corporate governance

This study shows that the market reacts positively when sharehholders

This chapter examines the relationship between corporate governance and corporate fraud with a focus on internal and external governance characteristics and how they affect the likelihood of fraud. The chapter also examines the evidence on governance-related changes in firms affected by fraud.

We examine directors’ skill diversity, through Regulation S-K’s requirements, and report that skill diversity varies across boards. Greater commonality in skill sets correlates with improved firm performance.

We analyze 3677 European IPOs from 1998 to 2012. When Member States in the EU implemented governance codes like SOX, IPO underpricing decreased on their regulated markets compared to exchange-regulated ones. Improved governance enhances transparency and reduces information asymmetries in IPO valuations.

Companies using search firms for board members pay CEOs higher salaries and total compensations. Such companies are less likely to fire CEOs after poor performance and more likely to engage in M&A with low returns. Using geographic distance as an instrument, we find search firm-identified directors negatively impact firm performance and governance.

We analyze the SEC’s proxy access rule and its impact on shareholder wealth focusing on firms’ governance characteristics. Firms with a high probability of being targeted have more negative returns while independent directors and non-cash compensation positively influence the market’s reaction. Smaller boards have less negative impact, suggesting the rule isn’t seen as value-enhancing by marginal shareholders.

We examine SEC’s director nomination rule’s wealth effects. Results contradict shareholder empowerment creating value: Abnormal returns are negative for events increasing passage probability.