Transparency and Corporate Governance

An objective of many proposed corporate governance reforms is increased transparency. This goal has been relatively uncontroversial, as most observers believe increased transparency to be unambiguously good. We argue that, from a corporate governance perspective, there are likely to be both costs and benefits to increased transparency, leading to an optimum level beyond which increasing transparency lowers profits. This result holds even when there is no direct cost of increasing transparency and no issue of revealing information to regulators or product-market rivals. We show that reforms that seek to increase transparency can reduce firm profits, raise executive compensation, and inefficiently increase the rate of CEO turnover. We further consider the possibility that executives will take actions to distort information. We show that executives could have incentives, due to career concerns, to increase transparency and that increases in penalties for distorting information can be profit reducing.

Information Disclosure and Corporate Governance

In public-policy discussions about corporate disclosure, more is typically judged better than less. In particular, better disclosure is seen as a way to reduce the agency problems that plague firms. We show that this view is incomplete. In particular, our theoretical analysis shows that increased disclosure is a two-edged sword: More information permits principals to make better decisions; but it can, itself, generate additional agency problems and other costs for shareholders, including increased executive compensation. Consequently, there can exist a point beyond which additional disclosure decreases firm value. We further show that larger firms will tend to adopt stricter disclosure rules than smaller firms, ceteris paribus. Firms with better disclosure will tend, all else equal, to employ more able management. We show that governance reforms that have imposed greater disclosure could, in part, explain recent increases in both CEO compensation and CEO turnover rates.Corporate governance; Corporate disclosure

Boards of directors as an endogenously determined institution: a survey of the economic literature

The authors identify the primary findings of the empirical literature on boards of directors. Typically, these studies have sought to answer one of the following questions: How are the characteristics of the board related to profitability? How do these characteristics affect boards' observable actions? What factors affect board makeup and evolution? Across these studies, a number of regularities have emerged - notably, the fact that board composition does not seem to predict corporate performance, while board size has a negative relationship to performance. The authors note, however, that because there has been little theory to accompany these studies, it is difficult to interpret the empirical results, particularly with respect to possible policy prescriptions.Corporate governance ; Corporate profits

Contract Renegotiation in Agency Problems

This paper studies the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can hold up the agent, undermining the agent's investment incentives. We begin by identifying a countervailing effect: Investment by the agent can increase his value for the asset, thus improving his bargaining position in renegotiation. We show that option contracts will achieve the first best whenever this threat-point effect dominates the holdup effect. Otherwise, achieving the first best is difficult and, in many cases, impossible. In such cases, we show that if parties have an appropriate signal available, then the first best is still attainable for a wide class of bargaining procedures. A noisy signal, however, means that the optimal contract will involve terms that courts might view as punitive and so refuse to enforce.

A Framework for Assessing Corporate Governance Reform

In light of recent corporate scandals, numerous proposals have been introduced for reforming corporate governance. This paper provides a theoretical framework through which to evaluate these reforms. Unlike various ad hoc arguments, this framework recognizes that governance structures arise endogenously in response to the constrained optimization problems faced by the relevant parties. Contract theory provides a set of necessary conditions under which governance reform can be welfare-improving: 1) There is asymmetric information at the time of contracting; or 2) Governance failures impose externalities on third parties; or 3) The state has access to remedies or punishments that are not available to third parties. We provide a series of models that illustrate the importance of these conditions and what can go wrong if they are not met.

Extensive horizontal gene transfer in cheese-associated bacteria.

Acquisition of genes through horizontal gene transfer (HGT) allows microbes to rapidly gain new capabilities and adapt to new or changing environments. Identifying widespread HGT regions within multispecies microbiomes can pinpoint the molecular mechanisms that play key roles in microbiome assembly. We sought to identify horizontally transferred genes within a model microbiome, the cheese rind. Comparing 31 newly sequenced and 134 previously sequenced bacterial isolates from cheese rinds, we identified over 200 putative horizontally transferred genomic regions containing 4733 protein coding genes. The largest of these regions are enriched for genes involved in siderophore acquisition, and are widely distributed in cheese rinds in both Europe and the US. These results suggest that HGT is prevalent in cheese rind microbiomes, and that identification of genes that are frequently transferred in a particular environment may provide insight into the selective forces shaping microbial communities

Microwave detection of buried mines using non-contact, synthetic near-field focusing

Existing ground penetrating radars (GPR) are limited in their 3-D resolution. For the detection of buried land-mines, their performance is also seriously restricted by `clutter'. Previous work by the authors has concentrated on removing these limitations by employing multi-static synthetic focusing from a 2-D real aperture. This contribution presents this novel concept, describes the proposed implementation, examines the influence of clutter and of various ground features on the system's performance, and discusses such practicalities as digitisation and time-sharing of a single transmitter and receiver. Experimental results from a variety of scenarios are presented

Nonlinear dynamics of flexural wave turbulence

The Kolmogorov-Zakharov spectrum predicted by the Weak Turbulence Theory remains elusive for wave turbulence of flexural waves at the surface of an thin elastic plate. We report a direct measurement of the nonlinear timescale $T_{NL}$ related to energy transfer between waves. This time scale is extracted from the space-time measurement of the deformation of the plate by studying the temporal dynamics of wavelet coefficients of the turbulent field. The central hypothesis of the theory is the time scale separation between dissipative time scale, nonlinear time scale and the period of the wave ($T_d>>T_{NL}>>T$). We observe that this scale separation is valid in our system. The discrete modes due to the finite size effects are responsible for the disagreement between observations and theory. A crossover from continuous weak turbulence and discrete turbulence is observed when the nonlinear time scale is of the same order of magnitude as the frequency separation of the discrete modes. The Kolmogorov-Zakharov energy cascade is then strongly altered and is frozen before reaching the dissipative regime expected in the theory.Comment: accepted for publication in Physical Review

Synthetically-focused surface-penetrating radar for operation from a moving vehicle

This paper reports on a research programme, started recently under DERA sponsorship, on applying synthetic focusing to an oblong horizontal stand-off array, where all the voxels in a vertical slice underneath the centre-line of the array are synthesised electronically, with the third dimension provided by the search vehicle's forward movement. This should permit a very high search rate for buried mines, in a wide range of ground conditions

Re-entrant magnetic field induced charge and spin gaps in the coupled dual-chain quasi-one dimensional organic conductor Perylene2_2[Pt(mnt)2_2]

An inductive method is used to follow the magnetic field-dependent susceptibility of the coupled charge density wave (CDW) and spin-Peierls (SP) ordered state behavior in the dual chain organic conductor Perylene$_2$[Pt(mnt)$_2$]. In addition to the coexisting SP-CDW state phase below 8 K and 20 T, the measurements show that a second spin-gapped phase appears above 20 T that coincides with a field-induced insulating phase. The results support a strong coupling of the CDW and SP order parameters even in high magnetic fields, and provide new insight into the nature of the magnetic susceptibility of dual-chain spin and charge systems.Comment: 6 pages, 6 figure