Contrary to contentions in prior literature that emerging multinationals are only regional players, the evidence on the globalness of Indian firms presented in this study suggests that a number of emerging multinationals are global firms. Their strategies are targeted at both the developed and developing markets with the intensity of their overseas operations comparable or far greater than those of the world’s leading multinationals. Many of these firms have greater sales or capital assets outside their home base. Indeed, many of them qualify as global firms as they have a significant presence (over 10 percent of sales) in each of the four regions (triad and the non-triad developing regions) and no one region accounts for more than 50 per cent of their global sales. The study of the transformation of emerging multinationals into non-home region players provides considerable potential for better understanding management theories and practices.
{"title":"On the Globalness of Emerging Multinationals: A Study of Indian MNEs","authors":"R. Aggarwal, J. Pradhan","doi":"10.2139/ssrn.1681802","DOIUrl":"https://doi.org/10.2139/ssrn.1681802","url":null,"abstract":"Contrary to contentions in prior literature that emerging multinationals are only regional players, the evidence on the globalness of Indian firms presented in this study suggests that a number of emerging multinationals are global firms. Their strategies are targeted at both the developed and developing markets with the intensity of their overseas operations comparable or far greater than those of the world’s leading multinationals. Many of these firms have greater sales or capital assets outside their home base. Indeed, many of them qualify as global firms as they have a significant presence (over 10 percent of sales) in each of the four regions (triad and the non-triad developing regions) and no one region accounts for more than 50 per cent of their global sales. The study of the transformation of emerging multinationals into non-home region players provides considerable potential for better understanding management theories and practices.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114165982","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}
It has been a puzzle why foreign firms obtain credit ratings by global rating agencies such as S&P or Moody’s rather than from their home country’s rating agencies even though the global raters typically assign lower credit ratings when these foreign firms issue bonds in their home currencies. In addition, unlike firms in the U.S., foreign firms are not required to obtain ratings from the SEC-sanctioned Nationally Recognized Statistical Rating Agencies (NRSROs). We investigate this puzzle with new 3,525 yen-denominated plain vanilla bonds issued in Japan during 1998-2009 and find that bonds rated by at least one global agency can, on average, result in yields that are 11-14 bps lower than those rated by only Japanese rating agencies. However, during the 2007-2009 financial crisis, Japanese issuers which used S&P and Moody’s actually faced yields that were 14-19 bps higher, thus negating the prior advantage of obtaining a bond rating from a global rating firm, after controlling for other factors. This suggests that the credibility and reputation of the global rating agencies such as S&P and Moody’s have declined following public disclosure of these firms’ problems associated with the subprime mortgage securitization process. In addition to the greater size and longer maturity of the bond issue, we find that Japanese firms with more financial leverage, greater information asymmetry, higher levels of equity ownership by foreigners, poor financial performance, and greater systematic risk are more likely to seek ratings from Moody’s or S&P rather than Japanese rating agencies.
