All required readings, and information on assessments can be found on the subject web page (See Moodle below). Students are strongly advised to log into the subject web page at least once a week. Additional readings: Other academic reference papers will be listed on Moodle. They are available in full-text format (pdf files) from the library. The easiest way to find them is to (1) SSRN.com or (2) the faculty member’s personal or university webpage.
Course Outline – required and recommended readings
* Denotes required readings
** Denotes required literature surveys
Background Reading Prior to First Class
*Shleifer, A. and W. Vishny, 1997, A Survey of Corporate Governance, Journal of Finance 52, 737-783.
Becht, M., P. Bolton and A. Roell, 2003, Corporate Governance and Control in The Handbook of the Economics of Finance, Volume 1A, Corporate Finance (eds.) G. Constantinides, M. Harris and R. Stultz, North-Holland.
Black, B., A. G. de Carvalho, V. Khanna, W. Kim and B. Yurtoglu, 2020, Which Aspects of Corporate Governance Do and Do Not Matter in Emerging Markets, Journal of Law, Finance, and Accounting, 5(1), 137–177.
Jiang, F. and K. Kim, 2020, Corporate Governance in China. A Survey. Review of Finance, 733–772
Lehmann, E. and S. Vismara, 2020, Corporate Governance in IPO firms. Annals of Corporate Governance, 5(1), 1–100.
Guest, P. M. and M. Nerino, 2020, Do Corporate Governance Ratings Change Investor Expectations? Evidence from Announcements by Institutional Shareholder Services, Review of Finance, 24(4), 891–928.
Introduction to Corporate Governance (1 week)
Fama, E. 1980. Agency Problems and the Theory of the Firm, Journal of Political Economy 88(2): 288-307.
*Fama, E., and M. Jensen, 1983, Separation of Ownership and Control, Journal of Law and Economics 26, 301-325.
Hellwig, M., 2009, A Reconsideration of the Jensen-Meckling Model of Outside Finance, Journal of Financial Intermediation 18, 495-525.
*Jensen, M. and W. Meckling, 1976, Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure, Journal of Financial Economics 3(4): 305-60.
*Jensen, M., 1986, Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers, American Economic Review 323-329.
*Klein, B. and K. Leffler, 1981, The Role of Market Forces in Assuring Contractual Performance, Journal of Political Economy 89:4, 615-641.
Demsetz, H. (1983) "The Structure of Ownership and the Theory of the Firm," Journal of Law and Economics.
Methodological Approaches in Corporate Governance I – Endogeneity & Natural Experiments (1 week)
*Atanasov, V. and B. Black, 2016, Shock-Based Causal Inference in Corporate Finance and Accounting Research, Critical Finance Review, 5: 207–304
*Roberts, M. and T. Whited, 2013, Endogeneity in Empirical Corporate Finance, Handbook of the Economics of Finance (PA), 493-572.
*Donelson, D., L. Kettell, J. McInnis and S. Toynbee, 2021, The Need to Validate Exogenous Shocks: Shareholder Derivative Litigation, Universal Demand Laws and Firm Behavior, forthcoming Journal of Accounting and Economics.
Berg, T. and D. Streitz, 2019, Handling Spillover Eﬀects in Empirical Research, SSRN working paper.
Athey, S. and G. Imbens, 2017, The State of Applied Econometrics: Causality and Policy Evaluation, Journal of Economic Perspectives 31(2), 3-32.
Bartlett, R. and F. Partnoy, 2020, The Misuse of Tobin's Q, Vanderbilt Law Review, 73 (2), 353-372.
Crane, A., A. Koch, 2018, Shareholder Litigation and Ownership Structure: Evidence from a Natural Experiment, Management Science 64 (1), 5–23.
Ellul, A. I. Erel and U. Rajan, 2021, The COVID-19 Pandemic Crisis and Corporate Finance, Review of Corporate Financial Studies, 9(3), 421–429.
Methodological Approaches in Corp. Governance II – Matching Methods, DID Regressions (1 week)
*Atanasov, V. and B. Black, 2020, The Trouble with Instruments: The Need for Pre-treatment
Balance in Shock-Based Instrumental Variable Designs, Management Science, 67(2), 1270–1302.
