Non-compliant firms required to raise board independence by the 2003 NYSE and NASDAQ listing rules significantly increased their dividend payouts and held less cash reserves. As the crisis unfolded, they were more likely to reduce investment and ultimately under-performed compliant firms. The under-performance was more severe for non-compliant firms facing higher costs of external financing and those with greater growth opportunities. Our evidence suggests that regulations requiring independent boards facilitate higher dividends and thereby mitigate agency costs of free cash flow. However, they may also make firms more dependent on external financing and more susceptible to adverse external financing shocks.
{"title":"Board Structure, Payout Policy, and Performance during the Crisis: An Unintended Consequence of the Sarbanes-Oxley Act and the Exchange Listing Rules","authors":"Jie Chen, Woon Sau Leung","doi":"10.2139/ssrn.3694823","DOIUrl":"https://doi.org/10.2139/ssrn.3694823","url":null,"abstract":"Non-compliant firms required to raise board independence by the 2003 NYSE and NASDAQ listing rules significantly increased their dividend payouts and held less cash reserves. As the crisis unfolded, they were more likely to reduce investment and ultimately under-performed compliant firms. The under-performance was more severe for non-compliant firms facing higher costs of external financing and those with greater growth opportunities. Our evidence suggests that regulations requiring independent boards facilitate higher dividends and thereby mitigate agency costs of free cash flow. However, they may also make firms more dependent on external financing and more susceptible to adverse external financing shocks.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"42 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115326457","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study compares how government research and development (R&D) subsidy and knowledge transfer from universities and public research institutions stimulate a firm's new product development. More importantly, we emphasize that the effects of these governmental R&D policies on new product development can be achieved not only directly, but also via a mediating role – a firm's innovation capability. Furthermore, we test how other external knowledge sources (such as knowledge from universities and public research institutions) interact with government R&D support to stimulate new product development. The results, based on an investigation of 270 Chinese firms, suggest that both government R&D subsidy and knowledge transfer from universities and public research institutions enhance new product development. The results also show that although government R&D subsidy and knowledge transfer from universities and public research institutions has a direct impact on new product development, innovation capability does mediate the above relationships. Moreover, unlike the findings that other external knowledge sources have a direct influence on new product development as indicated by the previous literature, our findings suggest that external knowledge sources substitute with the government R&D subsidies and complement with knowledge transfer from universities and public research institutions. The results confirm the old sayings that teaching to fish (knowledge transfer from universities and public research institutions can complement with other external knowledge sources) is much better than giving fish (government R&D subsidies substitute other external knowledge sources). This paper enriches current literature of government R&D support policies to firm new product development by providing empirical evidences.
{"title":"Giving Fish or Teaching to Fish? An Empirical Study of the Effects of Government Research and Development Policies","authors":"Kai Xu, Kuo-Feng Huang, Erming Xu","doi":"10.1111/radm.12087","DOIUrl":"https://doi.org/10.1111/radm.12087","url":null,"abstract":"This study compares how government research and development (R&D) subsidy and knowledge transfer from universities and public research institutions stimulate a firm's new product development. More importantly, we emphasize that the effects of these governmental R&D policies on new product development can be achieved not only directly, but also via a mediating role – a firm's innovation capability. Furthermore, we test how other external knowledge sources (such as knowledge from universities and public research institutions) interact with government R&D support to stimulate new product development. The results, based on an investigation of 270 Chinese firms, suggest that both government R&D subsidy and knowledge transfer from universities and public research institutions enhance new product development. The results also show that although government R&D subsidy and knowledge transfer from universities and public research institutions has a direct impact on new product development, innovation capability does mediate the above relationships. Moreover, unlike the findings that other external knowledge sources have a direct influence on new product development as indicated by the previous literature, our findings suggest that external knowledge sources substitute with the government R&D subsidies and complement with knowledge transfer from universities and public research institutions. The results confirm the old sayings that teaching to fish (knowledge transfer from universities and public research institutions can complement with other external knowledge sources) is much better than giving fish (government R&D subsidies substitute other external knowledge sources). This paper enriches current literature of government R&D support policies to firm new product development by providing empirical evidences.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"107 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131723396","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Opinion polls suggest Scotland will reject independence, opening the way to a review of economic governance in the United Kingdom, a complex quasi-federal, asymmetric system of administrations and parliaments, the result of ad hoc changes over decades. One party wants telecommunications “devolved” to Northern Ireland, other would leave it at the United Kingdom, where there is wide support for a voluntary “digital champion” to boost Internet adoption amongst the elderly and the poor. There is network governance economic regulation at the global, EU, ministerial and regulator levels, though generally excluding the four nations: England, Northern Ireland, Scotland and Wales. There are no formal mechanisms to involve the three devolved legislatures in telecommunications governance, which is complex and lies partially beyond democratic oversight and judicial review. Improvements are required to simplify, increase transparency (e.g., more use of open data) and the widen involvement, enabling oversight and review.
