Major technological, regulatory, and institutional changes have made finance more widely available in recent years, amounting to a bone fide 'financial revolution'. In this article, we focus on the impact the financial revolution has had on the way firms are (or should be) organized and managed, and on the policy consequences.
{"title":"The Influence of the Financial Revolution on the Nature of Firms","authors":"R. Rajan, Luigi Zingales","doi":"10.2139/ssrn.259537","DOIUrl":"https://doi.org/10.2139/ssrn.259537","url":null,"abstract":"Major technological, regulatory, and institutional changes have made finance more widely available in recent years, amounting to a bone fide 'financial revolution'. In this article, we focus on the impact the financial revolution has had on the way firms are (or should be) organized and managed, and on the policy consequences.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"33 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124940928","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}
Scholars today are inquiring as to what, other than formal legal commands or lawsuits based thereon, influences the behavior of human actors in corporations. "Norms versus corporate law" has become a subject of symposia and other fora of inquiry. In that inquiry, arguably two neglected, overlapping aspects have been "soft law" and the role of international organizations such as the OECD, World Bank, IMF and the World Trade Organization (WTO). International and comparative scholars define soft law to include aspirational codes of conduct for corporate actors, corporate governance codes of best practices, treaty provisions, trade agreement provisions, and the like, all of "which may provide a conceptual framework for decisionmaking" in the corporate setting "but do not seriously constrain [corporate] decisionmakers." Codes of best practices also include a substantial comparative aspect as scholars and teachers compare the Vienot Report in France with the Cadbury Report in the UK, the ALI Corporate Governance Project and General Motors' 29 points in the United States, the Bosch Report in Australia and similar codes around the world. Newer codes of best practices include those in Italy, Korea and Japan. The growth of large multinational corporations and the collective action problem host nation states face in policing multinationals' activities highlight the need for study of soft law, the role of international organizations, and their effects on corporate activities with respect to core worker welfare and safety protections, environmental degradation, and similar subjects. The time may soon be arriving when these subjects have a place in the basic business organizations classes taught in law schools here in the United States as well as elsewhere.
{"title":"Teaching Comparative Corporate Governance: The Significance of 'Soft Law' and International Institutions","authors":"Douglas M. Branson","doi":"10.2139/SSRN.253950","DOIUrl":"https://doi.org/10.2139/SSRN.253950","url":null,"abstract":"Scholars today are inquiring as to what, other than formal legal commands or lawsuits based thereon, influences the behavior of human actors in corporations. \"Norms versus corporate law\" has become a subject of symposia and other fora of inquiry. In that inquiry, arguably two neglected, overlapping aspects have been \"soft law\" and the role of international organizations such as the OECD, World Bank, IMF and the World Trade Organization (WTO). International and comparative scholars define soft law to include aspirational codes of conduct for corporate actors, corporate governance codes of best practices, treaty provisions, trade agreement provisions, and the like, all of \"which may provide a conceptual framework for decisionmaking\" in the corporate setting \"but do not seriously constrain [corporate] decisionmakers.\" Codes of best practices also include a substantial comparative aspect as scholars and teachers compare the Vienot Report in France with the Cadbury Report in the UK, the ALI Corporate Governance Project and General Motors' 29 points in the United States, the Bosch Report in Australia and similar codes around the world. Newer codes of best practices include those in Italy, Korea and Japan. The growth of large multinational corporations and the collective action problem host nation states face in policing multinationals' activities highlight the need for study of soft law, the role of international organizations, and their effects on corporate activities with respect to core worker welfare and safety protections, environmental degradation, and similar subjects. The time may soon be arriving when these subjects have a place in the basic business organizations classes taught in law schools here in the United States as well as elsewhere.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-01-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121009597","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 aim of this study is to test whether existing capital structure theories relating to the use of straight debt and equity explain the use, in the UK, of preference shares as equity securities and convertible debt as debt securities. The study provides an empirical examination of the influence of non-debt tax shield, size, volatility of earnings, growth, asset structure and profitability. A second aim of the study is to examine to what extent firms in the UK may be using preference shares for their debt attributes and convertible debt for their equity attributes. The sample comprises 331 firms for the period 1992 ? 1997. The sample includes firms who use preference shares and convertible debt as well as a similar number of firms who do not use these instruments. Evidence obtained so far provides strong support for the suggestion that tax shields on debt play a minor, rather than major role, in the financing decision as the use of preference shares were found to have significant negative relationships with non-debt tax shields. Asset structure is also found to have an unexpected relationship with preference shares. These findings support the idea that firms may consider the agency, characteristics of preference shares as being more advantageous, when looking at what type of security to issue. Firms use less risky securities, other than straight equity, in order to reduce the agency conflicts of debt. Convertible debt is also found to have a counter-intuitive relationship with non-debt tax shields. Further evidence for convertible debt supports a recent study by Munro (1996) that convertible debt issuers tended to be large and intangible intensive. The evidence obtained for both preference shares and convertible debt does not rationalise the use of these instruments according to traditional capital structure theories. The study provides scope for further research to support the idea that firms use these hybrid securities for reasons other than those explored by traditional capital structure theories. Key words: Capital Structure Theories Preference Shares Convertible Debt
