Limited Liability and Justice: When Should We Pierce the Corporate Veil?

One of the most debated topics in corporate law is that of understanding where the boundary lies between justice and shareholder limited liability. Although contrasting with corporate creditors’ interests, the shareholder’s right to enjoy limited liability is the cornerstone of the economic and social development of a country. It is for this reason that countries […]

ESG ETFs and the Costs of Information Synthesis

            Despite likely being the most successful investment product since the 2008 global financial crisis, exchange traded funds (ETFs) have a serious comparability problem. The problem is particularly acute in environmental, social, and governance (ESG) themed funds, which have benefited from a recent surge in investor interest. A post-crisis explosion in ETF product offerings, combined with extensive issuer discretion in the composition, replication and tracking […]

Social and Financial Performance across Heterogeneous CSR Approaches

In the face of climate change, investors, consumers, regulators, and many other stakeholders increasingly demand firms to become more sustainable and enhance their corporate social performance (CSP). Firms respond to this institutional pressure by pursuing corporate social responsibility (CSR). Where the combined CSP of firms is instrumental in fighting climate change, capturing the individual CSP […]

Does Socially Enforced Corporate Social Responsibility Lead to Substantive Action?

Pressures to mandate corporate social responsibility (CSR) actions grow every day, with stakeholders increasingly demanding that firms act in a responsible manner. However, little is known about how firms may react to such external demands for CSR, and which practices may arise as a result. In our recent paper, we examine these issues, looking at a set of technological […]

Has Post-reorg Equity Outperformed in the Last Three Decades?

In the US, financially distressed firms use Chapter 11 of the Bankruptcy Code to restructure their liabilities and business operations under the supervision of the bankruptcy court. Many of the Chapter 11 firms successfully reorganize and emerge from bankruptcy. Upon emergence, they often cancel old equity interest and issue new stock (i.e., post-reorg equity) to […]

Re-examining Board Reforms and Firm Value: Response to “How Much Should We Trust Staggered Differences-In-Differences Estimates?” by Baker, Larcker, and Wang (2021)

The last few decades have seen an explosion of corporate board reforms. Fauver, Hung, Li, and Taboada (2017, “FHLT”) examine the impact of board reforms on the value of firms in 41 countries from 1990 to 2012. Using staggered difference-in-differences (“DiD”) estimates, FHLT find that firm value increases after board reforms. However, the robustness of these results is contested by Baker, […]

Costly Environmental and Social Incidents: New Evidence from Equity Issuance

There is a burgeoning awareness of corporate social performance in the current business climate. Yet, there remains much confusion over the value proposition of corporate nonfinancial investments in the environmental, social, and governance (ESG) areas. To date, the bulk of research attempts to link firm-level ESG ratings provided by third-party rating agencies to a wide […]

AI in the Boardroom: A Revolutionary Construct?

The importance of good corporate governance has received a renewed vigor over the last decade, culminating recently with the impact of the COVID-19 pandemic. Companies now, more than ever before, need to be more resilient and sustainable. Our recent paper explores the shortcomings of corporate governance and how AI may provide tools to address some of these […]

Relative Performance Evaluation and the Peer Group Opportunity Set

The use of incentive-compensation practices based on relative performance has grown dramatically in recent years (see Figure 1). As of 2019, more than 50% of large U.S. firms base executive compensation in part on their firms’ performance relative to peer firms, compared to just 20% in 2006. Further, relative total shareholder return (“TSR”) is now […]

Trust Culture and the Effectiveness of Consumer Protection

In our recent paper, we study consumer complaints filed with the Consumer Financial Protection Bureau (CFPB), the watchdog agency charged with protecting consumers from financial abuses, and their disciplinary effect on bank behavior. Since its establishment, the role and effectiveness of the agency has been subject to debate—the previous administration tried to dismantle it, while the […]