*Bertrand, M. and S. Mullainathan, 2003, Enjoying the Quiet Life? Corporate Governance and Managerial Preferences, Journal of Political Economy, 111, 1043-1075.
Bertrand, M. and E. Duflo and S. Mullainathan, 2004, How Much Should We Trust Differences–in-Differences Estimates? Quarterly Journal of Economics, 119, 249-275.
*Chaney, T., D. Sraer and D. Thesmar, 2012, The Collateral Channel: How Real Estate Shocks Affect Corporate Investment, American Economic Review, 102, 2381-2409.
*Gormley, T. and D. Matsa, 2014, Common Errors: How to (and Not to) Control for Unobservable Heterogeneity, Review of Financial Studies, 27(2), 617-661.
Karpoff, J. and M. Wittry, 2018, Institutional & Legal Context in Natural Experiments: The Case of State Anti-Takeover Laws, Journal of Finance, 73(2), 657-714.
*Petersen, M., 2009, Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches, Review of Financial Studies, 22(1), 434-480.
*Roberts, M. and T. Whited, 2013, Endogeneity in Empirical Corporate Finance, Handbook of the Economics of Finance (PA), 493-572.
Sojli, E., W. Tham and W. Wang, 2021, Time-varying Group Unobserved Heterogeneity in Finance, UNSW working paper.
Grieser, W. and C. Hadlock, 2019, Panel-Data Estimation in Finance: Testable Assumptions and Parameter (In)Consistency, Journal of Financial and Quantitative Analysis 54, 1-29.
Methodological Approaches in Corporate Governance III – Panel Regressions & DDR (1 week)
*Appel, I., T. Gormley and D. Keim, 2020, Identification Using Russell 1000/2000 Index Assignments: A Discussion of Methodologies, Critical Finance Review, Forthcoming.
Bakke, T. and T. Whited, 2012, Threshold Events and Identification: A Study of Cash Shortfalls, Journal of Finance 67(3), 1083–1111.
Bena, J. and T. Xu, 2013, Competition and Ownership Structures of Closely-Held Firms, Review of Financial Studies, 30(5), 1583-1626.
*Chemmanur, T. and X. Tian, 2018, Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis, Journal of Financial and Quantitative Analysis, 53(3), 1163-1194.
Colak, G. and T. Whited, 2007, Spin-offs, Divestitures and Conglomerate Investment, Review of Financial Studies, 20, 557-595.
*Crane, A., S. Michenaud and J. Weston, 2016, The Effect of Institutional Ownership on Payout Policy: A Regression Discontinuity Design Approach, Review of Financial Studies, 29 (6), 1377-1408.
*Cunat, V., M. Guadalupe and M. Gine, 2012, The Vote Is Cast: The Effect of Corporate Governance on Shareholder Value, Journal of Finance, 67(5), 1943-1977.
Kwan, A., R. Masulis and T. McInish, 2015, Trading Rules, Competition for Order Flow and Market Fragmentation, Journal of Financial Economics, 115, 330-48.
*Roberts, M. and T. Whited, 2013, Endogeneity in Empirical Corporate Finance, Handbook of the Economics of Finance (PA), 493-572 (sections on Matching and DDR).
CEO and Managerial Incentives (1 week)
**Edmans, A. and X. Gabaix, 2016, Executive Compensation: A Modern Primer, Journal of Economic Literature, 54(4), 1232-1287.
Murphy, K., 2013, Executive Compensation: Where We Are and How We Got There, Handbook of the Economics of Finance (PA), 211-356.
Edmans, A., X. Gabaix and D. Jenter, 2017, Executive Compensation: A Survey of Theory and Evidence, Chapter 7 in Benjamin E. Hermalin and Michael S. Weisbach (eds.), Handbook of the Economics of Corporate Governance, Elsevier: Amsterdam, 383-539,
Hermalin, H. and M. Weisbach, Assessing Managerial Ability: Implications for Corporate Governance, Chapter 3 of The Handbook of the Economics of Corporate Governance, coedited with B. Hermalin and M. Weisbach, 2017, Elsevier Publishers.
Graham, J., C. Harvey, M. Puri, 2013, Managerial attitudes and corporate actions, Journal of Financial Economics, 109, 103-121.