{"title":"Rating Agency Reputation, the Global Financial Crisis, and the Cost of Debt","authors":"S. Han, Michael S. Pagano, Yoon S. Shin","doi":"10.2139/ssrn.1680084","DOIUrl":"https://doi.org/10.2139/ssrn.1680084","url":null,"abstract":"It has been a puzzle why foreign firms obtain credit ratings by global rating agencies such as S&P or Moody’s rather than from their home country’s rating agencies even though the global raters typically assign lower credit ratings when these foreign firms issue bonds in their home currencies. In addition, unlike firms in the U.S., foreign firms are not required to obtain ratings from the SEC-sanctioned Nationally Recognized Statistical Rating Agencies (NRSROs). We investigate this puzzle with new 3,525 yen-denominated plain vanilla bonds issued in Japan during 1998-2009 and find that bonds rated by at least one global agency can, on average, result in yields that are 11-14 bps lower than those rated by only Japanese rating agencies. However, during the 2007-2009 financial crisis, Japanese issuers which used S&P and Moody’s actually faced yields that were 14-19 bps higher, thus negating the prior advantage of obtaining a bond rating from a global rating firm, after controlling for other factors. This suggests that the credibility and reputation of the global rating agencies such as S&P and Moody’s have declined following public disclosure of these firms’ problems associated with the subprime mortgage securitization process. In addition to the greater size and longer maturity of the bond issue, we find that Japanese firms with more financial leverage, greater information asymmetry, higher levels of equity ownership by foreigners, poor financial performance, and greater systematic risk are more likely to seek ratings from Moody’s or S&P rather than Japanese rating agencies.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"150 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122462942","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}
Insurance in India has been emerging as an important and profitable business. Every insurer wants to capture the maximum share in the market and is offering both Unit Linked Insurance Plans (ULIP) and traditional plans. ULIPs are the youngsters in the product portfolios of life insurance companies. They provide the buyer a life cover as well as investment avenue. Today, these are the stars, accounting for 80 percent of polices sold by life insurers and their rapid rise has been fueled to a large extent by the last bull runs in the stock market. There is an enormous choice of ULIP Plans available in the insurance market, but such a wide range of plans puzzle the buyer. The present study examines the Unit Linked Insurance Plans of selected private life insurers on the basis of policy features, charges and the performance registered by each investment. It is observed that as a whole Wealth Advantage plan of ICICI Pru is the best plan in terms of diverse ULIP features and charges. Birla Sun Life’s Individual Life Creator and Birla Sun Life’s Individual Life Magnifier has emerged as the top two ULIP funds.
{"title":"Exploration and Analysis of Structure and Growth Performance of Selected ULIPs","authors":"A. Khurana, Kanika Goyal","doi":"10.2139/SSRN.1713906","DOIUrl":"https://doi.org/10.2139/SSRN.1713906","url":null,"abstract":"Insurance in India has been emerging as an important and profitable business. Every insurer wants to capture the maximum share in the market and is offering both Unit Linked Insurance Plans (ULIP) and traditional plans. ULIPs are the youngsters in the product portfolios of life insurance companies. They provide the buyer a life cover as well as investment avenue. Today, these are the stars, accounting for 80 percent of polices sold by life insurers and their rapid rise has been fueled to a large extent by the last bull runs in the stock market. There is an enormous choice of ULIP Plans available in the insurance market, but such a wide range of plans puzzle the buyer. The present study examines the Unit Linked Insurance Plans of selected private life insurers on the basis of policy features, charges and the performance registered by each investment. It is observed that as a whole Wealth Advantage plan of ICICI Pru is the best plan in terms of diverse ULIP features and charges. Birla Sun Life’s Individual Life Creator and Birla Sun Life’s Individual Life Magnifier has emerged as the top two ULIP funds.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128270683","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}
State governments allocate authority, under a federally imposed cap, to issue tax-exempt bonds that fund “private activities” such as industrial expansion, student loans, and low-income housing. This paper presents political economy models of the allocation process and an empirical analysis. Due to an idiosyncrasy of the tax code, the annual per capita volume cap varies widely between states. I estimate that, on average, there is an additional $0.80 per capita per year of borrowing for each additional dollar per capita of volume cap. This confirms that the cap is a binding constraint in most cases, and authority to issue tax-exempt bonds is a scarce resource. I find that mortgage revenue bonds and student loan bonds are the most responsive to differences in the cap. The gross state product and employment in manufacturing and utilities drive allocations to industrial development bonds and utilities bonds. While controlling for the size of the education sector, I find campaign contributions from educational interests are associated with higher authorizations for student loans. One result runs counter to the theoretical models. Higher campaign contributions from utilities interests are associated with lower utilities borrowing. Unions do not have an independent effect on allocations.
