Shareholder Activism through Proxy Proposals: The European Perspective

This paper is the first to investigate the corporate governance role of shareholderinitiated proxy proposals in European firms. While proposals in the US are nonbinding even if they pass the shareholder vote, they are legally binding in the UK and most of Continental Europe. Nonetheless, submissions remain relatively infrequent in Continental Europe in particular, with major variations across countries in ownership structures, monitoring incentives, and the laws and regulations governing shareholder access to the proxy. We use sample selection models to analyze target selection and proposal success in terms of the voting outcomes and the stock price effects, and make several contributions to the literature. First, proposal submissions remain infrequent compared to the US in Continental Europe in particular. In the UK proposals typically relate to a proxy contest seeking board changes, while in Continental Europe they are more focused on specific governance issues. Second, there is some evidence that the proposal sponsors are valuable monitors, because the target firms tend to underperform and have low leverage. The sponsors also observe the identity of the voting shareholders, because proposal probability increases in the target’s ownership concentration and the equity stake of institutional investors. Third, while proposals enjoy limited voting success across Europe, they are relatively more successful in the UK. The outcomes are strongest for proposals targeting the board but are also affected by the target characteristics including the CEO’s pay-performance sensitivity. Finally, proposals are met with strong negative stock price effects when they are voted upon at general meetings. This suggests that rather than attribute them control benefits, the market often interprets proposals and their failure to pass the vote as a negative signal of governance concerns. Indeed, the market responds better to proposals submitted against large firms with low leverage, which is consistent with agency considerations. However, the stock price effects are most negative for poorly performing firms with low market-to-book ratios, which implies that the proposal outcomes only intensify the market’s concerns over firms that have previously underperformed.Shareholder activism;shareholder proposals;corporate governance;sample selection

Foreign Bond Markets and Financial Market Development: International Perspectives

The domestic bond markets of the Asia and Pacific region have grown considerably since the Asian financial crisis of 1997, although they remain undeveloped relative to the region's weight in the world economy. This paper proposes that in order to encourage further development of these markets, regulators should make them more accessible to foreign borrowers. To that end we offer insights into the nature and mechanics of foreign bond issuance by investigating the key characteristics of 3,132 foreign bonds issued in 14 countries (other than the United States) between July 1928 and June 2009. We found that the foreign borrowers that tap domestic markets are overwhelmingly of high credit quality and comprise sovereigns, supranationals, and major financial institutions. There is a preference for simple fixed-rate payment structures, which can then be swapped into the currency and coupon type of choice using currency and interest rate derivatives. On the whole, the long-term viability of foreign bond markets appears linked to the presence of highly liquid foreign exchange and derivatives markets that facilitate risk management and transformation, enabling regulation that facilitates cooperation with market participants, the presence of benchmark issues, and competitive pricing between alternate market segments.bond markets; financial market development; foreign bonds

Initial data for black hole-neutron star binaries, with rotating stars

The coalescence of a neutron star with a black hole is a primary science target of ground-based gravitational wave detectors. Constraining or measuring the neutron star spin directly from gravitational wave observations requires knowledge of the dependence of the emission properties of these systems on the neutron star spin. This paper lays foundations for this task, by developing a numerical method to construct initial data for black hole--neutron star binaries with arbitrary spin on the neutron star. We demonstrate the robustness of the code by constructing initial-data sets in large regions of the parameter space. In addition to varying the neutron star spin-magnitude and spin-direction, we also explore neutron star compactness, mass-ratio, black hole spin, and black hole spin-direction. Specifically, we are able to construct initial data sets with neutron stars spinning near centrifugal break-up, and with black hole spins as large as $S_{\rm BH}/M_{\rm BH}^2=0.99$.Comment: 25 pages, 12 figure

Massive disk formation in the tidal disruption of a neutron star by a nearly extremal black hole

