Corporate Governance in the US and Europe: Where Are We Now? by Tom Kirchmaier, Geoffrey Owen, Jeremy Grant

SSRN-Corporate Governance in the US and Europe: Where Are We Now? by Tom Kirchmaier, Geoffrey Owen, Jeremy Grant:This one is long but very interesting! It is really a book more than a paper. It is "based on a conference organised by the London School of Economics and New York University, held in London on November 4th and 5th, 2004.The conference brought together academics and practitioners from

The New York Times Dealbook

The beginning of a semester is always a good time to put in a free plug for the NY Times DealBook. In many ways it is the best source of online business news I am found.

It is a daily newsletter that gives summaries and links to news from a multitude of sources (NY Times and not). HIGHLY RECOMMENDED! and FREE!

The New York Times> E-mail Preferences> Dealbook

Sarbanes-Oxley after Three Years by Larry Ribstein

SSRN-Sarbanes-Oxley after Three Years by Larry Ribstein:I am sure many of you have been wondering whether Sarbanes-Oxley has been successful or not. I know that I have been! Unfortunately, it is a very difficult thing to test. While the costs are relatively easy to measure, the benefits are not. Moreover, even like any regulation, the passage is anticipated and thus normal event studies get

NYSE and ArcaEx Merger Update

NYSE and ArcaEx to Merge-- Writing in Financial Engineering News, Cynthia Harrington updates us on the NYSE and ArcaEx merger. While not exactly news, the report does have some interesting updates and would make excellent out of text book reading for any Instititions (or Money and Banking) class.Highlight: Figure 1. It shows the amazing drop in average spreads since 1994. WOW! As late as 2000 the

SSRN-Core Finance Trends in the Top MBA Programs in 2005 by Kent Womack, Ying Zhang

SSRN-Core Finance Trends in the Top MBA Programs in 2005 by Kent Womack, Ying Zhang:Following Friday's mention of the DeAngelo, DeAngelo, and Zimmerman paper that looks at what is wrong with MBA programs at some universities, I was sent the following paper by Womack and Zhang. They survey MBA programs to see what trends exist.The good news? More finance! "Five of the nineteen schools responding

The Fed's "meeting" in Jackson Hole

If you have not been watching the annual Central Bank meeting (sponsored by Kansas City Fed) taking place in on in Jackson Hole, you have missed a great deal.A few highlights:The NY Times reports on Greenspan's own comments:"Fed chairman implicitly took aim at both the torrid run-up in housing prices and at the broader willingness of investors to bid up the prices of stocks and bonds and accept

What's Really Wrong With U.S. Business Schools? by Harry DeAngelo, Linda DeAngelo, Jerold Zimmerman

What's Really Wrong With U.S. Business Schools? by Harry DeAngelo, Linda DeAngelo, Jerold Zimmerman:Wow, it sounds bad. I am very glad I chose a small university (St. Bonaventure). However, the choice leads me to not really comment on the paper since being at a small university removes me from many (but not all) of the problems cited in the paper. Moreover, I do not feel I can add any value to

Measuring the True Cost of Active Management by Mutual Funds by Ross Miller

SSRN-Measuring the True Cost of Active Management by Mutual Funds by Ross Miller:Yet another WOW paper!Miller decomposes mutual fund returns into an active portion and a passive portion. He then shows that the fees are for the active portion are much higher than most investors would suspect.Longer version: It is well known that actively managed funds are highly correlated with market indices.

SSRN-Who Monitors the Mutual Fund Manager, New or Old Shareholders? by Woodrow Johnson

Who Monitors the Mutual Fund Manager, New or Old Shareholders? by Woodrow Johnson:Johnson looks at the behavior of mutual fund investors to determine whether shareholders who have held the shares for longer behave differently than new shareholders. He finds that there are differences in behavior. Specifically he finds little relation between fund performace and selling behavior of existing

India's turn in the spotlight

It is always fascinating to notice how reading something makes you more aware of other articles on the same topic. Given that I recently finished ristening to Thomas Friedman's The World is Flat (which I HIGHLY recommend! One of best books I have read this year!) it should be of little surprise that yesterday I blogged an article on China and today it is India's turn.In the past 24 hours I have

Do Online MBAs Make the Grade?

