Mihail K. Miletkov

Foreign Independent Directors and the Quality of Legal Institutions

Foreign directors can affect firm value through their advising and monitoring functions. However, the demand for these directors, as well as their effect on firm performance is likely to be influenced by firm- and country-level characteristics. In a large sample of non-US firms, we find that foreign directors are more likely to be associated with firms that have more foreign operations and an international shareholder base, and firms that are located in countries with a limited supply of potentially qualified domestic directors – countries with a smaller, less well-educated populace and lower levels of capital market development. We also find that the association between foreign directors and firm performance is more positive in countries with lower quality legal institutions, and when the director comes from a country with higher quality legal institutions than the firm’s host country. Our study highlights the importance of considering national demographic factors and levels of capital market development when modeling the supply and demand for foreign directors, and also underscores the importance of institutional quality in the foreign director’s home and host country when assessing the effect of that director on firm performance.

Legal institutions, democracy and financial sector development

Conventional wisdom suggests that institutional development is a precursor to financial sector development. Using a panel of 122 countries over the period 1970–2000, we find that while there is a correlation between the quality of legal institutions and financial development, the relationship is not causal. Changes in the quality of legal institutions do not predict changes in the level of financial development. The results suggest that legal institutions and the financial sector develop simultaneously and are jointly determined by unobservable country-specific factors.

Investor Protection and the Role of Firm‐Level Financial Transparency in Attracting Foreign Investment

We ask if companies can attract foreign equity capital by improving the transparency of their financial statements. Using a large panel of firms across 51 countries outside the United States, we show that the answer is yes, but only in countries with relatively high levels of investor protection. In countries with poor investor protection, unilaterally increasing firm-level transparency has no effect on foreign ownership. Furthermore, our results indicate that in countries with higher levels of investor protection, the positive association between transparency and foreign ownership is stronger following a countrys adoption of the International Financial Reporting Standards.

Offshore Expertise for Onshore Companies: Director Connections to Island Tax Havens and Corporate Tax Policy

Theory and recent empirical literature suggest that social and professional connections may influence corporate policy. However, inference may be biased by the possibility that firms who share peers also share unobserved characteristics that are correlated with observed policy. Using a novel identification strategy, we predict and find that director connections through well-known island tax havens have a significant effect on corporate tax policy. Specifically, we find that U.S. firms with directors who are connected to firms domiciled on the islands of the Bahamas, Bermuda, or the Caymans exhibit significantly greater tax avoidance than other U.S. firms. The presence or arrival of an island director is associated with a reduction of between one and three percentage points in the firm’s effective tax rate. We also observe a significant increase in the use of tax haven subsidiaries following the arrival of the island director. This paper was accepted by Mary Barth, accounting.

Corporate boards and acquirer returns: international evidence

Purpose - – The purpose of this paper is to examine the effect of board structure on non-US acquirer returns in 11,499 acquisition transactions from 60 countries during the period from 2001 to 2011. Design/methodology/approach - – In this paper the authors employ event study methodology and regression analyses including instrumental variables two-stage least squares regressions. Findings - – The authors find that board independence in non-US firms is associated with significantly higher acquirer returns, but this effect is only present in countries with lower levels of investor protection. The authors contribute to the literature by documenting that due to the substitution effect between internal and external governance, when external governance mechanisms are not adequately developed, better internal governance (as measured by higher degree of board independence) reduces agency problems and leads to better firm decisions and outcomes (as measured by the quality of corporate acquisitions). Originality/value - – The paper is the first to empirically examine the relation between board independence and acquirer returns in non-US firms. The findings have important implications for both company managers and national policy makers who are debating the costs and benefits associated with increasing the degree of board independence in publicly traded companies around the world.

A Cure Rather than a Disease: Government Ownership and Minority Shareholder Protection

A master secondary clock system of the analog impulse type consisting of separate motor driven secondary clocks and a master control unit. The secondary clocks can be set at any time by an appropriate signal from the master clock so that even widely scattered secondary clocks can be brought at any time to the correct time. In one disclosed embodiment, the secondary clocks are moved by a series of rapid pulses form the master clock to a predetermined known time, the secondary clocks are brought into registry, the master clock calculates the time disparity between the registration time and the real time, and the secondary clocks are moved in unison to the real time. In another disclosed embodiment in which each secondary clock includes a microprocessor, an encoded digital signal representing the real time is transmitted to the secondary clocks, the secondary clocks move to a predetermined known time, a microprocessor in each secondary clock calculates the time disparity between the known time and the real time upon arrival of the second clock at the known time, and the secondary clocks thereafter move to the real time.

Chief Marketing Officers and Firm Performance: A Multinational Perspective on the Value Relevance of the Chief Marketer

We examine the effect of the marketing function of the firm, operationalized as the existence of a marketing executive position (CMO, VP of Marketing), on financial performance (return on assets) in a large global cross-sectional time-series dataset of publicly traded companies. We draw on literature on top management team influence within the firm, and theorize that the CMO, as the consumer advocate within the firm is tasked with a myriad of functions such as advertising, new marketing staff hiring, sales forecasting, marketing research and marketing planning, advising senior managers, and coordinating and controlling marketing activities at the divisional level, all of which require cross-unit and cross-functional integration across the firm. Thus, we hypothesize that as the complexity of the environment that a firm operates in increases, so does the value-added of the chief marketers’ role.