{"title":"Multi-Networked Governance of Networks: Regulating Telecommunications in the United Kingdom","authors":"E. Sutherland","doi":"10.2139/SSRN.2504460","DOIUrl":"https://doi.org/10.2139/SSRN.2504460","url":null,"abstract":"Opinion polls suggest Scotland will reject independence, opening the way to a review of economic governance in the United Kingdom, a complex quasi-federal, asymmetric system of administrations and parliaments, the result of ad hoc changes over decades. One party wants telecommunications “devolved” to Northern Ireland, other would leave it at the United Kingdom, where there is wide support for a voluntary “digital champion” to boost Internet adoption amongst the elderly and the poor. There is network governance economic regulation at the global, EU, ministerial and regulator levels, though generally excluding the four nations: England, Northern Ireland, Scotland and Wales. There are no formal mechanisms to involve the three devolved legislatures in telecommunications governance, which is complex and lies partially beyond democratic oversight and judicial review. Improvements are required to simplify, increase transparency (e.g., more use of open data) and the widen involvement, enabling oversight and review.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"143 ","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2014-06-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113993021","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We investigate the incentives for facility-based firms to invest in infrastructure upgrades and to foreclose service-based firms. We focus on asymmetric regulation regarding service-based firms' access to the infrastructure held by a facility-based firm. Spillovers from the infrastructure upgrades made by a regulated facility-based firm on service-based firms play a key role in the incentives for making these upgrades. The spillover effect can enhance the incentives for the regulated facility-based firm to make upgrades if access prices are not regulated. The existence of rival facility-based firms strengthens the incentives for a regulated facility-based firm to make infrastructure upgrades, especially when the spillover effect is significant. Furthermore, if access prices are not regulated, the existence of rival facility-based firms weakens the incentives for a regulated facility-based firm to foreclose service-based firms.
{"title":"Infrastructure Upgrades and Foreclosure with Coexistence of Service-Based and Facility-Based Firms","authors":"Noriaki Matsushima, Keizo Mizuno","doi":"10.2139/ssrn.2187148","DOIUrl":"https://doi.org/10.2139/ssrn.2187148","url":null,"abstract":"We investigate the incentives for facility-based firms to invest in infrastructure upgrades and to foreclose service-based firms. We focus on asymmetric regulation regarding service-based firms' access to the infrastructure held by a facility-based firm. Spillovers from the infrastructure upgrades made by a regulated facility-based firm on service-based firms play a key role in the incentives for making these upgrades. The spillover effect can enhance the incentives for the regulated facility-based firm to make upgrades if access prices are not regulated. The existence of rival facility-based firms strengthens the incentives for a regulated facility-based firm to make infrastructure upgrades, especially when the spillover effect is significant. Furthermore, if access prices are not regulated, the existence of rival facility-based firms weakens the incentives for a regulated facility-based firm to foreclose service-based firms.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125486303","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Despite their predominance in developing countries, production networks vary enormously among countries and yet attempts to systematically compare their nature have been done very sporadically in the literature. Drawing on relational contract theory, this paper presents a novel framework for analyzing the differences in the ways production networks organize themselves in emerging markets by utilizing successful Asian organizational structures to illustrate strategy archetypes. The paper analyzes three different relational employment and outsourcing contract forms through which the lead firm in a production network can maintain a quasi-judicial role in resolving the contracting problems inherent in multi-firm transactions. The production network templates embodied by Korean chaebols, Japanese keiretsus and Taiwanese guanxi relationships use different explicit and implicit contractual arrangements to adjudicate interparty disputes internally and can serve as more appropriate benchmarks for firms operating in emerging markets as opposed to existing templates based on mainstream strategy theories generated in developed countries.
