Stock Market Returns, Corporate Governance and Capital Market Equilibrium

This paper analyzes why corporate governance matters for stock returns if the stock market prices the underlying managerial agency problem correctly. Our theory assumes that strict corporate governance prevents managers from diverting cash flows, but reduces incentives for managerial effort. In capital market equilibrium, this trade-off has implications for the firm's earnings, stock returns, and managerial ownership, because governance impacts the firm's risk-return structure. In particular, the strictness of corporate governance is negatively related to earnings and positively to β. Various empirical tests with U.S. data using the governance index of Gompers, Ishii, and Metrick (2003) yield results consistent with these predictions

Handedness modulates proprioceptive drift in the rubber hand illusion

Preference for use of either the left or right hand (‘handedness’) has been linked with modulations of perception and sensory processing—both of space and the body. Here we ask whether multisensory integration of bodily information also varies as a function of handedness. We created a spatial disparity between visual and somatosensory hand position information using the rubber hand illusion, and use the magnitude of illusory shifts in hand position (proprioceptive ‘drift’) as a tool to probe the weighted integration of multisensory information. First, we found drift was significantly reduced when the illusion was performed on the dominant vs. non-dominant hand. We suggest increased manual dexterity of the dominant hand causes greater representational stability and thus an increased resistance to bias by the illusion induction. Second, drift was generally greatest when the hand was in its habitual action space (i.e., near the shoulder of origin), compared to when it laterally displaced towards, or across the midline. This linear effect, however, was only significant for the dominant hand—in both left- and right-handed groups. Thus, our results reveal patterns of habitual hand action modulate drift both within a hand (drift varies with proximity to action space), and between hands (differences in drift between the dominant and non-dominant hands). In contrast, we were unable to find conclusive evidence to support, or contradict, an overall difference between left- and right-handers in susceptibility to RHI drift (i.e., total drift, collapsed across hand positions). In sum, our results provide evidence that patterns of daily activity—and the subsequent patterns of sensory input—shape multisensory integration across space