{"title":"Capital Structure Decision: The Use of Preference Shares and Convertible Debt in the UK","authors":"Sandra Laurent","doi":"10.2139/ssrn.251648","DOIUrl":"https://doi.org/10.2139/ssrn.251648","url":null,"abstract":"This aim of this study is to test whether existing capital structure theories relating to the use of straight debt and equity explain the use, in the UK, of preference shares as equity securities and convertible debt as debt securities. The study provides an empirical examination of the influence of non-debt tax shield, size, volatility of earnings, growth, asset structure and profitability. A second aim of the study is to examine to what extent firms in the UK may be using preference shares for their debt attributes and convertible debt for their equity attributes. The sample comprises 331 firms for the period 1992 ? 1997. The sample includes firms who use preference shares and convertible debt as well as a similar number of firms who do not use these instruments. Evidence obtained so far provides strong support for the suggestion that tax shields on debt play a minor, rather than major role, in the financing decision as the use of preference shares were found to have significant negative relationships with non-debt tax shields. Asset structure is also found to have an unexpected relationship with preference shares. These findings support the idea that firms may consider the agency, characteristics of preference shares as being more advantageous, when looking at what type of security to issue. Firms use less risky securities, other than straight equity, in order to reduce the agency conflicts of debt. Convertible debt is also found to have a counter-intuitive relationship with non-debt tax shields. Further evidence for convertible debt supports a recent study by Munro (1996) that convertible debt issuers tended to be large and intangible intensive. The evidence obtained for both preference shares and convertible debt does not rationalise the use of these instruments according to traditional capital structure theories. The study provides scope for further research to support the idea that firms use these hybrid securities for reasons other than those explored by traditional capital structure theories. Key words: Capital Structure Theories Preference Shares Convertible Debt","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"79 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114848543","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}
Discussions of comparative corporate governance have renewed the old question of corporate social responsibility, for whose benefit is the corporation to be operated? It is customary to think that US and UK law require that corporations be operated primarily for the benefit of shareholders. It is equally customary to think that German and other continental European law require that corporations be operated for the common good?shareholders, workers, creditors, communities and so on. At a general and abstract level both these customary ways of thinking are correct. But the truth of these general statements does not altogether hold up at the level of particular application. The variety of practices within particular countries and across national borders and the range of interests implicated and protected in different ways in both contexts render it difficult to describe national models except at a fairly high level of generality. Generalized descriptions can of course be very useful, but it is also useful when it is possible to conceive of mechanisms that enable more specific comparisons that transcend borders, whether international or intra-national. To do so requires a framework to distinguish types of governance mechanisms corporations use. Corporate governance mechanisms can be divided into three categories, two internal and one external. Internal governance mechanisms that address the relationship between those in control of the corporation on the one hand and all other constituents on the other (including shareholders, workers, lenders and communities) can be called vertical. Internal governance mechanisms that regulate directly the relationship between these various constituencies inter se can be called horizontal. External governance mechanisms are those rules and regulations imposed upon the corporate entity to address concerns beyond the penumbra of interests the corporation impacts directly, and include rules about competition and antitrust, national trade and security and so on. External and horizontal governance mechanisms tend to pose the most striking and specific distinguishing features of comparative corporate governance, while vertical governance mechanisms tend to be more universal and general. All these mechanisms are undergoing change and convergence around the world. Yet sufficient differences remain to enable presentation of generalized pictures of comparative corporate governance. This piece starts off with such pictures, describing in Part I a typical way of thinking about comparative corporate governance. It is a statement of the main characteristics of dominant models of corporate governance and finance: the market model (chiefly US and UK), the European bank model (chiefly Germany and France), and (more briefly) the Japanese bank model. These characteristics are increasingly blurring, however, and many differences have been overdrawn, as the descriptive and theoretical evidence presented in Part II suggests. Governance me
