Tuesday, August 04, 2015

Bankrupt Family Firms by Massimo Massa, Alminas Zaldokas :: SSRN

For good or bad, family forms are often different.  In this article Massa and Zaldokas investigate these differences during a bankruptcy.



Bankrupt Family Firms by Massimo Massa, Alminas Zaldokas :: SSRN:



"Abstract:      We study the role of family ownership during the bankruptcy process. We argue that at times of distress family blockholders are better positioned to manage the firm and this is appreciated by minority shareholders and lenders alike. We test this hypothesis focusing on the sample of public US corporations between 2001 and 2008. First, we show that family firms are less engaged in forum shopping, emerge from bankruptcy faster and have higher recovery rates.



Two fast "look-ins":

"...anecdotal evidence suggests that different types of large shareholders view bankruptcy proceedings differently and this in turn may affect bankruptcy costs. While institutional investors and professional asset managers are motivated by a purely financial resolution, families may also have reputational concerns and care about the survival of the firm or the welfare of its employees. They also have larger wealth at stake"


and

"Family block ownership is related to a 32% faster exit from bankruptcy, where the average time to exit is 446 days, and a 12% higher recovery rates for lenders, where the average recovery rate is 48%. This supports our hypothesis that family blockholders are more efficient in bankruptcy resolution." 




Definitely a worthy read!



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Monday, August 03, 2015

More than Money: Venture Capitalists on Boards by Natee Amornsiripanitch, Paul A. Gompers, Yuhai Xuan :: SSRN

More than Money: Venture Capitalists on Boards by Natee Amornsiripanitch, Paul A. Gompers, Yuhai Xuan :: SSRN:



In the department of "this fits what I teach perfectly"/ (Confirmation bias?), a new paper shows again that venture capitalists bring more tot the table than just capital.  Their expertise and relationships also matter.



"... a prior relationship with the founder, lead investor status, the size of a venture capital firm’s network of managers and outside board members, and geographic proximity between the venture capital firm and its portfolio companies are positively correlated with taking a board seat in an investment round. We also find that venture capitalists are far more likely to recruit managers or outside board members in portfolio companies on whose boards they serve. Furthermore, we find that these recruiting activities are only done by successful and well-connected venture capital firms on the board and not by their less successful and less connected counterparts. We control for potential endogeity by using the enactment of SOX as an instrument which exogenously increased the demand for sophisticated venture capital directors. This study provides evidence to support the notion that venture capital investors are active investors who take actions to enhance portfolio firm value."


Good stuff!







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Rankings of Published Price-Earnings Ratios and Investor Attention by Jordan Moore :: SSRN



Rankings of Published Price-Earnings Ratios and Investor Attention by Jordan Moore :: SSRN:



Jordan Moore shows that PE Rankings (independent of the PE ratio itself) are associated with returns.  This is a cool finding. It is at least consistent a view that investors' screening practices impact their investment results.



A "look-in":



"Results of empirical tests provide preliminary support for this P/E attention hypothesis.
In monthly time-series regressions, long-short decile portfolios earn average value-weighted
monthly excess returns of 101 basis points with an annual Sharpe ratio of 0.79 from 1974-
2013. In daily time-series regressions, long-short portfolios earn average value-weighted
daily excess returns of 16.99 basis points with an annual Sharpe ratio of 2.91 over the same
period.
Monthly and daily trading strategies earn significant “alphas” after controlling for market,
size, value, profitability, and investment factors in the Fama and French (2014) five-factor
model."








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Politically Connections, Institutional Monitoring and Earnings Quality: Some Evidence from Malaysia by Tee Chwee Ming :: SSRN

Politically Connections, Institutional Monitoring and Earnings Quality: Some Evidence from Malaysia by Tee Chwee Ming :: SSRN:



Ming and Gal have an interesting study on the behavior and monitoring of politically connected firms in Malaysia.  There three main findings are that politically connected firms



  • have lower earnings quality
  • "are not subject to market discipline despite reporting poor accounting quality"
  • where both board members and institutional investors are from matters. Specifically:
"when we consider ethnicity, we obtain
evidence to suggest that poor earnings quality in PCON firms are more prevalent in boards
dominated by Malay/Bumiputera directors as opposed to boards dominated by nonMalay/Bumiputera
directors. We also document evidence that PCON firms are not penalized
by the capital markets despite poor earnings quality. Interestingly, agency problems in PCON
firms can be mitigated through monitoring by institutional investors, particularly local
institutional investors."

Now if they can get around the chicken or the egg problem (are earnings quality low before connections--and hence connections are used to shield their lack of quality, or as a result of the connections.

Will get mentioned in class! 




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Tuesday, July 28, 2015

Corporate governance: the great debate – Director Magazine

Corporate governance: the great debate – Director Magazine:



"“Corporate governance is fast-changing and organic, and this is about stimulating a debate,” explains Oliver Parry, the IoD’s senior corporate governance adviser. “This report began with us working towards a good governance index of listed companies and evolved into a focus point for debate on the issue.” Companies of all sizes, says Parry, including small businesses, should aspire to good corporate governance"





good article!





