Fine-Pruning: Joint Fine-Tuning and Compression of a Convolutional Network with Bayesian Optimization

When approaching a novel visual recognition problem in a specialized image domain, a common strategy is to start with a pre-trained deep neural network and fine-tune it to the specialized domain. If the target domain covers a smaller visual space than the source domain used for pre-training (e.g. ImageNet), the fine-tuned network is likely to be over-parameterized. However, applying network pruning as a post-processing step to reduce the memory requirements has drawbacks: fine-tuning and pruning are performed independently; pruning parameters are set once and cannot adapt over time; and the highly parameterized nature of state-of-the-art pruning methods make it prohibitive to manually search the pruning parameter space for deep networks, leading to coarse approximations. We propose a principled method for jointly fine-tuning and compressing a pre-trained convolutional network that overcomes these limitations. Experiments on two specialized image domains (remote sensing images and describable textures) demonstrate the validity of the proposed approach.Comment: BMVC 2017 ora

Bonding Bankers: Notes Toward a Governance Approach to Risk Regulation

Important regulatory failures have been identified in the wake of the recent financial crisis, and comprehensive regulatory reform has been much on the minds of policymakers. Reform proposals call for a number of significant changes to the scope and structure of financial regulation to address systemic risk. With banking regulation, however, the twin tools of capital requirements and external supervision seem to remain the dominant regulatory levers. In this short discussion, I introduce the contours of an important supplement to the existing approach, a governance approach that uses bank executives\u27 compensation arrangements as a policy lever. I propose that bank executives receive some portion of their compensation in the form of their own bank\u27s publicly issued debt securities. Taking a page from the pay-for-performance movement, I argue that paying bank executives-at least in part-with bank debt securities can blunt the risk taking proclivities that shareholder-centered corporate governance encourages and that equity-based compensation exacerbates. My proposal piggybacks on prior suggestions that banks be required to issue subordinated debt as a device to induce market discipline to counter excessive risk taking

What Else Matters for Corporate Governance?: The Case of Bank Monitoring

We address a crucial but underappreciated question: what else besides corporate law matters for corporate governance? We take the novel view that corporate governance must involve more than corporate law. Corporate scholars focus almost exclusively on corporate law mechanisms for controlling managerial agency costs. We contend, however, that contracting parties also attempt to control agency costs in their contracts with the firm. In particular, we hypothesize that banks, by monitoring firms in connection with their loans, enhance firm value for the benefit of shareholders. We examine over one-thousand public firms for the period 1990-2004 to test the value of bank monitoring. Our approach builds on existing empirical scholarship on corporate governance, to which we add data on the presence of bank loans and their interactions with free cash flow, governance indices, and individual corporate governance provisions. We find evidence consistent with our hypothesis that bank monitoring improves firm value, especially where agency costs are high. Bank monitoring may provide an additional mechanism for corporate governance. Our findings have important implications for both regulatory design and corporate governance. Bank monitoring may offer positive spillovers not previously considered in the crafting of regulation affecting bank lending, creditor rights, and the operation of loan and credit derivatives markets. Legal rules affecting bank lending or monitoring may indirectly and inadvertently affect firm value, a nontrivial consideration given the pervasiveness of bank debt among public companies. We identify a number of regulatory areas that may deserve new attention. Similarly, future empirical corporate governance research should account for the effects of bank governance, as well as investigate further its potential for improving firm value

Financing Failure: Bankruptcy Lending, Credit Market Conditions, and the Financial Crisis

When contemplating Chapter 11, firms often need to seek financing for their continuing operations in bankruptcy. Because such financing would otherwise be hard to find, the Bankruptcy Code authorizes debtors to offer sweeteners to debtor-in-possession (DIP) lenders. These inducements can be effective in attracting financing, but because they are thought to come at the expense of other stakeholders, the Code permits these inducements only if no less generous a package would have been sufficient to obtain the loan. Anecdotal evidence suggests that the use of certain controversial inducements—I focus on roll-ups and milestones—has skyrocketed in recent years, leading critics to question whether DIP lenders were abusing their power. Lenders, however, respond that DIP loan terms simply reflect economic conditions: when credit is tight, as it was in recent years because of the Financial Crisis, more sweeteners are needed to induce lending