Are online MBAs as good as in-person MBAs?I am sure many of you have been asked (or have asked yourself) this question before.BusinessWeek tries to answer with a very qualified "yes". Why? Because a few bad apples are spoiling things for the rest of us.Do Online MBAs Make the Grade?: "Many of the online MBA programs are well-regarded and offer a way for busy people...to get advanced education

Podcasts: a new tool for teaching?

I hestitate to put this online so soon as I am not totally satisfied with the quality yet, but as the internet generally (and blogs more specifically) are about sharing information and ideas, I figured I would put this out there and see what others think and seek comments/help.As many of you know podcasts are the new 'hot thing" on the internet. They are essentially online radio shows made

China's Financial System

Allen, Qian, and Qian give a fascinating look at China's Financial System. The auhtors do an excellent job both explaining what exists and hypothesizing as to what will happen in the future as a result of current conditions.Some highlights: The paper comes to 4 broad conclusions. In the authors' words: "...the current financial system is dominated by a large but inefficient banking sector, and

Chinese Walls in German Banks

Yes, I confess, I picked this one for its title, but upon reading it, the paper turned out to be interesting!Chinese Walls in German Banks by Lehar and Randl.The short version? Chinese Walls leak not just in the US but in Germany. This leakage results in affiliated analysts having superior information.A slightly longer version:Chinese Walls are supposed to exist. We have seen that time and again

Corruption, Firm Governance, and the Cost of Capital

Garmaise and Liu present a model that has several important implications in their paperCorruption, Firm Governance, and the Cost of Capital.In the paper they "develop a model of a firm owned by shareholders and administered by managers who may be either honest or dishonest. When managers have an informational advantage but shareholders retain control, dishonest managers can make false reports

Corporate Governance in Cyberspace - A Blueprint for Virtual Shareholder Meetings by Dirk Zetzsche

SSRN-Corporate Governance in Cyberspace - A Blueprint for Virtual Shareholder Meetings by Dirk Zetzsche:This article "analyses the rules regarding the internet-based exercise of shareholder rights for public corporations incorporated in Canada, France, Germany, the U.S. (DelGCL & RMBCA), the UK and Switzerland"A few highlights: "...this paper asserts that the transition from the traditional

SSRN-Who Gains More by Trading - Individuals or Institutions? by Granit San

SSRN-Who Gains More by Trading - Individuals or Institutions? by Granit San:Wow, if proven true this could change some things!San finds that individuals outperform institutions when it comes to trading! So much for individuals as noise traders!A quick peek inside:* "individuals buy low and sell high, and that they realize superior gains by selling"* "findings suggest that due to holding winners

To buy or to build?

Margsiri, Mello, and Ruckles provide a thoughtful article that models the "grow vs buy" decision.SSRN-To Build or to Buy: Internal vs. External Growth by Worawat Margsiri, Antonio Mello, Martin Ruckes: "This paper relates growth via acquisitions to the characteristics of the possibility to grow organically"As in most modeling papers, this should come with the standard warning that "while the

A Discrete-Continuous Choice Model of Climate Change Impacts on Energy by Erin Mansur, Robert Mendelsohn, Wendy Morrison

This may not be strictly finance, but it is something that I have often wondered (but never investigated): if global warming happens, what will be the net effect on energy consumption?I would imagine that people will use more electricity for air conditioning and probably drive more, but will this be offset by lower heating expenditures?Mansur, Mendelsohn, and Morrison say no. In fact they

Banks and Credit Derivatives

Minton, Stulz, and Williamson have an important look at banks' usage of credit derivatives. The short version? Very few banks are using them! In 2003, only about 6% of banks with over $1B in assets report using this form of derivatives. Consistent with what we have seen on other derviatve usage, these banks tend to be much larger than average. Best guess as for the low usage? Transaction costs

