We derive conditions under which state-imposed limits on executive compensation can enhance efficiency and benefit shareholders (but not executives). Having their hands tied in the future allows a board of directors to credibly enter into relational contracts with executives that are more efficient than performance-based contracts. This in turn can have implications for firm strategy and the ideal composition of the board. The analysis also offers insights into the political economy of executive-compensation reform.

Do differences in corporate governance explain informed trading? Using a transaction-based model, we estimate the probability of information-based trading for a sample of TSE stocks. Strong evidence is found that firm governance explains informed trading. The probability of informed trading is smaller where measures of good governance are larger.

Four critical success factors are evaluated and applied. IT The collapse of the dot-com bubble has grown into an avalanche of company failures and mergers, stifling the emergence of new technological ventures. Larry Ellison, CEO and founder of Oracle, suggested the computing industry is in decline for the long-term when he noted, “What’s going on…is the end of Silicon Valley as we know it…The next big thing ain’t computers ” [8]. Many positive signs indicate it is not yet time to call it quits in the computing industry. This reminds us of Mark Twain’s remark, “The reports of my death are greatly exaggerated” after the New York Journal erroneously published his

This paper presents a critique of emergent views on the roles of the boards of directors in relation to information security. The analysis highlights several concerns about the separation and validation of proper theory and business assertions of information security at board level. New requirements articulated by industry bodies – represented by a selected group of experts and evident in literature – are compared to the underlying theory of corporate governance to identify possible discrepancies. The discussion shows in particular the importance of staying within the theoretical underpinnings of corporate governance when discussing the topic of governance in general and in relation to boards of directors ’ responsibilities. Our critique opens up more opportunities to clarify information security’s role and relationship to corporate governance. We seek to draw particular attention to the appropriate separation of governance and management. This latter point we hope will encourage academics and business practitioners to reflect on current corporate and individual biases and on the way terms such as information security governance are represented.

We examine the valuation of accounting variables, growth opportunities, and insider retention for a sample of 1,625 IPOs from three time-periods: 1986-1990, January 1997 through March 2000 (designated as the boom period), and April 2000 through December 2001 (designated as the crash period). Specifically, we test for valuation differences in the boom and crash relative to the more stable 1980s. Additionally, we investigate whether accounting variables, growth, and insider retention of technology IPOs and internet IPOs are valued differently. Our major findings are as follows. For profitable non-tech firms in the 1980s, income, sales, R&D, industry price-to-sales comparables, and insider retention are positively related to offer values. In the boom period, relative to the 1980s, income, industry comparables, and insider retention are valued more. Sales, book value of equity, and R&D are valued less. The finding on income is surprising and contrary to claims made in the financial press. In the crash period, relative to the 1980s, income is valued more, but R&D and industry comparables are valued less. We also document that, relative to the boom period, crash period sales were valued more, whereas insider retention and industry comparables were valued less. Relative to non-tech

A model of corporate governance must explain (i) why governance matters; (ii) variation in governance across firms (i.e., be responsive to the Demsetz and Lehn, 1985, critique); and (iii) the positive correlations found empirically between quality of corporate governance and corporate performance. The model presented here satisfies these three criteria. It assumes exogenous variation in firm potential. Firms with the best potential to perform well have the most to lose from poor governance; so they adopt stronger governance. Additionally, the model explains the correlation between firm size and executive compensation and why observed managerial incentives seem too low, among other phenomena.

and the Newly Independent States Abstract: This paper presents the first evidence on the impact of external governance mechanisms, board diversity and independence, and management compensation on outreach and sustainability of microfinance institutions in Central and Eastern Europe and the Newly Independent States. Results indicate that among external governance mechanisms only auditing affects outreach, whereas regulation and rating do not affect performance. Board diversity improves both outreach and sustainability while larger and less independent boards lower sustainability. Performance-based compensation is not effective in aligning the interest of managers and stakeholders, and underpaying managers reduces outreach. Governance and Performance of Microfinance Institutions in Central and Eastern Europe and the Newly Independent States Microfinance is the provision of loans and other financial services to the poor. The microfinance institution (MFI) has evolved as a result of the efforts of committed individuals and assistance agencies to reduce poverty by promoting self-employment and entrepreneurship. The MFI faces unique challenges because it must achieve a double bottom line—provide financial services to the poor (outreach) and cover its costs (sustainability). Microfinance is a significant and growing

We examine the valuation of financial variables, growth opportunities, insider retention and investment banker prestige for a sample of 1,655 IPOs from three time-periods: 1986-1990, January 1997 through March 2000 (designated as the boom period), and April 2000 through December 2001 (designated as the crash period). Once we control for IPO fundamentals (such as, income, sales, book equity, growth opportunities, insider retention, and investment banker prestige) and allow for different valuation of these fundamentals across different time-periods, average valuations of IPOs in the recent boom and crash periods were not statistically different from those of the late 1980s. We also document some shifts in the valuation of fundamentals across time-periods. Most interestingly, contrary to anecdotes in the financial press, income of IPO firms is weighted more when valuing IPOs in the boom period compared to the late eighties. With respect to inter-industry differences, we document that tech firms are valued less than nontech firms after controlling for IPO fundamentals. Interestingly, after we control for IPO fundamentals and allow for different valuation of these fundamentals for internet and noninternet IPOs, internet IPOs are not valued any differently than non-internet IPOs. Income and insider retention are valued more for tech firms. For internet firms, insider retention is valued more, but investment banker prestige, surprisingly, is valued less.

Abstract. The audit committee is one of the parts of corporate governance mechanism, which is understood as the relationship between corporate man-agers, directors and the providers of equity, people and institutions who save and invest their capital to earn the return. This study presents survey research results of audit committee activity in Polish public stock companies quoted on the Warsaw Stock Exchange (WSE). The purpose of this paper is to present the audit committee practice in Poland after 2009. The paper shows that the audit committee practice is still the most problematic issue of transitional Polish cor-porate governance rules. The survey has shown that the corporate needs and its implementation, and communication with listed companies leave a lot of room for improvement. The paper is based on the documents prepared in 2010 by PricewaterhouseCoopers, the Polish Association of Listed Companies and the

An impressive volume of careful empirical studies finds evidence that the strength of firms ’ corporate governance tends to be positively correlated with their financial performance; that is, firms that score higher on some measure of governance tend to outperform those which score worse. These findings are a puzzle insofar as we expect those who decide how a firm is organized, including its corporate governance, to do so in a manner that maximizes firm value subject to the relevant constraints. If the governance we observe is con-strained optimal, then why, in equilibrium, should any correlation— positive or negative—exist between it and firm performance? This paper offers an answer. In doing so, the paper also makes predictions about the correlation between firm size and strength of governance, provides new explanations for the correlation between firm size and executive compensation, and provides insights into why empirical estimates of managerial incentives are often deemed too low.