{"title":"Private-Activity Municipal Bonds: The Political Economy of Volume Cap Allocation","authors":"S. Whitaker","doi":"10.26509/WP-201013","DOIUrl":"https://doi.org/10.26509/WP-201013","url":null,"abstract":"State governments allocate authority, under a federally imposed cap, to issue tax-exempt bonds that fund “private activities” such as industrial expansion, student loans, and low-income housing. This paper presents political economy models of the allocation process and an empirical analysis. Due to an idiosyncrasy of the tax code, the annual per capita volume cap varies widely between states. I estimate that, on average, there is an additional $0.80 per capita per year of borrowing for each additional dollar per capita of volume cap. This confirms that the cap is a binding constraint in most cases, and authority to issue tax-exempt bonds is a scarce resource. I find that mortgage revenue bonds and student loan bonds are the most responsive to differences in the cap. The gross state product and employment in manufacturing and utilities drive allocations to industrial development bonds and utilities bonds. While controlling for the size of the education sector, I find campaign contributions from educational interests are associated with higher authorizations for student loans. One result runs counter to the theoretical models. Higher campaign contributions from utilities interests are associated with lower utilities borrowing. Unions do not have an independent effect on allocations.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127268711","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}
G. de Martino, Massimo Libertucci, Mario Marangoni, Mario Quagliariello
Contingent capital i?½ any debt instrument that converts into equity when a predefined event occurs i?½ has received increasing attention as a viable tool for allowing banks to raise capital when needed at relatively more affordable prices than common equity. While the debate has focused on contingent capital for systemically important financial institutions, this paper concentrates on its possible use for covering capital needs arising from the implementation of countercyclical buffers. We propose the introduction of countercyclical contingent capital (CCC) based on a double trigger. The interaction of the two triggers would determine a quasi-default status. Conversion would be required when the financial system is simultaneously facing aggregate problems and the individual bank i?½ while still in a going concern status i?½ shows weaknesses. Building on this proposal, the paper tests how different double triggers would have worked in the past and discusses the optimal design of the conversion mechanism and prudential treatment.
{"title":"Countercyclical Contingent Capital (CCC): Possible Use and Ideal Design","authors":"G. de Martino, Massimo Libertucci, Mario Marangoni, Mario Quagliariello","doi":"10.2139/SSRN.1721512","DOIUrl":"https://doi.org/10.2139/SSRN.1721512","url":null,"abstract":"Contingent capital i?½ any debt instrument that converts into equity when a predefined event occurs i?½ has received increasing attention as a viable tool for allowing banks to raise capital when needed at relatively more affordable prices than common equity. While the debate has focused on contingent capital for systemically important financial institutions, this paper concentrates on its possible use for covering capital needs arising from the implementation of countercyclical buffers. We propose the introduction of countercyclical contingent capital (CCC) based on a double trigger. The interaction of the two triggers would determine a quasi-default status. Conversion would be required when the financial system is simultaneously facing aggregate problems and the individual bank i?½ while still in a going concern status i?½ shows weaknesses. Building on this proposal, the paper tests how different double triggers would have worked in the past and discusses the optimal design of the conversion mechanism and prudential treatment.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125569432","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 importance of debt-for-equity swaps has come to the fore once again when a lethal combination of a lack of liquidity and a lack of new bank finance and capital injection on a perceived deterioration in covenant strength, associated with the vagaries of the most recent global economic crisis and the credit crunch suffered by financial markets has hit most companies throughout the world, as a result of which they have struggled to service a high level of debt and, consequently, lapsed into the brink of insolvency. Since, using their respective countries’ reorganisation mechanisms, a plethora of financially distressed businesses have successfully salvaged themselves from a potential insolvency with a clean slate, reorganisation law has proven to be an ideal area for observing the legal process of restructurings involving debt-for-equity swaps in a legal system within which it operates. The key contribution of this Article is two-fold. This Article provides insights into debt-for-equity swaps through the prism of the reorganisation law of the People’s Republic of China (PRC), and also uncovers some important differences between the “law on the books” and the “law in action.” Criticising the weaknesses of the reorganisation procedures or judicial weaknesses of the PRC in addressing the problems of businesses in financial difficulty, however, falls outside the scope of this Article.