{"title":"Commonalities and Prescriptions in the Vertical Dimension of Global Corporate Governance","authors":"L. Cunningham","doi":"10.2139/SSRN.244665","DOIUrl":"https://doi.org/10.2139/SSRN.244665","url":null,"abstract":"Discussions of comparative corporate governance have renewed the old question of corporate social responsibility, for whose benefit is the corporation to be operated? It is customary to think that US and UK law require that corporations be operated primarily for the benefit of shareholders. It is equally customary to think that German and other continental European law require that corporations be operated for the common good?shareholders, workers, creditors, communities and so on. At a general and abstract level both these customary ways of thinking are correct. But the truth of these general statements does not altogether hold up at the level of particular application. The variety of practices within particular countries and across national borders and the range of interests implicated and protected in different ways in both contexts render it difficult to describe national models except at a fairly high level of generality. Generalized descriptions can of course be very useful, but it is also useful when it is possible to conceive of mechanisms that enable more specific comparisons that transcend borders, whether international or intra-national. To do so requires a framework to distinguish types of governance mechanisms corporations use. Corporate governance mechanisms can be divided into three categories, two internal and one external. Internal governance mechanisms that address the relationship between those in control of the corporation on the one hand and all other constituents on the other (including shareholders, workers, lenders and communities) can be called vertical. Internal governance mechanisms that regulate directly the relationship between these various constituencies inter se can be called horizontal. External governance mechanisms are those rules and regulations imposed upon the corporate entity to address concerns beyond the penumbra of interests the corporation impacts directly, and include rules about competition and antitrust, national trade and security and so on. External and horizontal governance mechanisms tend to pose the most striking and specific distinguishing features of comparative corporate governance, while vertical governance mechanisms tend to be more universal and general. All these mechanisms are undergoing change and convergence around the world. Yet sufficient differences remain to enable presentation of generalized pictures of comparative corporate governance. This piece starts off with such pictures, describing in Part I a typical way of thinking about comparative corporate governance. It is a statement of the main characteristics of dominant models of corporate governance and finance: the market model (chiefly US and UK), the European bank model (chiefly Germany and France), and (more briefly) the Japanese bank model. These characteristics are increasingly blurring, however, and many differences have been overdrawn, as the descriptive and theoretical evidence presented in Part II suggests. Governance me","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130433207","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 adopts the benchmarking approach to study audit committee effectiveness in the UK. Using FRRP sample spanning a decade from 1990 to 2000, this paper investigates factors leading to the violation of accounting and financial reporting standards by UK firms. Our binary logit regression suggest the following results: First, smaller boards provide better incentive for monitoring; Second, consistent with previous studies, board and committee independence enhances reduce the likelihood of financial reporting problems; Third, contrary to popular suggestions, director share ownership might cause non-compliance with standards; Forth, outside directorships seem to enable non-executive directors to gain monitoring experience more quickly and is conductive to better financial reporting; Fifth, financial literacy and audit committee meeting frequency all reduce the probability of standard violations in financial reporting.
{"title":"Benchmarking Audit Committee Effectiveness in the UK","authors":"J. Song, Brian Windram","doi":"10.2139/ssrn.249865","DOIUrl":"https://doi.org/10.2139/ssrn.249865","url":null,"abstract":"This paper adopts the benchmarking approach to study audit committee effectiveness in the UK. Using FRRP sample spanning a decade from 1990 to 2000, this paper investigates factors leading to the violation of accounting and financial reporting standards by UK firms. Our binary logit regression suggest the following results: First, smaller boards provide better incentive for monitoring; Second, consistent with previous studies, board and committee independence enhances reduce the likelihood of financial reporting problems; Third, contrary to popular suggestions, director share ownership might cause non-compliance with standards; Forth, outside directorships seem to enable non-executive directors to gain monitoring experience more quickly and is conductive to better financial reporting; Fifth, financial literacy and audit committee meeting frequency all reduce the probability of standard violations in financial reporting.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"67 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116629075","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}
Agreements on reforms of corporate governance, corporate law, and securities regulations, in order to augment the functioning of emerging equity markets, are complicated due to the fact that two different financial systems with some opposing features have evolved in the advanced economies, namely the insider system and the outsider system. The persistence of these systems are sought to be explained by introducing interactions between corporate governance, regulatory intervention, and capital markets into a model of evolutionary game theory. Resulting network effects are identified and analyzed. One major conclusion of the analysis is that, in the long run, reforms should be headed towards features of the outsider system because it operates better in integrated capital markets. However, attempts to achieve immediate transition into that direction can have detrimental effects, if the legal environment is not supportive enough for arm's-length financing.
