Institutional Investor Preferences and Executive Compensation (Revision of 2011-103)

Abstract: In this paper, we investigate the attitudes of institutional investors, such as hedge funds, insurance companies, mutual funds and pension funds, towards a key corporate governance mechanism, namely executive compensation. We document the preferences they have about both the level and structure of executive compensation. Our analysis takes a comparative approach as we ask investors to reveal their preferences both for firms in the U.S. and in The Netherlands. Our analysis further sheds light on who should decide on executive pay, thereby contributing to the recent debate on shareholder involvement in executive pay. Finally, we examine their views on the most important and largest component of executive pay, executive stock options, and investigate what preferences they have when it comes to the design of such options.Executive Compensation;Institutional Investors;Corporate Governance.

Bank Reputation in the Private Debt Market

We examine the impact of lead arrangers’ reputation on the design of loan contracts such as spread and fees charged. Controlling for the non-randomness of the lender-borrower match (self-selection bias), we find that the reputation of top tier arrangers leads to higher spreads, and that top tier arrangers retain larger fractions of their loans in their syndicates. These larger spreads are especially pronounced for borrowers without credit rating that have the most to gain from the certification assumed by virtue of a loan contract with a top tier arranger. This certification channel differs from the one found in public markets, where certification leads to a reduced spread offered to the best clients. These differences between public and private markets can be explained by differences in the way they operate and are structured. Interestingly, the effect is strongest for transactions done after the changes in the banking regulations (including the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994) that led to significant consolidations in the banking industry, including among the largest commercial banks.private debt;syndicated loans;bank reputation;syndication;certification

Tranching in the Syndicated Loan Market

We use data comprising over 100,000 loans from 115 countries during 1995-2009 to examine factors that affect the extent of loan tranching, and the range of tranche spreads. The data show five factors that drive them: asymmetric information, borrower risk, transaction costs, the presence of institutional investors, and the legal system. Tranching is more extensive and generates greater differences in spreads between tranches of a same loan when asymmetric information and risk are more pronounced. Economic and institutional factors driving tranching are more directly applicable to non-investment grade loans. For developing countries, the data highlight factors that affect the extent of tranching but such factors show little sensitivity to the pricing of the relative spreads.Loan;Debt finance;Tranche;Law and finance

The Rise and Fall of the European New Markets: On the Short and Long-Run Performance of High-Tech Initial Public Offerings

initial public offerings;underpricing;long-run underperformance;stock exchange regulation;listing rules

Does the European company prevent the 'Delaware-effect'?

This article analyses the history of EU company law and locates a stable ‘non-competitive equilibrium’. This equilibrium follows from Member States that founded the EU unwilling to give up their lawmaking authority regarding company law issues. From the outset, Member States were determined to prevent the ‘Delaware effect’. Since then, stability has ruled. The agenda-setting in EU company law has changed little during the existence of the EU. Operative incentives, market structure and regulatory results have been more constant than dynamic, even as the recent enactment of the European Company has triggered discussion about competitive lawmaking in Europe

Institutional Investor Preferences and Executive Compensation (Revision of 2011-103)

Abstract: In this paper, we investigate the attitudes of institutional investors, such as hedge funds, insurance companies, mutual funds and pension funds, towards a key corporate governance mechanism, namely executive compensation. We document the preferences they have about both the level and structure of executive compensation. Our analysis takes a comparative approach as we ask investors to reveal their preferences both for firms in the U.S. and in The Netherlands. Our analysis further sheds light on who should decide on executive pay, thereby contributing to the recent debate on shareholder involvement in executive pay. Finally, we examine their views on the most important and largest component of executive pay, executive stock options, and investigate what preferences they have when it comes to the design of such options.