Corporate Governance and Control

Corporate governance is concerned with the resolution of collective action problems among dispersed investors and the reconciliation of conflicts of interest between various corporate claimholders. In this survey we review the theoretical and empirical research on the main mechanisms of corporate control, discuss the main legal and regulatory institutions in different countries, and examine the comparative corporate governance literature. A fundamental dilemma of corporate governance emerges from this overview: regulation of large shareholder intervention may provide better protection to small shareholders; but such regulations may increase managerial discretion and scope for abuse.

Imperfect Market Monitoring and SOES Trading

We develop a model of price formation in a dealership market where monitoring of the information flow requires costly effort. The result is imperfect monitoring, which creates profit opportunities for speculators, who do not act as dealers but simply monitor the information flow and quote updates in order to pick off stale quotes. Externalities associated with monitoring can help to sustain non-competitive spreads. We show that protecting dealers against the execution of stale quotes can result in larger spreads and be detrimental to price discovery due to externalities in monitoring. A reduction in the minimum quoted depth will reduce the spread and speculators' trading frequency. Our analysis is relevant for the SOES debate given that the behavior of speculators in our model is very similar to the alleged behavior of the real world SOES bandits.monitoring; bid-ask spread; automatic execution; SOES trading

Dual capacity trading and the quality of the market

Securities

Auction and dealership markets: what is the difference?

In the 1980s, the practice of listing stocks in several exchanges has become more frequent, and as a result investors have gained access to alternative trading systems to exchange the same stock. For instance, French, Italian and Spanish "blue chip" stocks can now be traded in their domestic exchanges, organised as auction markets, as well as in the London SEAQ International market, which is a dealership market. The key difference is that while in auction markets all outstanding orders are transacted at a single price via a centralized mechanism, in dealership markets they are placed with individual dealers, who execute them at preset quoted prices

What Makes Stock Exchanges Succeed? Evidence from Cross-Listing Decisions

Despite the increasing integration of capital markets, geography has not yet become irrelevant to finance. Between 1986 and 1997, European public companies have increasingly listed abroad, especially in the U.S. We relate the cross-listing decisions to the characteristics of the destination exchanges (and countries) relative to those of the home exchange (and country). European companies appear more likely to cross-list in more liquid and larger markets, and in markets where several companies from their industry are already cross-listed. They are also more likely to cross-list in countries with better investor protection, and more efficient courts and bureaucracy, but not with more stringent accounting standards.cross-listings, going public, initial public offerings, geography, stock market competition