Corporate governance : a study of director liability, firm performance and shareholder wealth

This study examines the relationship between the composition of the board of directors, director liability, the firm's performance and shareholder wealth. The existence of a director liability crisis is first examined. Both anecdotal and empirical evidence suggest that such a crisis did indeed occur. The evidence also suggests that the "crisis" primarily hurt firms that were performing poorly. To verify the existence of a "crisis" and to gain insight into the effect director resignations have on firm value, a sample of firms, where more than one director resigned at the same time, is collected. This sample spans the period when it is hypothesized that a crisis occurred and the period following the "crisis". As predicted, shareholders response to directors resignations are significantly different during these two periods. During the "crisis" years the resignation of directors results in a loss to firm value for all firms. The magnitude of the loss is directly related to firm performance. Alternatively, following the "crisis", the relationship between performance and shareholder response to the directors resignation is inverse and not always negative. These results suggest that the board's composition can effect firm value and that during the "crisis" period directors were hard to replace and therefore their resignations reduced firm value. The more negative response from poorly performing firms suggests that for these firms directors are especially valuable. Under normal conditions, i.e., after the "crisis", shareholders view changes in board composition as positive events in firms that are doing poorly, and as a negative signal from firms that are doing well. An examination of the event that legally eliminated the "director liability crisis," i.e., the adoption of provisions eliminating directors' liability, provides further evidence as to the importance of directors to poorly performing firms. Shareholders of poorly performing firms respond positively to the adoption of these provisions, emphasizing the importance of maintaining the integrity of the board of directors. For other firms, this is less important and the adoption of these provisions does not effect firm value.Business Administratio

Ayn Rand rewrote the story of capitalism to show that it is a necessary good

The 2008 financial crisis gave rise to sustained criticism of capitalism as an economic system, with many of its advocates conceding that while an immoral system, it is also a ‘necessary evil’. Reflecting on the writings of Ayn Rand, Yaron Brook and Don Watkins reject this view, and instead argue that capitalism is a necessary good. They maintain that capitalism is the only social system that takes into account people’s rationality, enabling them to survive and prosper through self-interest

Dr. Yaron Brook discusses Democracy vs. Victory: Why the Forward Strategy of Freedom Had to Fail at the Ford Hall Forum, audio recording

After Sept. 11th, the Bush administration declared that we must bring freedom to the Middle Eastern nations that threaten us; thus, the Forward Strategy of Freedom. By establishing democracies in key Muslim countries, starting with Afghanistan and Iraq, we would spur a revolution in the rest of the Muslim world—a revolution that would bring free, pro-Western, anti-terrorist governments to power. But the strategy has failed. The Muslim world has grown more militant, radical leaders are being elected to power, and Islamic totalitarian groups like Hamas and Hezbollah are on the rise. Dr. Yaron Brook discusses the inherent flaws of the Forward Strategy of Freedom and explore what should replace it.https://dc.suffolk.edu/fhf-av/1066/thumbnail.jp

The Gains from Takeover Deregulation: Evidence from the End of Interstate Banking Restrictions

This paper uses interstate banking deregulation to explore the benefits of takeover deregulation and how these benefits are distributed across different firms. We find large and significant abnormal returns around the Interstate Banking and Branching Efficiency Act of 1994 which imply it created $85 billion of value in the banking industry. Consistent with an active market for corporate control allowing beneficial consolidation and providing needed discipline, there is a strong negative relationship between banks\u27 abnormal returns and their prior performance. Consistent with managerial entrenchment limiting takeover discipline, banks with higher insider ownership, lower outside block ownership, and/or less independent boards have lower abnormal returns

Corporate Governance and Recent Consolidation in the Banking Industry

Using the universe of publicly traded banks at year-end 1993, we find that target banks\u27 outside directors, but not inside directors, tend to own more stock than their counterparts in other banks. Having an outside blockholder is also associated with banks becoming targets. In contrast to existing research on industrial firms, board structure does not help determine which sample banks sell. Neither the fraction of outsiders on a bank\u27s board nor having an outside-dominated board differentiate the target banks in our sample. Instead, outside directors/shareholders and blockholders appear to be primarily responsible for encouraging bank managers to accept an attractive merger offer

Capitalism vs Socialism Debate

Watch Yaron Brook - Chairman of the Board, Ayn Rand Institute - and Bhaskar Sunkara - Author of “The Socialist Manifesto: The Case for Radical Politics in an Era of Extreme Inequality”- debating about the merits and prospects of Capitalism and Socialism.Salem Cente