{"title":"Debt-for-Equity Swap and Reorganisation Law in the People’s Republic of China","authors":"C. Palmer","doi":"10.2139/SSRN.1671909","DOIUrl":"https://doi.org/10.2139/SSRN.1671909","url":null,"abstract":"The importance of debt-for-equity swaps has come to the fore once again when a lethal combination of a lack of liquidity and a lack of new bank finance and capital injection on a perceived deterioration in covenant strength, associated with the vagaries of the most recent global economic crisis and the credit crunch suffered by financial markets has hit most companies throughout the world, as a result of which they have struggled to service a high level of debt and, consequently, lapsed into the brink of insolvency. Since, using their respective countries’ reorganisation mechanisms, a plethora of financially distressed businesses have successfully salvaged themselves from a potential insolvency with a clean slate, reorganisation law has proven to be an ideal area for observing the legal process of restructurings involving debt-for-equity swaps in a legal system within which it operates. The key contribution of this Article is two-fold. This Article provides insights into debt-for-equity swaps through the prism of the reorganisation law of the People’s Republic of China (PRC), and also uncovers some important differences between the “law on the books” and the “law in action.” Criticising the weaknesses of the reorganisation procedures or judicial weaknesses of the PRC in addressing the problems of businesses in financial difficulty, however, falls outside the scope of this Article.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131797405","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 examines the effect of corporate asset growth on stock returns using data on nine equity markets in Asia. For the period from 1981 to 2007, we find a pervasive negative relation between asset growth and subsequent stock returns. Such relation is weaker in markets where firms' asset growth rates are more homogeneous and persistent and in markets where firms rely more on bank financing for growth. On the other hand, corporate governance, investor protection, and legal origin do not influence the magnitude of the asset growth effect in Asian markets.
{"title":"Asset Growth and Stock Returns: Evidence from Asian Financial Markets","authors":"Tong Yao, Tong Yu, T. Zhang, Shawn Chen","doi":"10.2139/ssrn.1683784","DOIUrl":"https://doi.org/10.2139/ssrn.1683784","url":null,"abstract":"This study examines the effect of corporate asset growth on stock returns using data on nine equity markets in Asia. For the period from 1981 to 2007, we find a pervasive negative relation between asset growth and subsequent stock returns. Such relation is weaker in markets where firms' asset growth rates are more homogeneous and persistent and in markets where firms rely more on bank financing for growth. On the other hand, corporate governance, investor protection, and legal origin do not influence the magnitude of the asset growth effect in Asian markets.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116793900","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}
Dimitris Andriosopoulos, Chrysovalantis Gaganis, Fotios Pasiouras, C. Zopounidis
This study presents the first attempt to develop classification models for the prediction of share repurchases using multicriteria decision aid (MCDA) methods. The MCDA models are developed using two methods namely UTilites Additives DIScriminantes (UTADIS) and ELimination and Choice Expressing REality (ELECTRE) TRI, through a ten-fold cross-validation approach. The sample consists of 1060 firms from France, Germany and the UK. We find that both MCDA models achieve quite satisfactory classification accuracies in the validation sample and they outperform both logistic regression and chance predictions.
{"title":"Developing Multicriteria Decision Aid Models for the Prediction of Share Repurchases","authors":"Dimitris Andriosopoulos, Chrysovalantis Gaganis, Fotios Pasiouras, C. Zopounidis","doi":"10.2139/ssrn.1668594","DOIUrl":"https://doi.org/10.2139/ssrn.1668594","url":null,"abstract":"This study presents the first attempt to develop classification models for the prediction of share repurchases using multicriteria decision aid (MCDA) methods. The MCDA models are developed using two methods namely UTilites Additives DIScriminantes (UTADIS) and ELimination and Choice Expressing REality (ELECTRE) TRI, through a ten-fold cross-validation approach. The sample consists of 1060 firms from France, Germany and the UK. We find that both MCDA models achieve quite satisfactory classification accuracies in the validation sample and they outperform both logistic regression and chance predictions.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128555061","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}
Economic Geography maintains that economic activities are not randomly distributed across space. This paper examines the impact of industrial and regional characteristics on venture capital activities in the United States from 1995 until 2009. The unique database allows for stratifications into seventeen industries within nineteen regions of the United States. This study affirms the significance of both Location and industry in venture capital investment. Both statistical and graphical methods are employed in order to better ascertain the dynamic nature of the data.