Edmans, A., T. Gosling and D. Jenter, 2021, CEO Compensation: Evidence from the Field, ECGI Working Paper.
Karpoff, J. M. and Q. Dupont, 2020. The Trust Triangle: Laws, Reputation, and Culture in Empirical Finance Research (with Quentin Dupont), Journal of Business Ethics 163, 217–238.
Decaire, P. and D. Sosyura, 2021, CEO Pet Projects, ASU Working Paper.
Jenter, Dirk and Katharina Lewellen, 2021. Performance-Induced CEO Turnover, Review of Financial Studies 34, 569 – 617 (lead article)
Bennedsen, M., M. Tsoutsoura and D. Wolfenzon, 2021, Talent Gap in Family Firms, SSRN Working Paper.
Juan-Pedro Gómez and Maxim Mironov, 2021, COVID-19 and the value of CEOs: The unintended effect of soccer games across European stocks, IE University Working Paper.
Lei, Z., D. Petmezas, R. Rau, and C. Yang, 2021, Local boy does good: CEO birthplace identity and corporate social responsibility, King’s College London Working Paper
Duchin, R. and D. Sosyura, 2021, Remotely Productive: The Economics of Long Distance CEOs, Boston College Working Paper.
Fan, J., Q. Gu and X. Yu, 2021, Collectivist Cultures and the Emergence of Family Firms, Journal of Law and Economics, forthcoming.
Edmans, A., L. Li and C. Zhang, 2021, Employee Satisfaction, Labor Market Flexibility, and Stock Returns Around the World, London Business School Working Paper.
Cziraki, P., D. Jenter, 2021, The Market for CEOs, CESifo Working Paper.
Daniel, N., W. Ghazni and L. Naveen, 2021, Dollars at Risk and Overconfidence, Drexel University Working Paper.
Corporate Ownership Structure (1 week)
**Dasgupta, A. V. Fos and Z. Sautner, 2020, Institutional Investors and Corporate Governance, ECGI Working Paper.
Bebchuk, L. and R. Tallarita, 2020, The Illusory Promise of Stakeholder Governance, Cornell Law Review, 106, 91-178.
Lewellen, Jonathan and Katharina Lewellen, 2021. Institutional investors and corporate governance: the incentive to be engaged, Journal of Finance, forthcoming.
Chen, T., H. Dong and C. Lin, 2020, Institutional Shareholders and Corporate Social Responsibility, Journal of Financial Economics, 135(2), 483–504.
Lewellen, Katharina and Michelle Lowry, 2021. Does common ownership really increase firm coordination? Journal of Financial Economic, 141(1), 322-344.
Liu, X., 2021, Real Effect of Bank's Block-holding on Firm's Market Power, City University HK Working Paper.
Li, S.Z., E. Maug and M. Schwartz-Ziv, 2021, When Shareholders Disagree: Trading after Shareholder Meetings, Review of Financial Studies, forthcoming.
Bai, C.-E. C.-T. Hsieh, Z. Song and X. Wang, 2021, Special Deals from Special Investors: The Rise of State-Connected Private Owners in China, Tsinghua University Working Paper.
Fan, J., and W. Leung, 2020, The impact of ownership transferability on family firm governance and performance: The case of family trusts, Journal of Corporate Finance, 61, 101409.
Fos, V. and C. Holderness, 2021, The Distribution of Voting Rights to Shareholders, ECGI Working Paper.
Bena, J. and I. Wang, 2021, Mutual Fund Disagreement and Firm Value: Passive vs. Active Voice, UBC Working Paper.
Aminadav, G. and E. Papaioannou, 2020, Corporate Control around the World, Journal of Finance 75 (3), 1191-1246.
Burkart, M., S. Lee and H. Petri, 2021, The Role of Debt in the Market for Corporate Control: A Theory of LBO Financing, London School of Economics Working Paper.
Corporate Boards of Directors (2 weeks)
**Hermalin, B.E., and M.S. Weisbach, 2003. Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature, Federal Reserve Bank of New York Economic Policy Review 9(1), 7–26.
**Masulis, R., 2020, A Survey of Recent Evidence on Boards of Directors and CEO Incentives, Asia-Pacific Journal of Financial Studies 49, 7-35.