The New Death of Contract: Creeping Corporate Fiduciary Duties for Creditors

The article identifies a worrisome trend in corporate law and scholarship. Across seemingly unrelated issue areas, courts and scholars have lost faith in private corporate bargains. They invite judicial intervention into private contract, proposing to expand fiduciary duties beyond their traditional shareholder centered focus to protect non-shareholder claimants from managerial opportunism. When conflict between claimant classes becomes acute, managers pursuing shareholder value may make inefficient investments that benefit shareholders but harm other claimants and the firm generally. I argue that claimants\u27 private contracts with the firm are superior to expanded duty for constraining this opportunism. I focus on one specific conflict - the conflict between shareholders and creditors. Existing doctrine already works a shift in fiduciary duties to creditors when this conflict becomes acute - when a firm becomes insolvent. Scholars propose to expand on current doctrine to include more creditors more of the time. I argue that both existing doctrine and its proposed expansions suffer fatal theoretical infirmities. The chief failing is that the accepted hypothetical bargain analysis from which corporate fiduciary duty derives cannot justify current doctrine or expansion proposals. Expanded duty to creditors is also costly compared to private contract. I propose an approach I call contract primacy. Shareholder primacy should remain the default rule. Private contracting should be effective to curb manager opportunism. Additional legal constraints are costly and unnecessary. Sophisticated creditors typically negotiate elaborate covenant protections by the time a firm is in distress, often to the benefit of other creditors, who implicitly delegate monitoring responsibilities to the low cost monitor. A creditor may even negotiate for control of the firm, displacing shareholder primacy. Against the current doctrine and conventional wisdom, courts should vindicate these contracts for creditor primacy without insisting on the firm\u27s insolvency. The doctrine should be abandoned, and proposals for further expansion of fiduciary duty for creditors should be rejected

Financing Failure: Bankruptcy Lending, Credit Market Conditions, and the Financial Crisis

When contemplating Chapter 11, firms often need to seek financing for their continuing operations in bankruptcy. Because such financing would otherwise be hard to find, the Bankruptcy Code authorizes debtors to offer sweeteners to debtor-in-possession (DIP) lenders. These inducements can be effective in attracting financing, but because they are thought to come at the expense of other stakeholders, the Code permits these inducements only if no less generous a package would have been sufficient to obtain the loan.Anecdotal evidence suggests that the use of certain controversial inducements — I focus on roll-ups and milestones — skyrocketed in recent years, leading critics to question whether DIP lenders were abusing their power. Lenders, however, respond that DIP loan terms simply reflect economic conditions: When credit is tight, as it was in recent years because of the Financial Crisis, more sweeteners are needed to induce lending.Using a hand-collected dataset reflecting contractual detail in DIP loan agreements, I examine the relationship between changes in credit availability and DIP loan terms before, during, and after the Crisis. As one might expect, I find that ordinary loan provisions like pricing and reporting covenants are sensitive to changes in credit availability. By contrast, I also find that the incidence of so-called “extraordinary provisions” has no statistically meaningful relationship with changes in credit availability. These findings have important implications for bankruptcy policymakers and judges struggling to evaluate whether extraordinary DIP lending inducements are necessary. Too-generous loan terms come at the expense of junior claimants and may distort the bankruptcy process in favor of senior claimants

Pay for Banker Performance: Structuring Executive Compensation for Risk Regulation