{"title":"Location, Location, Location: Entrepreneurial Finance Meets Economic Geography","authors":"Emanuel Shachmurove, Yochanan Shachmurove","doi":"10.2139/ssrn.1666819","DOIUrl":"https://doi.org/10.2139/ssrn.1666819","url":null,"abstract":"Economic Geography maintains that economic activities are not randomly distributed across space. This paper examines the impact of industrial and regional characteristics on venture capital activities in the United States from 1995 until 2009. The unique database allows for stratifications into seventeen industries within nineteen regions of the United States. This study affirms the significance of both Location and industry in venture capital investment. Both statistical and graphical methods are employed in order to better ascertain the dynamic nature of the data.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131192307","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}
A large number of empirical studies in the U.S. report that there is no cross-sectional relationship between board composition and firm performance. On the other hand, a relatively small but growing literature on boards in emerging market corporations shows that a higher level of board independence is associated with both firm actions which are consistent with the interests of shareholders and with superior firm performance. This important difference between developed and emerging markets suggests that boards matter more in weak governance systems. We analyze the relationship between board structure and firm performance for a sample of listed companies in Turkey - a country that features relatively weak protection for investors, firms associated with family controlled business groups and pyramidal structures. We do so by using a hand-collected data set on directors’ personal characteristics and their roles. We document that Turkish boards are populated besides members of the controlling shareholder and their affiliated parties, by employees of the apex firm in the business group, by ex-politicians, ex-bureaucrats and ex-military officers. Classifying the board members as independent and affiliated directors, we report three main results: (i) Board independence is unrelated to equity issues, (ii) Independent directors are unlikely to curb the extent of related party transactions, and (iii) Depending on the statistical methods we use, the presence of independent board members and firm performance are negatively related or uncorrelated. These results are robust under different specifications and estimation methods which try to deal with the endogeneity problems inherent in board research. Especially the findings (ii) and (iii) challenge the usefulness of independent directors as an internal governance device in Turkish companies.
{"title":"The Effects of Board Independence in Controlled Firms: Evidence from Turkey","authors":"Melsa Ararat, H. Orbay, B. Yurtoglu","doi":"10.2139/ssrn.1663403","DOIUrl":"https://doi.org/10.2139/ssrn.1663403","url":null,"abstract":"A large number of empirical studies in the U.S. report that there is no cross-sectional relationship between board composition and firm performance. On the other hand, a relatively small but growing literature on boards in emerging market corporations shows that a higher level of board independence is associated with both firm actions which are consistent with the interests of shareholders and with superior firm performance. This important difference between developed and emerging markets suggests that boards matter more in weak governance systems. We analyze the relationship between board structure and firm performance for a sample of listed companies in Turkey - a country that features relatively weak protection for investors, firms associated with family controlled business groups and pyramidal structures. We do so by using a hand-collected data set on directors’ personal characteristics and their roles. We document that Turkish boards are populated besides members of the controlling shareholder and their affiliated parties, by employees of the apex firm in the business group, by ex-politicians, ex-bureaucrats and ex-military officers. Classifying the board members as independent and affiliated directors, we report three main results: (i) Board independence is unrelated to equity issues, (ii) Independent directors are unlikely to curb the extent of related party transactions, and (iii) Depending on the statistical methods we use, the presence of independent board members and firm performance are negatively related or uncorrelated. These results are robust under different specifications and estimation methods which try to deal with the endogeneity problems inherent in board research. Especially the findings (ii) and (iii) challenge the usefulness of independent directors as an internal governance device in Turkish companies.","PeriodicalId":340291,"journal":{"name":"ERN: Intertemporal Firm Choice & Growth","volume":"15 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123633833","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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