What to do when you can't vote out management. And Does stock price trump governance?

Do you need a class example of how shareholders can influence management behavior even when management controls the majority of the board.Is the Times In Play on Wall Street? - April 27, 2006 - The New York Sun - NY News:"Morgan Stanley Investment Management announced last week that it withheld votes for the company's class A director nominees at the April 18 annual meeting, prompting much

Good news from Africa: EA Bourses to Be Integrated and Vigin gives millions to Africa's poor

A few quick news items of note on AfricaReading Jeff Sach's "The End of Poverty" coupled with my brothers' (Pat's) trip to Ghana as part of a medical group that worked in hospitals and an orphange have brought the suffering that occurs in Africa to the forefront of my thinking of late (and adding to my RSS readers didn't hurt either!), so today I will share some good news from the often forgotten

Enter the Neuro-Economists: Why Do Investors Do What They Do? - New York Times

Behaviorial Finance at its best!Enter the Neuro-Economists: Why Do Investors Do What They Do? - New York Times: "...economists are studying these phenomena scientifically. The economists are using a new technology that allows them to trace the activity of neurons inside the brain and thereby study how emotions influence our choices, including economic choices like gambles and investments.For

VC firms bet on clean energy deals - Apr. 26, 2006

Want to see a good side of higher energy prices? Here you go:VC firms bet on clean energy deals - Apr. 26, 2006: "Venture capital investors are flocking to clean energy technologies, a market expected to grow to $167 billion worldwide in the next decade, but some in the sector worry about too much money chasing too few deals.Venture capitalists have been pumping increasing amounts of money into

A Penny for Your Thoughts, and 1.4 Cents for the Penny - New York Times

A Penny for Your Thoughts, and 1.4 Cents for the Penny - New York Times: "This week the cost of the metals in a penny rose above 0.8 cents, more than twice the value of last fall. Because the government spends at least another six-tenths of a cent — above and beyond the cost of the metal — to make each penny, it will lose nearly half a cent on each new one it mints.The real problem could come if

Buffalo News - Big trend on campus: podcasting

Buffalo News - Big trend on campus: podcasting:"Podcasting - audio or video recordings posted online for use on computers or devices like iPods - has become a trendy academic tool on the nation's campuses, including UB, St. Bonaventure University and Buffalo State College......Why attend class if you can view or listen to the podcast? "That hasn't been an issue, at least not yet," said James

Housing Futures

More good news from the world of financial innovation!Thanks to MoneyScience for pointing out the following from Robert Shiller:The Korea Herald : The Nation's No.1 English Newspaper: "Within a month, the Chicago Mercantile Exchange (CME), in collaboration with [other companies]... will launch futures and options contracts on home prices in ten cities in the United States. The contracts will be

MSN Money - 'Superperks' sweeten executives' pay

Dave sent me the following. It will definitely liven up class discussions! $890,000 for race car driving lessons? I hope he got to keep the car!MSN Money - 'Superperks' sweeten executives' pay: "The corporate gravy train is still rolling, and its contents are as odd as ever. A sampling: $890,000 worth of race-car driving lessons for one president's sons, maid service, lawn sprinklers, Bermuda

Financial Engineering News Cartoon: FENtoon

What the world really needs is more finance cartoons! So here is one from Financial Engineering News Cartoon: FENtoonIt is especially well timed as we JUST did derivatives in class.

Snow urges end to lend-and-forgive cycle - Yahoo! News

Following up on yesterday's story of the forgiveness of Nigeria's is today's speech by US Treasury Secretary John Snow who stressed that debt forgivenss alone is not enough:Snow urges end to lend-and-forgive cycle - Yahoo! News: "'The clearance of unsustainable debt is a critical component of the broader solution,' Snow said in prepared remarks to the Development Committee of the World Bank and

allAfrica.com: Nigeria: Govt Free of Most Foreign Debt, Pledges Social Investments

allAfrica.com: Nigeria: Govt Free of Most Foreign Debt, Pledges Social Investments: "Dr. Ngozi Okonjo-Iweala, the finance minister of Nigeria, says that a significant portion of the nation's revenues can be re-targeted to improve the lives of Nigerians, now that most international debt has been retired. She says health care and education are areas where the government aims to make significant

And here is leadership

Note, I am not against CEOs making much money. That said, from a leadership position, making MUCH more than others can be demotivating, so in that light I have a new found respect for Susan Lyne the Chief executive of Martha Stewart Living Omnimedia (even if she did it for PR opportunity!). From BusinessWeek:No Hair Shirts, But Still...: "Lyne got a cash bonus of $625,500 last year. Instead of

First Bank to Settle I.P.O. Suit - New York Times

This one fits in perfectly with a recent class discussion on how Investment Bankers might "bribe" firms' CEOs for future business. From the NY Times:First Bank to Settle I.P.O. Suit - New York Times:"J. P. Morgan Chase said yesterday that it would pay $425 million to settle its part of a class-action lawsuit that contends dozens of banks cheated investors out of hundreds of millions of dollars