**Adams, R., B. Hermalen and M. Weisbach, 2010, The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey, Journal of Economic Literature, 48(1), 58-107.
Adams, R., 2017, Boards and the Directors Who Sit on Them, in The Handbook of the Economics of Corporate Governance, coedited with B. Hermalin and M. Weisbach, 2017, Elsevier Publishers.
Nili, Y., 2020, The Fallacy of Director Independence, Wisconsin Law Review 491.
Ewens, M. and N. Malenko, 2021, Board Dynamics over the Startup Life Cycle, University of Michigan Working Paper.
Eckbo, B. Espen. Knut Nygaard and Karin S. Thorburn, 2021, Valuation Effects of Norway’s Board Gender-Quota Revisited, Management Science, forthcoming.
Chen, S.-S., Y.-S.Chen, J.-K. Kang and S.-C. Peng, 2020, Board Structure, Director Expertise and Advisory Role of Outside Directors, Journal of Financial Economics 138, 483-503.
Geng, H., H. Hau, R. Michaely and B. Nguyen, 2021, The Effect of Board Overlap on Firm Behavior, University of Hong Kong Working Paper.
Bebchuk, L., A. Brav, W. Jiang and T. Keusch, 2020, Dancing with Activists, Journal of Financial Economics 137, 1--41.
Fich, E., J. Harford and A. Tran, 2021, Disloyal managers and shareholders’ wealth, University of Washington Working Paper.
Kuzmina, O. and V. Melentyeva, 2021, Gender diversity in corporate boards: Evidence from quota-implied discontinuities, New School of Economics Working Paper.
Ding, W., C. Lin, T. Schmid and M. Weisbach, 2021, Risk perceptions, board networks, and directors’ monitoring, Ohio State Working Paper
Giannetti, M. and T. Wang, 2021, Public Attention to Gender Equality and the Demand for Female Directors, ECGI Working Paper.
Cai, J., T. Nguyen and R. Walkling, 2021, Director Appointments: It Is Who You Know, Review of Financial Studies, forthcoming.
Gopalan, R., T. Gormley and A. Kalda, 2021, It’s Not So Bad: Director Bankruptcy Experience and
Corporate Risk-Taking, Journal of Financial Economics, Forthcoming.
Naaraayanan, L. and K. Nielsen, 2021, Does personal liability deter individuals from serving as independent directors? Journal of Financial Economics 140, 621-643.
Anti-Takeover Provisions and M&A (1 week)
**Eckbo, E., A. Malenko and K. Thorburn, 2020, Strategic Decisions in Takeover Auctions: Recent Developments, Annual Review of Financial Economics 12:237–76.
Nili, Y. and Kastiel, 2021, The Corporate Governance Gap, Yale Law Journal, forthcoming.
Cuñat, V., M. Gine, and M. Guadalupe. 2020. Price and probability: Decomposing the takeover effects of anti-takeover provisions. Journal of Finance 75 (3), 2591–2629.
Chen, Y., J.-K. Kang, J. Kim, and H. Na, 2020, Ownership structure, antitakeover provisions, and the cost of debt, SSRN Working Paper.
Catan, E. and M. Klausner, 2018, Board declassification and firm value: Have shareholders and boards really destroyed billions in value? NYU working paper.
Chemmanur, T., M. Gupta and K. Simonyan, 2021, How Does Private Firm Innovation Affect Anti-Takeover Provisions in Corporate Charters? Evidence from Firms Going Public.
Chen, I-J., P.-H. Hsu and Y. Wang, 2021, Staggered Boards and Brand Innovations: Evidence from Massachusetts State Bill HB 5640, National Taiwan University Working Paper.
Hertzel, M. and H. Zhao, 2019, Why Do Baords Let Their CEOs Take Outside Directorships? Entrenchment and Embeddedness, Arizona State Working Paper.
Corporations and Political Connections (1 week)
Knill, A., B. Liu, and J. McConnell, 2020, Media Partisanship and Fundamental Corporate Decisions, Purdue University working paper
Bertrand, M., M. Bombardini, R. Fisman, F. Trebbi, and E. Yegen, 2021, Investing in Influence: Investors, portfolio firms, and political giving, NBER Working Paper.