CareerJournal | Retirement Plans - Retirement Planning - Pension Plans

CareerJournal | Retirement Plans - Retirement Planning - Pension PlansThis past Sunday the Buffalo News ran an article by the Wall Street Journal's Kelly Greene on the problem facing many retirees who expected their expenses to drop more than they have. The short version of the article was that because of more traveling, more consumer spending, and higher energy bills, post retirement expenses

The Gambler's Fallacy and the Hot Hand: Empirical Data from Casinos

The Gambler's Fallacy and the Hot Hand: Empirical Data from CasinosMoneyscience.org points to the paper by Croson and Sundali (in the Journal of Risk and Uncertainty) who use video from a casino to document the existence of both a gambler's fallacy (the idea is that because some event has not happened in a while it is "due" and the hot hands fallacy (I am on a roll, so I will remain lucky).A few

Market timing and capital structure

Jay Ritter and Ronbing Huang give us more evidence that firms do time security issuance. From their paper:"publicly traded U.S. firms fund a much larger proportion of their financing deficit with external equity when the cost of equity capital is low. Small growth firms rely heavily on debt financing, and only resort to equity markets when the cost of equity is low." It is also important to note

'Do you Expect Me to Pander to the Students?' The Cold Reality of Warmth in Teaching by Robert Bruner

Robert Bruner has a really good piece on teaching. He discusses the ability to bring "warmth" to the finance classroom.Do you Expect Me to Pander to the Students?' The Cold Reality of Warmth in Teaching by Robert BrunerA quick intro:"It is entirely possible to be warm and a tough teacher; to be warm and teach a dry technical subject; and to be warm even when you don’t feel like it. The effective

It's all relative!

Everything is relative.

Yeah we knew that, but there is a new study out that suggests even happiness is realtive. It is being widely reported today, but I do think it has a big impact in finance. Short version: everything is realtive.

Obviously this is not new. Indeed there was quite a bit on it Gregg Easterbrook's Progress Paradox.

Scotsman.com News - UK - Happiness is besting Joneses

Dollar Cost Averaging passes the test!

In Dollar Cost Averaging Brennan, Li, and Torous presents evidence that dollar cost averaging (investing equal amounts whether the market is up or down) actually works! In their words:"evidence supports the view that the individual investors who follow this strategy in purchasing individual stocks to add to an existing portfolio are better off than if they followed the 'rational' strategies

FPA Journal - Focus: Finding Career Paths

The Journal of Financial Planning has a cool article that is really a "roundtable" on what it is like to work as a Financial Planner. It really should be required reading for anyone considering gettting into the field!
FPA Journal - Focus: Finding Career Paths: "New planners and veterans alike voiced strong opinions on career opportunities and obstacles in the planning profession. While some

Change is Good or the Disposition Effect Among Mutual Fund Managers by Anna Scherbina, Li Jin

Previous research has shown that individual investors often hold on to losing stocks for too long. It has largely been assumed that this is because individuals are reluctant to admit their mistakes. Empirically this has been shown by many including Odean 1998.There is some, although less persuasive evidence that professional money managers are less likely to make this financial error. Short

ISLAMIC MORTGAGES: Faith, finance forge new path

Kim Norris of the Detroit Free Press presents an interesting look at Islamic Mortgages. Islamic mortgages are different than traditional mortgages since many Muslims believe interest is wrong.ISLAMIC MORTGAGES: Faith, finance forge new path: "In Islamic mortgages, an intermediary such as a bank buys the property, and the homeowner eventually obtains the home through a lease-to-own arrangement."A

Optimism and Economic Choice by Manju Puri, David Robinson

Puri and Robinson give us a new look at the old idea that optimism matters.They identify optimists by looking at people's self-reported life expectancy. The findings are that not only do optimists work harder, but they buy more individual stock than their more pessimistic peers. .SSRN-Optimism and Economic Choice by Manju Puri, David Robinson:Short version:"Optimists are more likely to believe

Do Investors Reinvest Dividends and Tender Offer Proceeds? by Elias Rantapuska

SSRN-Do Investors Reinvest Dividends and Tender Offer Proceeds? by Elias RantapuskaShort answer: Not really.Rantapuska asks two interesting questions: Are dividends and the proceeds from tender offers really reinvested? Are the proceeds from cash flows from tender offers treated differently than those from dividends. Using data from Finland, the author finds that a relatively small