{"title":"Global Differences in Corporate Governance Systems - Theory and Implications for Reforms","authors":"M. Berndt","doi":"10.2139/ssrn.255886","DOIUrl":"https://doi.org/10.2139/ssrn.255886","url":null,"abstract":"Agreements on reforms of corporate governance, corporate law, and securities regulations, in order to augment the functioning of emerging equity markets, are complicated due to the fact that two different financial systems with some opposing features have evolved in the advanced economies, namely the insider system and the outsider system. The persistence of these systems are sought to be explained by introducing interactions between corporate governance, regulatory intervention, and capital markets into a model of evolutionary game theory. Resulting network effects are identified and analyzed. One major conclusion of the analysis is that, in the long run, reforms should be headed towards features of the outsider system because it operates better in integrated capital markets. However, attempts to achieve immediate transition into that direction can have detrimental effects, if the legal environment is not supportive enough for arm's-length financing.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"23 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134290884","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}
Some of the most far-reaching changes in the financial markets currently occur in the structure of the market for markets for financial instruments itself. This article first highlights some of the most prominent recent evidence. In the subsequent analysis, demand side, supply side, and governance aspects are dealt with. On the demand side, banks and security houses may currently be in a powerful position due to their role as switchmen with respect to order routing. However, investors, institutional as well as individual, are empowered at the expense of access intermediaries as opener, i.e., less intermediated, trading platforms become more realistic. On the supply side, the interplay of IT, regulation, and the tremendous growth in market volume increased the competitiveness in the market for markets significantly, in particular by lowering market entry barriers. The governance analysis claims that, until now, traditional exchanges and their emerging competitors differ not that much as one might think at first sight. Almost all of them are still member and customer controlled entities (MCCEs). However, since increasing competition unevenly affects the parties connected to an MCCE, power shifts can be observed. Significant steps towards an outside owned and controlled entity (OOCE) are still very rare. Such steps would include trading platform suppliers going public with a substantial free float. In summary, we seem to be at the beginning of the transformation of the market for markets to a much more competitive sector, which, until now, only has affected a few trading objects. Seen this way, for the future we should expect the emergence of a deeply differentiated range of products and services in response to the great diversity of preferences among the customers.
{"title":"Recent Developments in the Market for Markets for Financial Instruments","authors":"S. Prigge","doi":"10.2139/ssrn.258593","DOIUrl":"https://doi.org/10.2139/ssrn.258593","url":null,"abstract":"Some of the most far-reaching changes in the financial markets currently occur in the structure of the market for markets for financial instruments itself. This article first highlights some of the most prominent recent evidence. In the subsequent analysis, demand side, supply side, and governance aspects are dealt with. On the demand side, banks and security houses may currently be in a powerful position due to their role as switchmen with respect to order routing. However, investors, institutional as well as individual, are empowered at the expense of access intermediaries as opener, i.e., less intermediated, trading platforms become more realistic. On the supply side, the interplay of IT, regulation, and the tremendous growth in market volume increased the competitiveness in the market for markets significantly, in particular by lowering market entry barriers. The governance analysis claims that, until now, traditional exchanges and their emerging competitors differ not that much as one might think at first sight. Almost all of them are still member and customer controlled entities (MCCEs). However, since increasing competition unevenly affects the parties connected to an MCCE, power shifts can be observed. Significant steps towards an outside owned and controlled entity (OOCE) are still very rare. Such steps would include trading platform suppliers going public with a substantial free float. In summary, we seem to be at the beginning of the transformation of the market for markets to a much more competitive sector, which, until now, only has affected a few trading objects. Seen this way, for the future we should expect the emergence of a deeply differentiated range of products and services in response to the great diversity of preferences among the customers.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"579 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134405775","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 paper we investigate whether there is evidence of a target company cross-border effect by comparing the premium for those companies acquired by other UK companies with the premium for those acquired by non-UK firms. Using data for the period 1986-1991, it is found that target company shareholders gain significantly more from cross-border than from domestic acquisitions. The cross-border effect appears to be partly attributable to a significantly higher proportion of cross-border than domestic bids being full cash offers, and target company shareholders are found to gain significantly more from cash than from equity offers. However, even when controlling for these and other bid characteristics, the target company cross-border effect remains highly significant, amounting to somewhere between 6.02 and 9.17 percentage points, depending on model specification.