Mkrtchyan, A., A., J. Sandvik, and V. Zhu, 2021, CEO Activism and Firm Value, University of Calgary Working Paper.
Sheng, J., Z. Sun and W. Wang, 2021, Partisan Return Gap: The Polarized Stock Market in the Time of a Pandemic, University of California Irvine Working Paper.
Lauren H. Cohen and Bo Li, 2021, The Political Economy of Anti-Bribery Enforcement, Harvard business School Working Paper.
Fotak, V., H. Lee, W. Megginson and J. Salas, 2021, Selling Indulgencies: The Political Economy of Tariff Exemption Grants, University of Oklahoma Working Paper.
Sarkar, A., 2021, Firm Boundaries and Political Uncertainty: Evidence from State Elections in India, HKUST Working Paper.
Kaviani, M., H. Maleki and P. Savor, 2021, Reaching for Influence: Do Banks Use Loans to Establish Political Connections, University of Delaware Working Paper.
Tang, D., J. Yan and C. Yao, 2021, The Determinants of ESG Ratings: Rater Ownership Matters, University of Hong Kong Working Paper.
Corporate Governance and the Environment (2 extra classes – weeks 7&8)
**De Haas, R. and A. Popov, 2021, Finance and Green Growth. European Central Bank working paper.
Berg, F., J. Koelbel and R. Rigobon, 2019, Aggregate Confusion: The Divergence of ESG ratings. MIT Working Paper.
Shive, S., and M. Forster, 2020, Corporate governance and pollution externalities of public and private firms. The Review of Financial Studies, 33(3), 1296-1330.
Zhi, W., 2021, Will Nature-Loving CEOs Make the World Greener? Frankfurt School of Finance and Management Working Paper.
Naaraayanan, S., K. Sachdeva and V. Sharma, 2020, The real effects of environmental activist investing, SSRN Working Paper 3483692.
Akey, P., and I. Appel, 2019, Environmental Externalities of Activism. SSRN Working Paper 3508808.
Flammer, C., 2021, Corporate Green Bonds. Journal of Financial Economics, forthcoming.
Shi, Y., J. Wu and Y. Zhang, 2021, Corporate Social Responsibility in Supply Chain: Green or Greenwashing? Working Paper
Agarwal, S., K. Chan, R. Xie and N. Xu, 2021, Are executives more socially responsible when raised with siblings? Evidence from Chinese family firms, NUS Working Paper.
Kaviani, M., L. Li and H. Maleki, 2021, Conservative TV and Corporate Social Responsibility, University of Delaware Working Paper.
Brandon, R., S. Glossner, P. Krueger, P. Matos and T. Steffen, 2021, Do Responsible Investors Invest Responsibly? University of Virginia Working Paper.
Mesonnier J.-S. and B. Nguyen, 2021, Showing Off Cleaner Hands: Mandatory Climate-Related Disclosure by Financial Institutions and the Financing of Fossil Energy, Banque of France Working Paper.
Bolton, P. and M. Kasperczyk, 2021, Singling Through Carbon Disclosure, Imperial College Working Paper.
Ilhan, E. P. Krueger, Z. Sautner and L. Starks, 2021, Climate Risk Disclosure ad Institutional Investors, Frankfurt School Working Paper.
Dyck, A., K. Lins, L. Roth, M. Towner and H. Wagner, 2020, Renewable Governance: Good for the Environment? SSRN working paper.
Li, F., C. Lin and T.C. Lin, 2021, Climate Vulnerability and Corporate Innovation: International Evidence, University of Hong Kong Working Paper.
Corporate Financial Fraud and Litigation
Karpoff, J., A. Koester, D.S. Lee and G. Martin, 2017, Proxies and Databases in Financial Misconduct Research, The Accounting Review, 92(6), 129-163.
Yang, J., Y. Yu and L. Zheng, 2021, The Impact of Shareholder Litigation Risk on Equity Incentives, Evidence from a Quasi-Natural Experiment, Accounting Review, forthcoming.
Karpoff, J. 2021, The Future of Financial Fraud, Journal of Corporate Finance, forthcoming.
Alawadhi, A., J. Karpoff, J. Koski and G. Martin, 2020, The Prevalence and Costs of Financial Misrepresentation, SSRN Working Paper.