For Interns, It's Nice to Feel Wanted Again - New York Times

Good news for students looking for finance jobs and internships!For Interns, It's Nice to Feel Wanted Again - New York Times: "Recruiters, along with college career counselors, say that the growth in financial jobs coupled with recruitment drives by hedge funds and other firms have given students a strong hand this year.'Those firms that had to reduce their numbers in 2000 and 2001 are now back

Foreign Stocks Are In, and So Is Indexing - Knowledge@Wharton

As per normal, the Wharton people did another great job with this issue! My favorite:Foreign Stocks Are In, and So Is Indexing - Knowledge@Wharton: "In February...investors poured nearly $19 billion into foreign-stock mutual funds, compared to $8.4 billion for U.S. stock funds.......American investors have also grown enamored of indexers, which now hold about 15% of assets invested in

FMA Online--Cliff Smith

Probably the most underrated finance website is the FMA Online e-Journal. It has videos, papers, and much more. It really is a great resource. While I have mentioned it before, but the new update is amazing. Winter, 2005 FMA Online:It has video presentation of Cliff Smith's (University of Rochester) lecture on Corporate Governance and Organizational Architecture. As I have told him, I do

Growth Options, Beta, and Cost of Capital

Growth Options, Beta, and the Cost of Capital Object) by Antonio Bernardo, Bhagwan Chowdry, and Amit Goyal.This is a good one! It looks at the betas of firms' assets in place relative to the betas of their growth options and finds that the growth options have significantly higher betas. The authors then show that this difference in betas can lead to significant differences in cost of capital

Responsible Fools? The Tradeoff between Mortgage Prepayments and Tax-Deferred Retirement Savings by Jennifer Huang, Gene Amromin, Clemens Sialm

Have a few extra dollars? Debating whether to pay down your mortgage or invest a bit more in your retirement account? A working paper by Huang, Amromin, and Sialm suggests the latter may be a wiser choice.SSRN-Responsible Fools? The Tradeoff between Mortgage Prepayments and Tax-Deferred Retirement Savings by Jennifer Huang, Gene Amromin, Clemens Sialm:"a significant number of households can

FRB: Speech, Ferguson--Thoughts on Financial Stability and Central Banking--April 17, 2006

Fed Vice Chairman Roger Fergusons' remarks this morning are perfect for a Money and Banking or Financial Institutions class!FRB: Speech, Ferguson--Thoughts on Financial Stability and Central Banking--April 17, 2006:Some Highlights:* "Few subjects are more important for central bankers than the efficiency and stability of our financial system....Ironically, our interest in financial stability seem

Tulip Bulb Mania

It's spring in Western New York so what better to talk about than the Tulip Bubble of the late 16th Century?From the Stock-Market-Crash blog's section on Famous Bubbles:Tulip Bulb Mania: "In less than one month, the price of tulip bulbs went up twenty-fold! To put that into perspective, if you had invested $1,000 and came back on month later, your investment would have ballooned to $20,000! Now

History of Wall Street and the Stock Markets

AtoZ Investments gets the Link of the Week for its 4-page history of Wall Street. Very interesting!History of Wall Street and the Stock Markets: "It was just a matter of time before our new country, The United States of America, would organize formal stock and bond trading. 1792 was the year. In 1792, New York City's population was about 34,000, not including Brooklyn and Queens which were still

Pension Rule Could Lower Net Worths - New York Times

Pension Rule Could Lower Net Worths - New York Times: "The study, by the Milliman actuarial firm, of the 100 largest companies with pension plans, showed that most had understated their obligations even though they complied with the current rules.That included not only weak companies like airlines and automakers but also strong ones....Over all...adopting the proposed accounting change would wipe

Good news today, bad news later.

My guess is that this surprises NO ONE, ;), but it is interesting to see it in writing.Short version: managers don't like to tell bad news.SSRN-Do Managers Withhold Bad News? by S.P. Kothari, Susan Shu, Peter Wysocki:Abstract: "In this study, we examine whether managers delay disclosure of bad news relative to good news. If managers accumulate and withhold bad news up to a certain threshold,

Does Jensen’s Free Cash Flow Hypothesis Explain European LBOs Today? by AndreBetzer

SSRN-Does Jensen’s Free Cash Flow Hypothesis Explain European LBOs Today? by Andre Betzer:Andre Betzer looks at European Leveraged Buyouts (financed with at least 50% debt) to determine if Jensen's Free Cash Flow (FCF) Hypothesis can explain (or predict) the the LBO.Jensen's FCF hypothesis is that firms with high levels of Cash flow will waste it on negative NPV projects. From this, it has been

Insider trading case of the decade

You have to read this! It has everything any insider trading case could want---from a retired seamstress, to classified ads placed to hire accomplices, to the theft of advance copies of BusinessWeek, to strippers, to Russian baths. (I am not making this up!)From the Globe and Mail:"The case is “one of the most extensive insider trader cases in this district in decades,” Michael Garcia, the U.S.

