Faculty Bibliography

In the corporate finance tradition, starting with Berle and Means (1932), corporations should generally be run to maximize shareholder value. The agency view of corporate social responsibility (CSR) considers CSR an agency problem and a waste of corporate resources. Given our identification strategy by means of an instrumental variable approach, we find that well-governed firms that suffer less from agency concerns (less cash abundance, positive pay-for-performance, small control wedge, strong minority protection) engage more in CSR. We also find that a positive relation exists between CSR and value and that CSR attenuates the negative relation between managerial entrenchment and value. (C) 2016 Published by Elsevier B.V.

This paper introduces a new hand-collected data set that tracks restrictions on shareholder rights at approximately 1,000 firms from 1978 to 1989. In conjunction with the 1990 to 2006 IRRC data, we track shareholder rights over 30 years. Most governance changes occurred during the 1980s. We find a robustly negative association between restrictions on shareholder rights (using G-Index as a proxy) and Tobin's Q. The negative association only appears after judicial approval of antitakeover defenses in the 1985 landmark Delaware Supreme Court decision of Moran v. Household. This decision was an unanticipated exogenous shock that increased the importance of shareholder rights.

We propose in this paper the forward-casting method for estimating 10b-5 damages. We argue that this method compares favorably to two commonly used 10b-5 damage methods: constant dollar back-casting and the allocation method. Most importantly, both constant dollar back-casting and the allocation method, in contrast to forward-casting, fail to incorporate market expectations in estimating the stock price that would have obtained absent the alleged fraud. In the course of our discussion, we demonstrate how each one of these three methods work in practice using facts and data from an actual case. The choice of a damage method, as we document, can make a dramatic difference in estimated damages.