We undertake the first large-sample analysis of foreign tax holiday participation by U.S. firms.
We model leverage cycles in the natural laboratory of a mature asset class, namely US Commercial Real Estate. In this setting we can observe entrepreneurs' asset values as well as debt balance and thus model capital-market yields, as conditioned by market-wide leverage, which indicates debt availability. Using a VAR framework, we examine variance decompositions and impulse-response functions. We show that leverage constitutes the primary driver of innovations in capital-market yields and vice versa. We further find evidence for flight to quality as well as knock-on effects that affect low-leverage entrepreneurs in the market.
Financial intermediaries often provide guarantees that resemble out-of-the-money put options, exposing them to tail risk. We present a model in the context of the U.S. life insurance industry in which variable annuity (VA) guarantees and associated hedging operate within the regulatory capital framework to create incentives for insurers to overweight high-risk and illiquid bonds (“reach-for-yield”).
We investigate the effect of cross-border regulatory cooperation on global mutual fund portfolio allocations, focusing on the Multilateral Memorandum of Understanding (MMoU), a non-binding information sharing arrangement between global securities regulators. Connections between the US Securities and Exchange Commission (SEC) and other foreign regulators increase the SEC’s ability to pursue US cross-listed firms. We find that foreign investment in US-cross- listed firms domiciled in the signatory country increases significantly relative to non-cross-listed firms from that country.
One of the long-standing damages of institutional racism in the United States has been a bleak economic outlook for African Americans. In this Kenan Insight, we ask whether today’s activism might prove to be a defining moment in turning the tide for Black economic futures, and if so, who will play the key roles in creating lasting change.
Although the level of power held by the marketing department can determine key organizational outcomes, including firm performance, this power often is modest and, in many firms, diminishing. To address this apparent disconnect, the authors propose that the board of directors is a critical but overlooked driver of marketing department power.
In closed-end funds, a managed distribution policy (MDP) is a dividend commitment potentially requiring the liquidation of assets. We argue that MDPs lower managerial claims on fund assets and, when the fund is at a discount, increase shareholder value. This transfer of wealth can be rationalized by managers wishing to deter a challenge from activist shareholders through a costly proxy vote. We find strong empirical evidence that managers respond to the presence of activists using MDPs, that MDPs constitute an effective wealth transfer to shareholders, and that activists are less likely to challenge management when an MDP is in place.
Corporations face constant pressure to respond to a wide range of social, environmental and governance issues, many of are outside the company’s core mission. Determining whether or how to respond to such pressures is a complex process, often requiring substantial time and resources on the part of senior management. In a new paper, “Willing and Able: A General Model of Organizational Responses to Normative Pressures,” Olga Hawn, University of North Carolina Kenan-Flagler Business School Assistant Professor for Strategy, Entrepreneurship, and Sustainability; Rodolphe Durand of HEC Paris; and Ioannis Ioannou from the London Business School provide a dynamic framework for understanding how companies analyze and respond – or don’t respond – to “normative pressures” on matters that include global warming, environmental stewardship, occupational health, executive compensation and corporate governance, among others. This pressure comes from a wide range of interest groups that may include activists, non-governmental organizations (NGOs) and other stakeholders.
While call centers have recently invested in callback technology, the impact of this innovation on callers’ behavior and call center performance has been less clearly understood. Using call center data from a US commercial bank, we perform an empirical study of callers’ decisionmaking process in the presence of a callback option.
Although both businessmen and scholars agree that the practice of corporate finance and corporate strategy should be closely coordinated and logically consistent, a large gap exists between the two functions. Although MBA programs routinely cover both subjects, they employ very different analytical and decision tools and the interaction between the two bodies of knowledge rarely receives the attention it deserves. The resulting Finance-Strategy gap can lead strategically oriented firms to de-emphasize or even discard classic finance techniques such as Net Present Value (NPV).