Separation between CEO and Chairman of the Board is typically viewed as evidence of good corporate governance. Surprisingly, the literature has failed so far to uncover any significant relation between CEO/Chairman duality and firm performance. By distinguishing between periods with and without CEO turnover, we empirically identify two offsetting effects: the correlation between duality and per...

Article history: Received 17 July 2014 Received in revised form 18 March 2015 Accepted 2 April 2015 Available online 9 April 2015 This study investigates whether earnings management reduces the level of value relevance and whether good corporate governance restrains earnings management. Using hand-collected data comprising 1012 firm-year observations from all companies listed on the Shanghai SS...

This paper presents a non-monotonic relationship between foreign direct investment and trade based on the idea that, although FDI eliminates trade costs on the final good, the investing firm has to bear increased trade costs on an intermediate good. JEL-Classification: F 23, R3, L12

We investigate how borrowers’ corporate governance influences bank loan contracting terms in emerging markets and how this relation varies across countries with different country-level governance. We find that borrowers with stronger corporate governance obtain favorable contracting terms with respect to loan amount, maturity, collateral requirements, and spread. Firm-level and country-level co...

Political parties can be vehicles for economic and social development in poor countries. They can also serve as rent seeking instruments. Uncovering how parties function is therefore key to establishing the preconditions for good governance. The paper discusses when and why clientelism on the basis of party affiliation may arise. Operationally, party-based clientelism is defined as a bias of pu...

We study the process of wealth creation by alliances and relate it to the quality of governance of firms. We argue that alliances increase firm’s operating flexibility, reduce the agency costs related to the free-cash flows as well as the agency costs related to the distortion in the allocation of capital within the firm. Given the constraints on the use of free cash flows, managers at the helm...

This paper considers the role of corruption in impelling capital flight. Identifying corruption as one dimension of poor governance, the empirical analysis explores direct linkages between corruption and capital flight in a broad sample of countries. The novelty of this investigation is that it is based on a portfolio choice model of asset allocation that explicitly recognizes corruption as con...

This article examines how accounting transparency and corporate governance interact. Firms with better governance are associated with higher abnormal returns, but even more so if they also have higher transparency. The effect is largely monotonic—it is small and insignificant for opaque firms and large and significant for transparent firms—and survives numerous robustness tests. We find support...

We propose a model in which firms compete to attract better managers by using corporate governance as part of an optimal executive compensation scheme. Higher governance decreases the cost of taking disciplinary actions against managers, but when managerial talent is scarce, competition among firms to attract better managers implies that firms under-invest in governance. The reason is that mana...