Excessive risk taking by firm managers did not originate with the Financial Crisis of 2007-08. Though bankers had special incentives to take big risks in the period before the Crisis, the incentive effects of equity-based compensation have been understood for some time. Among other things, equity compensation tends to induce greater risk taking by aligning managers’ risk preferences with those of equity holders. Longstanding government guaranties of bank liabilities additionally served to intensify bankers’ risk taking incentives. I propose to ameliorate this gambler’s incentive with a new approach to compensation at the largest banks, one that explicitly accounts for the possibility of excessive risk taking and incentivizes bankers against it. I propose that bankers be paid in part with their banks’ public subordinated debt securities. Market pricing of this debt will be particularly sensitive to downside risk at the bank. Including it in bankers’ pay arrangements and personal portfolios will therefore give bankers direct personal incentives to avoid excessive risk. Moreover, recent theoretical and empirical research suggests that as CEOs’ holdings of their firms’ debt increases, firm risk taking declines. My approach has important advantages over recent banker pay reform proposals. The largest banks are owned and operated as wholly-owned subsidiaries of bank holding companies (BHCs), which also typically own other financial institutions. Two proposals - one by Lucian Bebchuk and Holger Spamann, and another by Sanjai Bhagat and Roberta Romano - would compensate bankers with BHC securities. But because BHCs own other institutions besides the given banking subsidiary, BHC securities can offer bankers only noisy and indirect incentives with respect to risk taking at the bank. My approach overcomes this problem by paying bankers with debt securities issued by the bank itself, a course unavailable with these other proposals. Debt securities of the bank will be much more sensitive to downside risk at the bank than the BHC equity and other securities that are the focus of these other proposals. In addition, my proposal offers sufficient flexibility to enable the tailoring of banker pay to account for bankers’ existing portfolios of their firms’ securities and other claims on their firms. Because these portfolios typically dwarf bankers’ annual pay, they exert much stronger influence on banker risk taking than does annual pay. Compensation should therefore be structured primarily with these portfolio incentives in mind. My approach facilitates the tailoring of annual pay to achieve desirable portfolio incentives for bankers in a way that existing proposals cannot

The Future Claims Representative in Mass Tort Bankruptcy: A Preliminary Inquiry

Mass torts have becomemoved center stage in the courts, the academy, and the popular press. The plight of mass tort victims—asbestos victims, Dalkon shield users, breast implant recipients, among others—has become standard fare in the media., and cCourts and commentators have struggled for several decades attempting to craft just and workable solutionsresolutions of mass tort liabilities. The challenge is to save the business, restructuring its debts, while providing fair treatment to future claimants and achieving a final resolution of their rights against the business

After Orange County: Reforming California Municipal Bankruptcy Law

Because of federal Constitutional concerns, a municipal entity may resort to federal bankruptcy protection only with the authorization of its state. Federal law requires that a municipality be specifically authorized under state law to file for bankruptcy protection. Existing California law provides fairly broad authorization for its municipalities, but the statute is in need of both technical and substantive revision. After discussing Constitutional concerns and surveying other states\u27 approaches to municipal bankruptcy authorization, this Article recommends a system of discretionary access, in which the governor holds discretionary power to approve, disapprove, or condition a municipality\u27s access to bankruptcy

The Puzzle of Independent Directors: New Learning

In this symposium paper, I discuss and critique some new empirical learning on independent directors. The independent director has always offered a sort of magic bullet for corporate governance, representing the idealized monitor of executives’ behavior. Yet we corporate law scholars also harbor some ambivalence about the magic of this bullet. As much as we want to trust in the promise of independent directors, no solid empirical evidence exists to suggest that independent directors add value. Moreover, we have seen spectacular failures in the face of independent boards. How do we account for this disconnect between our intuitions and best intentions, on the one hand, and the stubborn refusal of the empirical evidence to confirm our faith in independent directors? Several possibilities come to mind. First, existing definitions of independence may be too lax. Independence requirements may fail to screen out important conflicts. A second possibility (not exclusive of the first) is that firms may be heterogeneous, such that optimal board composition may vary across firms. Independent boards may add value at some firms but not others. An emerging theoretical literature argues, for example, that firms’ information environments matter for independent directors’ efficacy. Monitors’ incentives and information are central to constraining agency costs. Happily, two recent empirical studies tackle these important issues. On incentives, one study investigates whether the existence of common backgrounds between CEOs and their nominally independent directors may affect directors’ monitoring. Another recent study focuses on directors’ costs of acquiring information about their firms and the effects of these costs on independent directors’ effectiveness. These studies suggest that the independent director’s place in corporate governance may be more complicated than we thought. We may need to refine our trust in independent directors and tailor our expectations about their utility