How Directors’ Foreign Board Experience Improves Governance

The corporate governance literature has shown a strong link between good governance practices and firm value. The mechanisms, however, that determine the choice of effective corporate governance and board arrangements in a changing global market are not well studied. In our new working paper “Governance Transfer Through Directors’ Foreign Board Experiences,” we examine one such potential mechanism—whether firms learn about corporate governance and board practices from their directors’ foreign board experiences.

Directors with international board experiences have access to a much larger and more diverse set of governance practices than directors who only sit on domestic firms’ boards. For example, … Read more

Venturing Beyond the IPO: Venture Capitalists’ Investments in Newly Public Firms

A wide body of literature emphasizes that venture capitalists focus on young private companies, generally in high-tech industries. However, contrary to this notion, we find that 29% of the firms that were backed by VCs prior to the IPO received additional VC funding within the first five years after the IPO, in a sample of IPOs between 1988 and 2010.

We find that this post-IPO VC financing is focused on companies with high information asymmetry and substantial growth opportunities.  These   companies  might otherwise find it difficult to raise capital at a viable price (see, e.g., Myers and Majluf, 1984).  In … Read more

Public versus Private Provision of Governance: The Case of Proxy Access

The tradeoffs between facilitating private contracting or imposing a one-size-fits-all solution by regulatory mandate are often unclear. In the field of corporate governance, predicting which approach would be more efficient is particularly complicated. Because the optimal level of shareholder rights may vary across firms, a universal public mandate may be a blunt solution when compared to private contracting. On the other hand, agency problems may impede private market forces, as when entrenched boards resist changes desired by shareholders.

In our new working paper, “Public versus Private Provision of Governance: The Case of Proxy Access,” we study a unique … Read more