Socially Responsible Investors

I hate it when the WSJ "scoops" me, but that is where I found out about this paper. It is by Bollen and Cohen.Socially Responsible Investing has been studied a great deal. Most of the work has looks at whether investors receive lower returns as a result of the SR criteria. Financial theory suggests that the more constraints placed on a portfolio, the lower the returns should be. (To put it

SSRN-Options and the Bubble by Robert Battalio, Paul Schultz

Time to rewrite my class notes.....Like many people I have been telling my classes that at least a portion of the reason that Internet stocks were allowed to get so overpriced during the so-called bubble was that short-sale restrictions prevented investors from shorting the shares to drive down prices.However, in their Options and the Bubble paper Robert Battalio and Paul Schultz show that even

Reputation Effects in Trading on the New York Stock Exchange by Andrew Ellul, Robert Jennings, Robert Battalio

Reputation matters. Once again we see that reputation and relationships matter. This papers presents evidence that trading costs on the NYSE are, in part, a function of the interpersonal relationships of floor traders.

SSRN-Reputation Effects in Trading on the New York Stock Exchange by Andrew Ellul, Robert Jennings, Robert Battalio: "reputation plays an important role in the liquidity

Do Managers Influence their Pay? Evidence from Stock Price Reversals Around Executive Option Grants by M.P. Narayanan, Hasan Seyhun

SSRN-Do Managers Influence their Pay? Evidence from Stock Price Reversals Around Executive Option Grants by M.P. Narayanan, Hasan Seyhun: "Consistent with the hypothesis that managers influence their pay, the reversals are positively related to grant size and the seniority of the manager, and negatively related to the firm size. "The size of this reversal is staggering."The market-adjusted return

They're back!

The US Treasury announced that the 30-year T bond will be making a return. (get it? I couldn't resist ;) )"Treasury is re-introducing regular semi-annual auctions of the 30-year nominal security beginning with a bond that will mature on February 15, 2036." Treasury Press ReleaseFrom the Seattle Times: "It is good because it will help the U.S. government finance its huge deficit and debt at

Don't Worry About China. Learn From It. - New York Times

Don't Worry About China. Learn From It. - New York Times: While there is a debate about the actual size of the Chinese economy, very few really have a grasp on the actual size.From the article:"range of estimates, but generally the gross domestic product of China in the year 2004 is estimated to be substantially less than $2 trillion. That would roughly make it one-sixth the size of the United

The McKinsey Quarterly: Sizing the emerging global labor market

Thomas Friedman's Flat World meet academia. McKinsey Quarterly reports on the impact outsourcing will have on the global economy. Short Version:Outsourcing is here to stay, will continue to grow as more jobs can be digitized, this will increase per capita income in developing economies without "major discontinuities in overall levels of employment and wages in developed countries."Of course that

FinanceProfessor.com trivia

I had a request for my old trivia page that had been taken off the website. So here it is. I had not looked at it in years. Some are pretty interesting.FinanceProfessor.com triviaFor instance:#34. Ronald Reagan was the first president to visit the NYSE#36. Arnold Schwarzenegger was a finance major#41. The Founder of Merrill Lynch (Charles Merrill) played semi-pro baseball prior to coming to

Low-Carb Pioneer Atkins Files Chapter 11

Projecting sales is difficult. Indeed, it is probably the hardest part of valuation and it can have large implications if we are wrong. Therefore, it is covered in virtually all investment and corporate finance classes at least to some degree. Well we now there is a new example to use: Atkins Nutritionals.

As the low carb diet fad cooled, not only have grocery stores left with unsold

RadioEconomics interview

As I warned/promised you last week, here is the RadioEconomics' interview I did. I just listened to it. I definitely did not break any new ground, but it does give a background on FinanceProfessor.com as well as some of the synergy between the site, the blogs, my research, and my classes.

Radio Economics

be sure to listen to some of the other interviews as well. Especially the Becker and