Sky Blog
Over the past few decades, the ownership of public corporations has been turned on its head. While private individuals owned approximately two-thirds of U.S. equities in 1970, today it is institutional investors like Blackrock, Vanguard, and State Street that control …
On August 3, the Federal Reserve (Fed) proposed for comment supervisory guidance for boards
of directors of Fed-supervised institutions1 (i.e., Board Effectiveness (BE) guidance). The proposed BE guidance is the result of a multi-year review by the Fed of …
Financial crises and corporate scandals like those involving Enron, Worldcom, or Fannie Mae have triggered increased academic research into the probability of stock price crashes. Stock price crashes have a material impact on investor welfare, and so are of interest …
Few research topics over the last two decades have proven as alluring and elusive as corporate governance. Its allure is self-evident: Since the turn of the 21st century, a growing number of pundits, commentators, and scholars have argued that high …
The news media are an important source of information for the U.S. capital markets, especially when drawing attention to questionable behavior of corporate executives. Coverage can, however, pressure companies into making dubious financial decisions like emphasizing short-term earnings over long-term …
A significant emerging governance issue is how best to monitor – and influence – the management style of senior executives who by nature are insensitive to the risks of their initiatives. As recent controversies across multiple industry sectors confirm, such …
Few areas of business stir up more controversy than private equity. Critics slam private equity firms for destroying companies by layering on debt, firing employees, and cutting costs at every opportunity. Proponents, on the other hand, respond that any changes …
Activist investors that believe an agency problem exists between shareholders and management may attempt a proxy contest aimed at specific issues or control of the board. Research shows that, in anticipation of a proxy contest, managers make significant adjustments in …
After almost every major financial-reporting scandal, news stories and congressional speeches inevitably follow, detailing how corporate culture encouraged and enabled fraud. For example, in September 2016, Wells Fargo CEO John Stumpf testified before the House Financial Services Committee regarding the
A recent essay of mine reflects on the proposition that corporate law should concern itself with social welfare, taking a historical approach. The essay begins with the quarter century after World War II, when corporate legal theory pursued an institutional …
When high-profile cases of fraud make the news, we often focus our attention on the CEO or other C-suite executives, asking what signs were missed and how we might better anticipate who might commit fraud. Academics have researched the characteristics …
Many financial institutions1 have implemented the three Lines of Defense (LoD) model to help define their risk management frameworks and bolster supervisors’ (e.g., desk heads and senior traders) abilities to monitor risk.2 However, as frameworks for managing financial …
The New York Stock Exchange requires that the board of each publicly traded corporation “conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively.” The purpose of this exercise is to ensure that boards …
There is a certain immediate attractiveness associated with the idea of impact investing. The objectives of many impact investors are in some ways similar to those of many critics of capitalist societies: both groups want to contribute to the achievement …
It has long been a policy of corporate law1 that the informed business decisions of independent and disinterested directors are protected by the presumption of the business judgment rule.2 Courts are reluctant to second-guess decisions that are made …
President Trump has repeatedly used his Twitter account to single out companies for criticism of their business practices, raising the question for a broad range of public companies of how to prepare for and potentially respond to such criticism. Of …
In our recent paper, we provide strong empirical evidence that banks play an active role in shaping borrowers’ tax planning. Our evidence is drawn from a comprehensive analysis of the impact of debt covenant violations on corporate tax avoidance.
Covenants …
Operating risk is a major concern for firm management and stakeholders. Stark examples of losses due to corporate operations include BP’s $17.2 billion loss in June 2010 following the Deepwater Horizon incident (Wong and Yousuf, 2010) and Freeport-McMoRan’s $13.9 billion …
This past year witnessed a number of new corporate governance initiatives. Among the most significant:
Why do some firms generate great wealth for investors and offer innovative solutions to problems, while seemingly similar firms are much less successful? Why do employees at some firms repeatedly act unethically, shocking their leaders with scandals, while seemingly similar …