When Managers Bypass Shareholder Approval of Board Appointments: Evidence from the Private Security Market

This paper investigates the influence of managerial entrenchment on private placements by examining the firm\u27s decision to appoint representatives of the private investors to the board without shareholder approval. By analyzing a sample of U.S. firms that appoint directors in combination with private offerings between 1995 and 2000, we find that firms with greater managerial entrenchment are more likely to bypass shareholder approval. Firms that bypass shareholders are less likely to appoint independent directors or to elect one of these directors as chairman. We also show that the market reacts more positively to the private offering announcement when the firm submits its board candidates for shareholder approval. Further, firms that bypass approval underperform compared to firms that obtain it. Overall our findings suggest that managers avoid shareholder approval to perpetuate entrenchment

A Survey of Litigation in Corporate Finance

Purpose The purpose of this paper is to review research on litigation in corporate finance. Design/methodology/approach This paper surveys studies on the estimation of litigation risk, litigation costs, stock reaction to lawsuit announcement, and the effect of litigation on corporate financial policies and outcomes. Findings The first section presents a survey of studies that estimate litigation risk. The authors then discuss a set of studies that focus on the various costs associated with litigation. The third area of review is about studies which estimate the market reaction to a lawsuit announcement. The next section surveys studies that examine the relation between litigation and a variety of corporate policies, behaviors, and outcomes. The authors then discuss the emerging literature on how corporate political connections can influence the outcome of litigation. The survey concludes with a brief summary and a discussion of suggestions for future research involving corporate litigation. Originality/value By providing an extensive review of the literature on litigation in corporate finance, this survey can help researchers to identify recent trends in litigation research and select promising new avenues of investigation in the field

The Effects of Securities Class Action Litigation on Corporate Liquidity and Investment Policy

The risk of securities class action litigation alters corporate savings and investment policy. Firms with greater exposure to securities litigation hold significantly more cash in anticipation of future settlements and other related costs. The result is due to firms accumulating cash in anticipation of lawsuits and not a consequence of plaintiffs targeting firms with high cash levels. The market value of cash is significantly lower for firms exposed to litigation risk. Corporate investment decisions are also affected by litigation risk, as firms reduce capital expenditures in response. Our results are robust to endogeneity concerns and possible spurious temporal effects

A Face Can Launch a Thousand Shares—and an 0.80% Abnormal Return

In this paper we examine the market reaction—price and volume—to the appearance of a firm in the Who’s News column of The Wall Street Journal. We differentiate between those firms whose articles are accompanied by a picture of an executive and a control set of firms whose articles on the same day are not accompanied by a picture. The results show a more pronounced market reaction to the “cum picture” articles, consistent with the incomplete information theory of Merton [1987] and the heuristic-based familiarity hypothesis. There is no evidence of significant long-run abnormal performance for the sample firms

SoftKiller, a particle-level pileup removal method

Existing widely-used pileup removal approaches correct the momenta of individual jets. In this article we introduce an event-level, particle-based pileup correction procedure, SoftKiller. It removes the softest particles in an event, up to a transverse momentum threshold that is determined dynamically on an event-by-event basis. In simulations, this simple procedure appears to be reasonably robust and brings superior jet resolution performance compared to existing jet-based approaches. It is also nearly two orders of magnitude faster than methods based on jet areas.Comment: 26 pages, 16 figures (2 appendices with further checks added

The Discretionary Effect of CEOs and Board Chairs on Corporate Governance Structures

In this study we analyze the effect of latent managerial characteristics on corporate governance. We find that CEO and board chair fixed effects explain a significant portion of the variation in board size, board independence, and CEO-chair duality even after controlling for several firm characteristics and firm fixed effects. The effect of CEOs on corporate governance practices is attributable mainly to executives who simultaneously hold the position of CEO and board chair in the same firm. Our results do not show a decline in CEO discretionary influence on corporate governance after the enactment of the Sarbanes–Oxley Act and stock exchange governance regulations