{"title":"Cross-Border Acquisitions into the UK - an Analysis of Target Company Returns","authors":"J. Danbolt","doi":"10.2139/ssrn.247680","DOIUrl":"https://doi.org/10.2139/ssrn.247680","url":null,"abstract":"In this paper we investigate whether there is evidence of a target company cross-border effect by comparing the premium for those companies acquired by other UK companies with the premium for those acquired by non-UK firms. Using data for the period 1986-1991, it is found that target company shareholders gain significantly more from cross-border than from domestic acquisitions. The cross-border effect appears to be partly attributable to a significantly higher proportion of cross-border than domestic bids being full cash offers, and target company shareholders are found to gain significantly more from cash than from equity offers. However, even when controlling for these and other bid characteristics, the target company cross-border effect remains highly significant, amounting to somewhere between 6.02 and 9.17 percentage points, depending on model specification.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"24 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125753823","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}
CalFed Bancorp is one of 126 S&Ls suing the U.S. government for breach of contract related to supervisory goodwill, a form of goodwill created by the acquisition of insolvent thrifts during the early 1980s. Before a determination of damages in its lawsuit, CalFed announced and issued a litigation participation security giving shareholders a proportional claim on recovered damages, if any. This announcement generated a positive excess return in part because it made CalFed a more likely acquisition target. This security also reveals important, yet previously unavailable, information about CalFed's lawsuit: its price reveals a market-based estimate of damages while its beta provides information about expected returns and the time until payoff. In a broader context, this security highlights acquisition facilitation as a benefit of issuing targeted stock as well as a series of lawsuits that will set important precedents regarding the determination of liability and the estimation of damages in breach of contract cases.
{"title":"The Information Content of Litigation Participation Securities: The Case of Calfed Bancorp","authors":"B. Esty","doi":"10.2139/ssrn.238532","DOIUrl":"https://doi.org/10.2139/ssrn.238532","url":null,"abstract":"CalFed Bancorp is one of 126 S&Ls suing the U.S. government for breach of contract related to supervisory goodwill, a form of goodwill created by the acquisition of insolvent thrifts during the early 1980s. Before a determination of damages in its lawsuit, CalFed announced and issued a litigation participation security giving shareholders a proportional claim on recovered damages, if any. This announcement generated a positive excess return in part because it made CalFed a more likely acquisition target. This security also reveals important, yet previously unavailable, information about CalFed's lawsuit: its price reveals a market-based estimate of damages while its beta provides information about expected returns and the time until payoff. In a broader context, this security highlights acquisition facilitation as a benefit of issuing targeted stock as well as a series of lawsuits that will set important precedents regarding the determination of liability and the estimation of damages in breach of contract cases.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128521016","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}
Contrary to public expectations, companies usually receive clean audit opinions shortly prior to failure. This study examines whether audit reports in failing companies are affected by auditor dependence or opinion shopping. I find audit fees, auditor size, auditor-client tenures and dominant directors are not significantly associated with going-concern opinions. This suggests audit reports are not affected by auditor dependence. I also find companies strategically appoint auditors who are less likely to issue going concern opinions. This suggests failing companies successfully engage in opinion shopping.
{"title":"Going-Concern Opinions in Failing Companies: Auditor Dependence and Opinion Shopping","authors":"C. Lennox","doi":"10.2139/ssrn.240468","DOIUrl":"https://doi.org/10.2139/ssrn.240468","url":null,"abstract":"Contrary to public expectations, companies usually receive clean audit opinions shortly prior to failure. This study examines whether audit reports in failing companies are affected by auditor dependence or opinion shopping. I find audit fees, auditor size, auditor-client tenures and dominant directors are not significantly associated with going-concern opinions. This suggests audit reports are not affected by auditor dependence. I also find companies strategically appoint auditors who are less likely to issue going concern opinions. This suggests failing companies successfully engage in opinion shopping.","PeriodicalId":415084,"journal":{"name":"Corporate Law: Finance & Corporate Governance Law eJournal","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2000-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121899952","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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