Scotsman.com Business - Nasdaq increases LSE stake to 15%

Wow, talk about a toe hold! Scotsman.com Business - Nasdaq increases LSE stake to 15%:"THE London Stock Exchange was thrown dramatically back into takeover play late yesterday when its largest institutional shareholder, Threadneedle Investments, sold its entire 12 per cent stake to the Nasdaq stock market.With other purchases, the US stock market confirmed last night that it had spent £448

Active Intermediation of Non-Underwritten Rights Offerings by Mark Peterson

Rights Issues are a way of issuing new equity. They involve the firm giving rights to existing shareholders. These rights entitle the holder to purchase new shares at the subscription price (which is lower than the current market price).Much research has look at rights issues. This has largely looked at who uses them, how they work, and why we don't see more of them (this latter point is often

Advances in Behavioral Finance, Volume II (The Roundtable Series in Behavioral Economics)

I just ordered it. Looks good. I will let you know.Advances in Behavioral Finance, Volume II (The Roundtable Series in Behavioral Economics):

CEO pay in the news

CEO pay is back in the news (does it ever really leave?) with several stories in the last few days. Most articles have been centering on calls for more disclosure.First the issue: CEO pay increases much faster than the average worker's pay AND this is not due to market forces but a "stacked deck". While the first is true, there well may be reasons for it (technology, flatter levels of management,

USATODAY.com - U.S. teenagers lack financial literacy

USATODAY.com - U.S. teenagers lack financial literacy: "U.S. teenagers are making little headway when it comes to financial literacy, a survey out Wednesday shows.High school seniors on average answered 52.4% of a 30-question financial survey correctly. That was up from 52.3% when the survey was last conducted two years ago but down from 57% in 1997, the first year for the survey, according to

Are Commodities Futures Too Risky for Your Portfolio? Hogwash! - Knowledge@Wharton

This article is by Gorton and Rouwenhorst. The quote is from the Knowledge@Wharton April 2006 Newsletter.Are Commodities Futures Too Risky for Your Portfolio? "are commodities really that risky? A shortage of data has left that question unanswered. Until now. Using the most comprehensive data on commodities futures returns ever assembled....Gorton and ...Rouwenhorst have reached a surprising

The importance of good governance: the Eastern European Evidence

Financial Globalization, Corporate Governance, and Easten EuropeSome look-ins:"Friedman (2005) makes the case that globalization leads to a flat world....Assuredly, the world is not flat yet. Nevertheless, the metaphor is helpful....For many countries, the most significant explicit barriers to trade in financial assets have been knocked down. "And yet:"Despite a dramatic increase in cross-border

Free Money Finance: Saving for Retirement the Second Hardest Thing to Do in Life

Free Money Finance: Saving for Retirement the Second Hardest Thing to Do in LifeFree Money Finance found an interesting article on the difficulty in saving for retirement that coincidentally has some interesting links on the cost savings of not smoking. Ironically, in my Intro classes we do something very similar to show the importance of saving "early and often" (of course such a calculation

Real Estate

Yesterday in my undergrad class (FIN 422) we covered real estate as an investment. Hence a few stories and links you may find interesting:From the Washington Post: Economy too reliant on housing? - washingtonpost.com Highlights - MSNBC.com: "The U.S. economy is more dependent on housing than it has been in a half-century, as the sector fuels consumer spending and has accounted for nearly

Behavioural Finance

Website of the week: Behaviouralfinance.netIt has nothing but tons and tons of great Behavioural (yes with the 'u') cites. If you are interested in the field or doing a paper that realtes, this is a GREAT starting point.Behavioural Finance: "'This area of enquiry is sometimes referred to as 'behavioral finance,' but we call it 'behavioral economics.' Behavioral economics combines the twin

Great retirement expectations, not great preparations - Apr. 4, 2006

Overconfidence and behavorial finance have a rich and growing history. It might be time to add the idea that we have enough for retirment to that growing list.From CNN:EBRI: Great retirement expectations, not great preparations - Apr. 4, 2006: "...among those in the very confident group, 22 percent said they aren't currently saving for retirement and 39 percent said they have less than $50,000

Does Ethics training work? Maybe

From CFO.com I Am Joe's Conscience - CFO Magazine - March Issue 2006 - CFO.com:Do training and new regulations lead to more ethical behavior? Maybe, Maybe not.On the "no side": "But is there any reason to believe all these codes and classes and scenarios do any good? The evidence is mixed. A recent survey of more than 4,000 employees found that reports of misdeeds have not diminished. In fact,

Less Can Be More When It Comes to Overseas Stocks - New York Times

The "Home Country Bias" is the finding that investors invest more in their home country than would be justified on a risk-return basis. Today's NY Times suggests that this bias may be growing less powerful. Less Can Be More When It Comes to Overseas Stocks - New York Times:"So far this year, about 70 cents of every new dollar invested in equity funds has been directed to internationally oriented

Free Trade pact?

This would be great! It should definitely help to end "End [Extreme] Poverty" in the long run! And the signal it sends is likewise good!From the BBC:"Brazil, India and South Africa are working to set up a free trade area they hope will eventually take in the continents they represent. The three made the pact at talks ahead of an informal World Trade Organization (WTO) meeting in Rio de Janeiro