Black hole-neutron star (BHNS) binaries are important sources of gravitational waves for second-generation interferometers, and BHNS mergers are also a proposed engine for short, hard gamma-ray bursts. The behavior of both the spacetime (and thus the emitted gravitational waves) and the neutron star matter in a BHNS merger depend strongly and nonlinearly on the black hole's spin. While there is a significant possibility that astrophysical black holes could have spins that are nearly extremal (i.e. near the theoretical maximum), to date fully relativistic simulations of BHNS binaries have included black-hole spins only up to $S/M^2$=0.9, which corresponds to the black hole having approximately half as much rotational energy as possible, given the black hole's mass. In this paper, we present a new simulation of a BHNS binary with a mass ratio $q=3$ and black-hole spin $S/M^2$=0.97, the highest simulated to date. We find that the black hole's large spin leads to the most massive accretion disk and the largest tidal tail outflow of any fully relativistic BHNS simulations to date, even exceeding the results implied by extrapolating results from simulations with lower black-hole spin. The disk appears to be remarkably stable. We also find that the high black-hole spin persists until shortly before the time of merger; afterwards, both merger and accretion spin down the black hole.Comment: 20 pages, 10 figures, submitted to Classical and Quantum Gravit

Inspiral-merger-ringdown waveforms of spinning, precessing black-hole binaries in the effective-one-body formalism

We describe a general procedure to generate spinning, precessing waveforms that include inspiral, merger and ringdown stages in the effective-one-body (EOB) approach. The procedure uses a precessing frame in which precession-induced amplitude and phase modulations are minimized, and an inertial frame, aligned with the spin of the final black hole, in which we carry out the matching of the inspiral-plunge to merger-ringdown waveforms. As a first application, we build spinning, precessing EOB waveforms for the gravitational modes l=2 such that in the nonprecessing limit those waveforms agree with the EOB waveforms recently calibrated to numerical-relativity waveforms. Without recalibrating the EOB model, we then compare EOB and post-Newtonian precessing waveforms to two numerical-relativity waveforms produced by the Caltech-Cornell-CITA collaboration. The numerical waveforms are strongly precessing and have 35 and 65 gravitational-wave cycles. We find a remarkable agreement between EOB and numerical-relativity precessing waveforms and spins' evolutions. The phase difference is ~ 0.2 rad at merger, while the mismatches, computed using the advanced-LIGO noise spectral density, are below 2% when maximizing only on the time and phase at coalescence and on the polarization angle.Comment: 17 pages, 10 figure

Numerical relativity reaching into post-Newtonian territory: a compact-object binary simulation spanning 350 gravitational-wave cycles

We present the first numerical-relativity simulation of a compact-object binary whose gravitational waveform is long enough to cover the entire frequency band of advanced gravitational-wave detectors, such as LIGO, Virgo and KAGRA, for mass ratio 7 and total mass as low as $45.5\,M_\odot$. We find that effective-one-body models, either uncalibrated or calibrated against substantially shorter numerical-relativity waveforms at smaller mass ratios, reproduce our new waveform remarkably well, with a negligible loss in detection rate due to modeling error. In contrast, post-Newtonian inspiral waveforms and existing calibrated phenomenological inspiral-merger-ringdown waveforms display greater disagreement with our new simulation. The disagreement varies substantially depending on the specific post-Newtonian approximant used

Suitability of hybrid gravitational waveforms for unequal-mass binaries

This article studies sufficient accuracy criteria of hybrid post-Newtonian (PN) and numerical relativity (NR) waveforms for parameter estimation of strong binary black-hole sources in second- generation ground-based gravitational-wave detectors. We investigate equal-mass non-spinning binaries with a new 33-orbit NR waveform, as well as unequal-mass binaries with mass ratios 2, 3, 4 and 6. For equal masses, the 33-orbit NR waveform allows us to recover previous results and to extend the analysis toward matching at lower frequencies. For unequal masses, the errors between different PN approximants increase with mass ratio. Thus, at 3.5PN, hybrids for higher-mass-ratio systems would require NR waveforms with many more gravitational-wave (GW) cycles to guarantee no adverse impact on parameter estimation. Furthermore, we investigate the potential improvement in hybrid waveforms that can be expected from 4th order post-Newtonian waveforms, and find that knowledge of this 4th post-Newtonian order would significantly improve the accuracy of hybrid waveforms.Comment: 11 pages, 14 figure