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Thursday, July 02, 2015

When CEOs Are Accidentally Overpaid - Bloomberg View

When CEOs Are Accidentally Overpaid - Bloomberg View:



great article focusing on this article by Kelly Shue



 "The difference in pay between different sections was larger than the difference within different sections.  Remember that these sections were randomly created. So Shue's finding means that human networks were a very important determinant of pay levels. She also found that when one executive's industry experienced a boom, the compensation of that executive's former HBS section-mates in totally unrelated industries would go up as well. "


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Tuesday, June 23, 2015

Top-CEO Pay Isn’t Driven By Talent, New Study Says - Real Time Economics - WSJ

Top-CEO Pay Isn’t Driven By Talent, New Study Says - Real Time Economics - WSJ: "“Compensation of CEOs has far outpaced that of very highly paid workers, the top 0.1% of earners,” write Mr. Mishel and Ms. Davis. “There are substantial rents embedded in executive pay, meaning that CEO pay gains are not simply the result of a competitive market for talent,” they say, citing earlier research findings.

Because of this, they conclude, if CEOs “were paid less there would be no loss of productivity or output.”"


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Monday, June 01, 2015

Women On Wall Street: Just A Tiny Portion Of Mutual Fund Managers Are Women

Women On Wall Street: Just A Tiny Portion Of Mutual Fund Managers Are Women:



From International Business Times:



"It’s no secret that the world of finance skews heavily male. But when it comes to mutual funds, the disparity is particularly stark: Women make up just 9 percent of mutual fund managers.

The data, compiled in a recent paper by Morningstar Research Director Laura Pavlenko Lutton, are even worse when you consider funds with female leadership. Only 2 percent of mutual fund assets are managed solely by women."


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Wednesday, May 27, 2015

Malkiel: Smart Beta = Smart Marketing Doesn't Equal Smart Investing

Malkiel: Smart Beta = Smart Marketing Doesn't Equal Smart Investing: "In traditional index funds, stocks are selected and weighted according to each company's market capitalization. Smart-beta strategies weigh a portfolio's stocks on book value, cash flows and dividends, and then tweak portfolios by adding what Malkiel calls “a trick or tilt toward another factor, by weight, by value or by earnings.”

The aim of smart beta is to increase the return without raising volatility. But Malkiel, the former dean of Yale School of Management, pounced on Rob Arnott, founder and chair of Research Affiliates, acclaimed for smart beta plays and his RAFI fundamentals-based indexes, to attack the strategy."



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Tuesday, May 26, 2015

What's Really Driving Income Inequality - Bloomberg View

Phenomenal article!:



What's Really Driving Income Inequality - Bloomberg View: "From 1978 to 2012, effectively all of the increase in wage inequality nationally has been due to increasing disparities from company to company. As the researchers note, “the wage gap between the most highly paid employees within these firms (CEOs and high level executives) and the average employee has increased only by a small amount, refuting oft-made claims that such widening gaps account for a large fraction of rising inequality in the population.” The researchers also found, by the way, that the male-female wage gap within companies has shrunk noticeably."



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Friday, May 08, 2015

An iconic chief executive vs. his company’s internal watchdogs

An iconic chief executive vs. his company’s internal watchdogs: "new details and allegations call into question how Liveris, close to presidents past and present, has been running the $58 billion company. The materials offer an inside look at how one of America’s largest multinational corporations conducts itself, and how its internal watchdogs battled their renowned chief executive over what they considered inappropriate practices and perks."



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At long last, corporate boards step up - Fortune

At long last, corporate boards step up - Fortune: "The latest reminder is a Wall Street Journal report that federal bank regulators are grilling individual directors of major Wall Street firms, sometimes monthly, as well as sitting in on board meetings and even instructing boards to add members with specific qualifications. It’s happening at the biggest firms—JPMorgan Chase, Bank of America, Goldman Sachs—and at smaller banks. While regulators have met with bank boards for years, the current intensity of oversight is unprecedented."



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Wednesday, April 15, 2015

Datawatch: price of an iPhone 6 around the world | FT Data

Datawatch: price of an iPhone 6 around the world | FT Data: "The strengthening of the US dollar has reduced the competitiveness of the US compared to the rest of the world according to an analysis of prices conducted by Deutsche Bank. However it remains the cheapest place to pick up an iPhone. In Brazil an iPhone 6 costs almost twice as much as in the US — in the UK you’ll pay a 23 per cent premium."



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Thursday, December 25, 2014

For investors, it’s a perfect time to go back to the basics - The Washington Post

Great stuff!! Way to go Barry!



For investors, it’s a perfect time to go back to the basics - The Washington Post: " I am going to suggest you take a different route: Focus on 10 basic, simple truths that many investors seemingly ignore. Some of you are unaware of these realities; others understand them intellectually but cannot act on your knowledge. These are the simple things that amateurs and pros alike get wrong.

"



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