{"title":"Quasi-Judicial Mechanisms in Asian Production Networks: Archetypes for Emerging Market Strategy","authors":"R. Galang","doi":"10.2139/ssrn.2083533","DOIUrl":"https://doi.org/10.2139/ssrn.2083533","url":null,"abstract":"Despite their predominance in developing countries, production networks vary enormously among countries and yet attempts to systematically compare their nature have been done very sporadically in the literature. Drawing on relational contract theory, this paper presents a novel framework for analyzing the differences in the ways production networks organize themselves in emerging markets by utilizing successful Asian organizational structures to illustrate strategy archetypes. The paper analyzes three different relational employment and outsourcing contract forms through which the lead firm in a production network can maintain a quasi-judicial role in resolving the contracting problems inherent in multi-firm transactions. The production network templates embodied by Korean chaebols, Japanese keiretsus and Taiwanese guanxi relationships use different explicit and implicit contractual arrangements to adjudicate interparty disputes internally and can serve as more appropriate benchmarks for firms operating in emerging markets as opposed to existing templates based on mainstream strategy theories generated in developed countries.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"98 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131704004","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The Supreme Court’s Citizens United decision to let corporations spend unlimited sums in federal elections was premised on a pair of promises: Corporations would disclose expenditures, and shareholders would police such spending. Those promises remain unfulfilled: of $266 million spent by outside groups in 2010, half was spent by groups that revealed nothing about their funders, double the total spending by outside groups in 2006. The best chance to fulfill those promises may now rest with the SEC. Contrary to consensus views, SEC action may benefit owners of affected firms. We estimate industry-adjusted price-to-book ratios of 80 companies in the S&P 500 that have policies calling for disclosure of electioneering. After controlling for size, leverage, research and development, growth and political activity, we find disclosing companies had 7.5 percent higher ratios than other S&P 500 companies in 2010. Our data are inconsistent with claims that disclosure is harmful, and are consistent with the idea that well-managed companies responsive to shareholder concerns tend to be valued more highly than other companies.
{"title":"Fulfilling Kennedy’s Promise: Why the SEC Should Mandate Disclosure of Corporate Political Activity","authors":"John C. Coates, IV, T. Lincoln","doi":"10.2139/SSRN.1923804","DOIUrl":"https://doi.org/10.2139/SSRN.1923804","url":null,"abstract":"The Supreme Court’s Citizens United decision to let corporations spend unlimited sums in federal elections was premised on a pair of promises: Corporations would disclose expenditures, and shareholders would police such spending. Those promises remain unfulfilled: of $266 million spent by outside groups in 2010, half was spent by groups that revealed nothing about their funders, double the total spending by outside groups in 2006. The best chance to fulfill those promises may now rest with the SEC. Contrary to consensus views, SEC action may benefit owners of affected firms. We estimate industry-adjusted price-to-book ratios of 80 companies in the S&P 500 that have policies calling for disclosure of electioneering. After controlling for size, leverage, research and development, growth and political activity, we find disclosing companies had 7.5 percent higher ratios than other S&P 500 companies in 2010. Our data are inconsistent with claims that disclosure is harmful, and are consistent with the idea that well-managed companies responsive to shareholder concerns tend to be valued more highly than other companies.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2011-07-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127040318","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this article we distinguish between two types of single-firm conduct. The first, which we call "extraction," is conduct engaged in by the firm to capture surplus from what the firm has itself created independent of the conduct’s effect on rivals. The second, which we call “extension," is single firm conduct that increases the firm’s profit by weakening or eliminating the competitive constraints provided by products of rivals. We propose as a fundamental antitrust policy towards single-firm conduct the following: Conduct merely to extract surplus the firm has created independent of the conduct’s effect on rivals should be permitted. Conversely, conduct that extends the firm’s market power by impairing the competitive constraints imposed by rivals presents a legitimate cause for concern. We subscribe strongly to the view that an essential element of appropriate antitrust policy is to allow a firm to capture as much of the surplus that, by its own investment, innovation, industry or foresight, the firm has itself brought into existence. We believe that alternative approaches to single-firm conduct, including in particular ones aiming to enhance static efficiency at the possible cost of dynamic efficiency and ones seeking to maximize overall welfare through more targeted intervention on a case-by-case basis (not to mention the use of competition policy to protect competitors rather than consumers) threaten seriously to impede economic growth and welfare over time. A policy that goes further, and which permits all unilateral conduct regardless of competitive effects (perhaps on grounds that "even more profit will generate even more innovation") is considered below and rejected as overly lenient, inconsistent with widely accepted presumptions in favor of inter-firm competition, and unwise, at least under the current state of economic knowledge. But we note that this conclusion is one based on our current economic knowledge and should remain a topic of ongoing research. It requires an empirical assessment of the gains from motivating more competition ex ante versus the subsequent loss of competition ex post.
