FinTech revolution: the impact of management information systems upon relative firm value and risk

The FinTech or ‘financial technology’ revolution has been gaining increasing interest as technologies are fundamentally changing the business of financial services. Consequently, financial technology is playing an increasingly important role in providing relative performance growth to firms. It is also well known that such relative performance can be observed through pairs trading investment. Therefore pairs trading have implications for understanding financial technology performance, yet the relationships between relative firm value and financial technology are not well understood. In this paper we investigate the impact of financial technology upon relative firm value in the banking sector. Firstly, using pairs trade data we show that financial technologies reveal differences in relative operational performance of firms, providing insight on the value of financial technologies. Secondly, we find that contribution of relative firm value growth from financial technologies is dependent on the specific business characteristics of the technology, such as the business application and activity type. Finally, we show that financial technologies impact the operational risk of firms and so firms need to take into account both the value and risk benefits in implementing new technological innovations. This paper will be of interest to academics and industry professionals

Board Composition, Corporate Performance, and the Cadbury Committee Recommendation

During the 1990s and beyond, countries around the world have witnessed calls and/or mandates for more outside directors on publicly-traded companies’ boards even though extant studies find no significant correlation between outside directors and corporate performance. We examine the connection between changes in board composition and corporate performance in the UK over the interval 1989–1996, a period that surrounds publication of the Cadbury Report calling for at least three outside directors for publicly-traded corporations. We find that companies that added directors to conform with this standard exhibited a significant improvement in operating performance both in absolute terms and relative to various peer-group benchmarks. We also find a statistically significant increase in stock prices around announcements that outside directors are added in conformance with this recommendation. We do not necessarily endorse mandated board structures, but the evidence appears to be that such a mandate was associated with an improvement in performance in UK companies

Outside Directors and Corporate Board Decisions

Between 1993 and 2000 at least 18 countries saw publication of guidelines that propose minimum representation of outside directors on corporate boards. The apparent premise underlying this movement is that boards with significant outside directors will make different and, perhaps, better decisions than boards dominated by inside directors. As the first-mover in this movement, the U.K. provides a laboratory for a “natural experiment” to examine this presumption empirically. We investigate one important board task - - the appointment of the CEO - - to determine whether boards are more likely to appoint an outside CEO after they have increased the representation of outside directors to comply with the exogenously imposed standards. We find that the (coerced) increase in outside directors leads to an increase in the likelihood of an outside CEO appointment. Additionally, announcement period stock returns indicate that investors appear to view appointments of outside CEOs as good news. Apparently, boards with more outside directors make different (and perhaps better) decisions

Dominant Shareholders, Corporate Boards and Corporate Value: A Cross-Country Analysis

We investigate the relation between corporate value and the fraction of independent directors in 799 firms with a dominant shareholder across 22 countries. We find a positive relation, especially in countries with weak legal protection for shareholders. The findings suggest that a dominant shareholder, were he so inclined, could offset, at least in part, the documented value discount associated with weak country-level shareholder protection by appointing an ‘independent’ board. The cost to the dominant shareholder of doing so is the loss in perquisites associated with being a dominant shareholder. Thus, not all dominant shareholders will choose independent boards

A market- and accounting-based analysis of changes in UK corporate management

SIGLEAvailable from British Library Document Supply Centre-DSC:DX199008 / BLDSC - British Library Document Supply CentreGBUnited Kingdo

The Cadbury Committee, Corporate Performance and Top Management Turnover

In December 1992, the Cadbury Committee published the Code of Best Practice which recommended that boards of publicly-traded UK corporations include at least three outside directors and that the positions of the chairman of the board and chief executive officer not be held by a single individual. The underlying presumption was that these government-sponsored recommendations would lead to enhanced board oversight. As a test of that presumption, we analyze the relation between top management turnover and corporate performance. We find that CEO turnover increased following publications of the Code, that the relationship between CEO turnover and performance was strengthened following publication of the Code, and that the increase in the sensitivity of turnover to performance was concentrated among firms that adopted the Cadbury Committee\u27s recommendation