Papers corporate governance
1. Theory of the firm: managerial behavior, agency costs and ownership structure, Jensen &
Meckling
The firm is a nexus of contractual relationships between individuals
Agency costs arise in firms with dispersed ownership, or firms where the manager is not the
owner.
Agency costs: monitoring, bonding and residual loss
Monitoring costs: costs the principal makes to make sure the agent doesn’t deviate from
doing what’s best for the firm.
Bonding costs: costs the agent is motivated to make to show the principal he’s working in
favour of the best interests of the owner.
Residual loss: the loss of welfare of the principal due to the divergence of incentives
2. The role of boards of directors in corporate governance: a conceptual framework and survey,
Adams, Hermalin & Weisbach
Governance structures arise endogenously because economic actors choose them in
response to the governance issues they face.
Bad type: the probability distribution of the NPV of a bad CEO
Good type: the probability distribution of the NPV of a good CEO
Vi: the point where there is a bigger chance that the CEO is good.
V0: point where NPV is zero.
Outside directors are non-executives, hired from outside the firm, inside directors are hired
from the inside of the firm.
Outside directors are more likely to look at firm performance. If the firm performs poorly, the
CEO of a firm with mainly outside directors is more likely to be fired.
3. CEO selection, succession, compensation and firm performance: a theoretical integration and
empirical analysis, Zajac
Hypothesis 1: Firms whose CEOs were promoted from within will be higher-performing firms.
Hypothesis 2: Firms whose CEOs have a specific successor in mind will be higher-performing
firms
, Hypothesis 3: Firms whose CEOs are more satisfied with their overall personal compensation
will be higher-performing firms
Hypothesis 4: Firms whose CEOs perceive greater connection between their personal wealth
and the wealth of the firm will be higher- performing firms
Hypothesis 5: Firms whose CEOs perceive greater connection between their personal
reputation as CEOs and the wealth of the firm will be higher-performing firms.
Results: hypothesis 1, 2 and 4 seem to be significantly true.
Insider CEO’s are more likely to get chosen because the board knows more about the
candidate and can monitor an insider CEO better, because there’s less information
asymmetry.
4. Understanding Enron: it’s about the gatekeepers, stupid, Coffee
Gatekeepers are reputational intermediaries who provide verification and certification
services to investors. They gatekeep the company’s financial statements, the transactions,
the credit ratings and other things the company does.
5. For Whom is the Corporation Managed in 2020?: The Debate over Corporate Purpose, Rock.
First, what is the best theory of the legal form we call “the corporation”?
Second, how should academic finance understand the properties of the legal form when
building models or engaging in empirical research?
Third, what are good management strategies for building valuable firms?
And, finally, what are the social roles and obligations of large publicly traded firms?
In the traditional view, other social problems have other solutions. But there was political
dysfunction, so that the legislation for the social problems failed.
Financial analyses are often based on stock prices but if it’s not only managed for the
shareholders, stock prices give an inaccurate value.
6. The economic consequences associated with integrated report quality: capital market and
real effects, Barth, Cahan, Chen & Venter
The goal of integrated reporting is to improve external information and to improve internal
decision making.
Study follows several South-African firms. South-Africa had a mandate for integrated
reporting since 2010, except for firms that could explain why they didn’t comply.
1. Theory of the firm: managerial behavior, agency costs and ownership structure, Jensen &
Meckling
The firm is a nexus of contractual relationships between individuals
Agency costs arise in firms with dispersed ownership, or firms where the manager is not the
owner.
Agency costs: monitoring, bonding and residual loss
Monitoring costs: costs the principal makes to make sure the agent doesn’t deviate from
doing what’s best for the firm.
Bonding costs: costs the agent is motivated to make to show the principal he’s working in
favour of the best interests of the owner.
Residual loss: the loss of welfare of the principal due to the divergence of incentives
2. The role of boards of directors in corporate governance: a conceptual framework and survey,
Adams, Hermalin & Weisbach
Governance structures arise endogenously because economic actors choose them in
response to the governance issues they face.
Bad type: the probability distribution of the NPV of a bad CEO
Good type: the probability distribution of the NPV of a good CEO
Vi: the point where there is a bigger chance that the CEO is good.
V0: point where NPV is zero.
Outside directors are non-executives, hired from outside the firm, inside directors are hired
from the inside of the firm.
Outside directors are more likely to look at firm performance. If the firm performs poorly, the
CEO of a firm with mainly outside directors is more likely to be fired.
3. CEO selection, succession, compensation and firm performance: a theoretical integration and
empirical analysis, Zajac
Hypothesis 1: Firms whose CEOs were promoted from within will be higher-performing firms.
Hypothesis 2: Firms whose CEOs have a specific successor in mind will be higher-performing
firms
, Hypothesis 3: Firms whose CEOs are more satisfied with their overall personal compensation
will be higher-performing firms
Hypothesis 4: Firms whose CEOs perceive greater connection between their personal wealth
and the wealth of the firm will be higher- performing firms
Hypothesis 5: Firms whose CEOs perceive greater connection between their personal
reputation as CEOs and the wealth of the firm will be higher-performing firms.
Results: hypothesis 1, 2 and 4 seem to be significantly true.
Insider CEO’s are more likely to get chosen because the board knows more about the
candidate and can monitor an insider CEO better, because there’s less information
asymmetry.
4. Understanding Enron: it’s about the gatekeepers, stupid, Coffee
Gatekeepers are reputational intermediaries who provide verification and certification
services to investors. They gatekeep the company’s financial statements, the transactions,
the credit ratings and other things the company does.
5. For Whom is the Corporation Managed in 2020?: The Debate over Corporate Purpose, Rock.
First, what is the best theory of the legal form we call “the corporation”?
Second, how should academic finance understand the properties of the legal form when
building models or engaging in empirical research?
Third, what are good management strategies for building valuable firms?
And, finally, what are the social roles and obligations of large publicly traded firms?
In the traditional view, other social problems have other solutions. But there was political
dysfunction, so that the legislation for the social problems failed.
Financial analyses are often based on stock prices but if it’s not only managed for the
shareholders, stock prices give an inaccurate value.
6. The economic consequences associated with integrated report quality: capital market and
real effects, Barth, Cahan, Chen & Venter
The goal of integrated reporting is to improve external information and to improve internal
decision making.
Study follows several South-African firms. South-Africa had a mandate for integrated
reporting since 2010, except for firms that could explain why they didn’t comply.