{"title":"Appropriate Antitrust Policy Towards Single-Firm Conduct","authors":"D. Carlton, K. Heyer","doi":"10.2139/ssrn.1111665","DOIUrl":"https://doi.org/10.2139/ssrn.1111665","url":null,"abstract":"In this article we distinguish between two types of single-firm conduct. The first, which we call \"extraction,\" is conduct engaged in by the firm to capture surplus from what the firm has itself created independent of the conduct’s effect on rivals. The second, which we call “extension,\" is single firm conduct that increases the firm’s profit by weakening or eliminating the competitive constraints provided by products of rivals. We propose as a fundamental antitrust policy towards single-firm conduct the following: Conduct merely to extract surplus the firm has created independent of the conduct’s effect on rivals should be permitted. Conversely, conduct that extends the firm’s market power by impairing the competitive constraints imposed by rivals presents a legitimate cause for concern. We subscribe strongly to the view that an essential element of appropriate antitrust policy is to allow a firm to capture as much of the surplus that, by its own investment, innovation, industry or foresight, the firm has itself brought into existence. We believe that alternative approaches to single-firm conduct, including in particular ones aiming to enhance static efficiency at the possible cost of dynamic efficiency and ones seeking to maximize overall welfare through more targeted intervention on a case-by-case basis (not to mention the use of competition policy to protect competitors rather than consumers) threaten seriously to impede economic growth and welfare over time. A policy that goes further, and which permits all unilateral conduct regardless of competitive effects (perhaps on grounds that \"even more profit will generate even more innovation\") is considered below and rejected as overly lenient, inconsistent with widely accepted presumptions in favor of inter-firm competition, and unwise, at least under the current state of economic knowledge. But we note that this conclusion is one based on our current economic knowledge and should remain a topic of ongoing research. It requires an empirical assessment of the gains from motivating more competition ex ante versus the subsequent loss of competition ex post.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"39 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130899512","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper tests the impact of mandated disclosure regulation on merger & acquisition (M&A) activity by studying the extension of the U.S. mandated disclosure regime to companies trading on the over-the-counter (OTC) securities market, the Securities Acts Amendments of 1964. The Securities Acts Amendments are an excellent test case of the effects on M&A activity due to (i) the large number of affected OTC companies, (ii) the typical paucity of disclosure among OTC companies before the passage of the legislation, (iii) the absence of any severe macroeconomic shocks during the test period and (iv) the natural control group provided by the non-OTC companies not affected by the Securities Acts Amendments. The paper tests the impact of mandated disclosure on M&A activity among OTC companies during the 1955-75 period in two ways, regression analysis and comparison with M&A activity among non-OTC companies. Both tests in the paper strongly support the views of several academics and practitioners that mandated disclosure provides useful information to the market and that this information encourages higher levels of M&A activity.
{"title":"The Effect of Disclosure Regulation on M&A Activity: Evidence from the Over-the-Counter Market","authors":"A. Uccellini","doi":"10.2139/ssrn.1032798","DOIUrl":"https://doi.org/10.2139/ssrn.1032798","url":null,"abstract":"This paper tests the impact of mandated disclosure regulation on merger & acquisition (M&A) activity by studying the extension of the U.S. mandated disclosure regime to companies trading on the over-the-counter (OTC) securities market, the Securities Acts Amendments of 1964. The Securities Acts Amendments are an excellent test case of the effects on M&A activity due to (i) the large number of affected OTC companies, (ii) the typical paucity of disclosure among OTC companies before the passage of the legislation, (iii) the absence of any severe macroeconomic shocks during the test period and (iv) the natural control group provided by the non-OTC companies not affected by the Securities Acts Amendments. The paper tests the impact of mandated disclosure on M&A activity among OTC companies during the 1955-75 period in two ways, regression analysis and comparison with M&A activity among non-OTC companies. Both tests in the paper strongly support the views of several academics and practitioners that mandated disclosure provides useful information to the market and that this information encourages higher levels of M&A activity.","PeriodicalId":301403,"journal":{"name":"POL: Government Regulation (Topic)","volume":"152 8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116701186","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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