loan pricing and has important implications for understanding the impact of companies' governance structure on loan contract design

The Shanxi Banks

The remote inland province of Shanxi was late Qing dynasty China’s paramount banking center. Its remoteness and China’s almost complete isolation from foreign influence at the time lead historians to posit a Chinese invention of modern banking. However, Shanxi merchants ran a tea trade north into Siberia, travelled to Moscow and St. Petersburg, and may well have observed Western banking there. Nonetheless, the Shanxi banks were unique. Their dual class shares let owners vote only on insiders’ retention and compensation every three or four years. Insiders shares had the same dividend plus votes in meetings advising the general manager on lending or other business decisions, and were swapped upon death or retirement for a third inheritable non-voting equity class, dead shares, with a fixed expiry date. Augmented by contracts permitting the enslavement of insiders’ wives and children, and their relative’s services as hostages, these governance mechanisms prevented insider fraud and propelled the banks to empire-wide dominance. Modern civil libertarians might question some of these governance innovations, but others provide lessons to modern corporations, regulators, and lawmakers.

Shareholder Protection, Stock Market Development, and Politics

This paper presents a political economy model where there is mutual feedback between investor protection and stock market development. Better investor protection induces companies to issue more equity and thereby leads to a broader stock market. In turn, equity issuance expands the shareholder base and increases support for shareholder protection. This feedback loop can generate multiple equilibria, with investor protection and stock market size being positively correlated across equilibria. The model’s predictions are tested on panel data for 47 countries over 1993-2002, controlling for country and year effects and endogeneity issues. We also document international convergence in shareholder protection to best-practice standards, and show that it is correlated with cross-border M&A activity, consistent with the model.political economy, shareholder protection, corporate governance, stock market

Bamboo beating bandits: conflict, inequality, and vulnerability in the political ecology of climate change adaptation in Bangladesh

Bangladesh contributes little to global greenhouse gas emissions, yet it is one of the countries most vulnerable to climate change. Based on semi-structured research interviews as a conduit to a literature review, this paper shows how the processes of enclosure, exclusion, encroachment, and entrenchment impede the vitality of its climate change adaptation efforts. Enclosure refers to when adaptation projects transfer public assets into private hands or expand the roles of private actors into the public sphere. Exclusion refers to when adaptation projects limit access to resources or marginalize particular stakeholders in decision-making activities. Encroachment refers to when adaptation projects intrude on biodiversity areas or contribute to other forms of environmental degradation. Entrenchment refers to when adaptation projects aggravate the disempowerment of women and minorities, or worsen concentrations of wealth and income inequality within a community. In the Bangladeshi case, climate change policies implemented under the country’s National Adaptation Program of Action have enabled elites to capture land through public servants, the military, and even gangs carrying bamboo sticks. Exclusionary forms of adaptation planning exist at both the national and local scales. Climate protection measures have encroached upon village property, char (public) land, forests, farms, and other public commons. Most egregiously, community coping strategies for climate change have entrenched class and ethnic hierarchies ultimately trapping the poor, powerless, and displaced into a predatory patronage system that only aggravates human insecurity and intensifies violent conflict. Planners and practitioners of adaptation projects need to become more cognizant of the potential for projects to harm others, or admit complicity in the processes of enclosure, exclusion, encroachment, and entrenchment, if they are ever to be eliminated