Signaling about norms: socialization under strategic uncertainty

We consider a signaling model where adults possess information about the dominant social norm. Children want to conform to whatever norm is dominant but, lacking accurate information, take the observed behavior of their parent as representative. We show that this causes a signaling distortion in adult behavior, even in the absence of conflicts of interest. Parents adopt attitudes that encourage their children to behave in a socially safe way, i.e. the way that would be optimal under maximum uncertainty about the prevailing social norm. We discuss applications to sexual attitudes, collective reputation, and trust

An examination of the relationship of governance structure and performance: Evidence from banking companies in Bangladesh

Corporate governance has become increasingly important in developed and developing countries just after a series of corporate scandals and failures in a number of countries. Corporate governance structure is often viewed as a means of corporate success despite prior studies reveal mixed, somewhere conflicting and ambiguous, and somewhere no relationship between governance structure and performance. This study empirically investigates the relationship between corporate governance mechanisms and financial performance of listed banking companies in Bangladesh by using two multiple regression models. The study reveals that a good number of companies do not comply with the regulatory requirements indicating remarkable shortfall in corporate governance practice. The companies are run by the professional managers having no duality and no ownership interest for which they are compensated by high remuneration to curb agency conflict. Apart from some inconsistent relationship between some corporate variables, the corporate governance mechanisms do not appear to have significant relationship with financial performances. The findings reveal an insignificant negative impact or somewhere no impact of independent directors and non-independent non-executive directors on the level of performance that strongly support the concept that the managers are essentially worthy of trust and earn returns for the owners as claimed by stewardship theory. The study provides support for the view that while much emphasis on corporate governance mechanisms is necessary to safeguard the interest of stakeholders; corporate governance on its own, as a set of codes or standards for corporate conformance, cannot make a company successful. Companies need to balance corporate governance mechanisms with performance by adopting strategic decision and risk management with the efficient utilization of the organization’s resources

The impact of board size on firm performance: evidence from the UK

We examine the impact of board size on firm performance for a large sample of 2746 UK listed firms over 1981-2002. The UK provides an interesting institutional setting, because UK boards play a weak monitoring role and therefore any negative effect of large board size is likely to reflect the malfunction of the board's advisory rather than monitoring role. We find that board size has a strong negative impact on profitability, Tobin's Q and share returns. This result is robust across econometric models that control for different types of endogeneity. We find no evidence that firm characteristics that determine board size in the UK lead to a more positive board size-firm performance relation. In contrast, we find that the negative relation is strongest for large firms, which tend to have larger boards. Overall, our evidence supports the argument that problems of poor communication and decision-making undermine the effectiveness of large boards

Leadership in agricultural machinery circles: experimental evidence from Tajikistan

Leadership is critical for the viability of rural groups. The way in which leadership is legitimised can mediate leader and group member behaviour in the face of social dilemmas. Yet there has been scant research on leader‐follower dynamics in naturally occurring groups. Highlighting the case of agricultural machinery circles in Tajikistan, the effect of leading by example on investments to a collective good is studied in a framed field experiment. To increase realism, and contrary to standard economic experiments, this investment is a voucher allowing the group to make a real‐world machinery purchase at reduced costs. Two treatments manipulate leaders’ legitimisation. Elected leaders achieve 30 per cent higher contributions to the collective investment against a baseline version without a leader. Contributions remain, on average, relatively stable over the course of the game. The results are discussed with reference to the debate on external intervention in agricultural producer organisations.Peer Reviewe

Corporate Watchdogs

© 2019 Financial Management Association International We investigate the role of financial analysts as corporate watchdogs. We show that firms that are subject to intense analyst monitoring are more likely to be investigated by the Securities and Exchange Commission or to be the subject of a securities class action. Using cross-sectional variations in managerial entrenchment, we find that this effect is not a reflection of the “dark side of analyst coverage,” analysts pushing executives to misbehave to exceed short-term expectations. Our findings are robust to different identification strategies addressing the endogeneity of analyst coverage decisions

Financial experts on the board: does it matter for the profitability and risk of the u.k. banking industry?

This paper explores the relation between board-level financial expertise, the profitability and the risk profile with panel data from the UK banking industry. The empirical findings document that collectively, financial experts have a positive influence on the performance outcomes of banks, they contribute to higher risks, especially in the case of large banks, while they improve the stock performance of the associated banks. Moreover, the results highlight that board-level qualified accountants have no statistical effect on that profitability, while such a positive link is established for the case of financial and banking professors, as well as for financial experts from other industries. Such findings imply that these two groups of professional financial experts may be easier adopted at group-level profits enhancement. Robustness checks confirm the results for all types of banking institutions, except those with a strong real-estate activity portfolio. Finally, certain commercial and/or policy implications of the results are reported.N/

Director-Liability-Reduction Laws and Conditional Conservatism

We study non-officer directors’ causal influence on the conditional conservatism of firms’ financial statements. We treat director-liability-reduction laws enacted by the 50 U.S. states in different years since 1986 as exogenous shocks to non-officer directors’ litigation risk. We find decreases in conditional conservatism after the law enactments, which vary predictably with cross-sectional variation in the demand for conditional conservatism from shareholders and lenders. We show that these effects flow through current asset decreases and switches away from Big N auditors. The results are robust to controlling for state antitakeover laws, tests for endogenous law enactment and parallel trends, and other sensitivity checks. Our results are consistent with non-officer directors monitoring and influencing the financial reporting process and have implications for corporate governance and corporate law reforms

The Impact of Gender Diversity on the Performance of Business Teams: Evidence from a Field Experiment

This paper reports on a field experiment conducted to estimate the impact of the share of women in business teams on their performance. Teams consisting of undergraduate students in business studies start up a venture as part of their curriculum. We manipulated the gender composition of teams and assigned students randomly to teams, conditional on their gender. We find that teams with an equal gender mix perform better than male-dominated teams in terms of sales and profits. We explore various mechanisms suggested in the literature to explain this positive effect of gender diversity on performance (including complementarities, learning, monitoring, and conflicts) but find no support for them

Board gender diversity and firm performance: the UK evidence

The file attached to this record is the author's final peer reviewed version.open access articleThis paper examines the relationship between gender diversity, selected female attributes and financial performance of FTSE 100 firms in the UK. Drawing on critical mass theory by measuring gender diversity as levels of female representation in the boardroom, this study finds a positive and significant relationship between gender diversity and firm performance. However, the results become highly significant and unequivocal when three or more females are appointed to the board compared to the appointment of two or less females. Further analysis reveals that post-appointment financial performance is positively related to female age, level of education and where female board members also hold executive director positions. The results remain unchanged after accounting for endogeneity concerns and employing alternative measures of firm performance, namely, return on assets and Tobin’s Q