A complete guide to pass your exam;
- Summary of the book (Corporate governance: A global perspective by Marc Goegen)
- Summary of lectures (1 to 21)
- Summary of the papers discussed
Motivation hypotheses results compare with literature methodology + data
Position RQs Answers
PAPER 1
Women in the boardroom and their impact on governance and performance
MESSAGE OF THE PAPER Women in the boardroom and their impact on governance
and performance
Position PROBLEM: Female representation in corporate boards is
What us the position of the paper problematic
in the literature? Females less presented
Why should I read the paper? PROBLEM: Tokinism
Why is it valuable? Females only used as tokens
PROBLEM: things are changings more diversity in
boards
Evidence of previous research is mixed
Research Question 1. Do measures of board inputs (director attendance
and committee assignments) vary with gender
diversity?
2. Does the gender composition of the board affect
measures of governance, such as chief executive
officer (CEO) turnover and compensation?
3. Does the effect of gender diversity on governance
matter sufficiently to affect corporate
performance?
Answer 1. Yes
Female less likely to have attendance problems
Female more likely to be on monitoring related
committees
Female less likely t sit on compensation
committee
2. Yes
CEO turnover more sensitive to stock price
changes
3. Mixed
PAPER 2
1
, Management ownership and market evaluation – evaluation by Morck, Schleifer and Vishny
MOTIVATION: Why should firm value and managerial ownership be related?
Convergence of interest
As I am getting owner, I am becoming more responsible and will perform better
o Managers may shirk
o But they are more responsible as their ownership stake increases
Forces: Market discipline, managerial labor market, product market, and market for corporate
control
Ownership is motivation (positive effect on firm value)
Managerial Entrenchment
o Managers control substantial fraction may be too powerful and entrench
Strong voting power, guarantee employment, attractive pays, no hostile takeover
Ownership enables the managers to execute their power, this decreases firm value
Firm Value VS Managerial Ownership
1. First define Firm Value
Performance measure
Tobin’s Q = Market value / replacement costs of it physical assets
Market value Priced by investor in the stock exchange
Market measure
Replacement cost Based on book value
Accounting measure
Market demands, so stock prices increases Q increases
DATA
Large industrial firms, 456 of Fortune 500 firms
Difficult to interpret
- Some observations are very low
- Highly skewed distribution of data on firms
- Correlation unsure (No logical pattern of increasing/decreasing)
- Negligables are ignored
- Outliers may increase error term (decrease precision of estimate)
Linearity
Correlation No clear pattern nonlinearity
Reasons for nonlinearity
- Heterogeneity across the firms
INDENTIFICATION
Y X
Tobin’s Q % of ownership
Piecewise linearity specification
Capture nonlinearity
1. X1 Board ownership 0 – 5%
2. X2 Board ownership 5 – 25%
3. X3 Board ownership >25%
Add control variables to..
2
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