Sandra Dow

CEO Incentives and Corporate Social Performance

This paper examines the relationship between CEO incentives and strong and weak corporate social performance. Using the KLD database we find that incentives have no significant relationship with strong social performance. Salary and long-term incentives have a positive association with weak social performance.

The sources and advantages of Japanese industrial organization

Using agency theory, this paper investigates advantages linked to Japanese industrial organization. Three variables theoretically linked to keiretsu organization, ownership structure, inter-firm investment, and financing flexibility were able to correctly classify U.S. and Japanese firms. We detect polarization of U.S. and Japanese firms in terms of performance and strategic decisions.

Corporate Governance and Business Strategies for Climate Change and Environmental Mitigation

Strategic corporate responses to climate change and environmental challenges do not seem to be the primary domain of corporate management. In the short run, such decisions are generally not consistent with executive incentives and often not seen as profit maximizing. Nevertheless, as some climate change responses may indeed be firm value maximizing, such decisions can be expected to reflect the nature of a firms corporate governance. Based on an analysis of 500 of the largest US firms, we show empirically that this is indeed the case. Specifically, this study documents that institutional ownership and board entrenchment seem to significantly influence climate change and environmental impact mitigation policies of large firms.

Probing corporate governance globally: Impacts of business systems and beyond

Effective mechanisms for corporate governance are essential for market-based economic systems. This chapter addresses the necessity of corporate governance research to address the competing goals of various stakeholders in the firm: managers, suppliers of financial capital, and other stakeholders. The review of literature reveals that firm-level complexity, as well as diversity of national business systems, are important for understanding corporate governance practices and regulations around the world.

KEIRETSU ORGANIZATION IN A CHANGING ECONOMIC CONTEXT: THE EVOLUTION OF DEBT AND EQUITY TIES AMONG KEIRETSU FIRMS

This paper examines the evolution of debt and equity ties among keiretsu firms between the early 1990s and the later part of the decade. During this time frame, the stable shareholding relations characteristic of the Japanese inter-corporate network faced significant pressures from the opening of the Japanese equity market and globalization of financial markets. We investigate whether the traditional “stakeholder model” of the Japanese firm is threatened by North American “shareholder” models. Using multiple measures of keiretsu ties, our analysis suggests this is not the case. Overall, we provide evidence of strengthening ties, although in the case of equity, there has been an evolution away from institutional investors.

Corporate Governance & Interlisted Stocks: The Persistence of Country Specific Traits

We analyze corporate governance mechanisms in Canadian and US firms. We show that despite similarities in governance practices in both countries, there are differences in the efficacy of these mechanisms. In particular, the performance of Canadian firms is less sensitive to ownership structure than that of US firms. Differences are also found in the performance implications of incentive pay. Our study suggests that country-specific governance trends persist among Canadian firms cross-listed in the United States. These findings may explain why Canadian firms which are cross-listed in the United States continue to trade at a discount compared to their US counterparts.

Greenhouse Gas Emissions Mitigation and Firm Value: A Study of Large North-American and European Firms

There is strong public pressure globally to mitigate GHG emissions even though regulatory requirements for GHG mitigation vary greatly among countries. However, research on the influence of GHG emissions mitigation on firm value has been inconclusive. This paper contributes by examining the impact of GHG emissions on firm value for a sample of over 600 large firms from the US, Canada, and Europe. We find that GHG emissions have a negative influence on firm value. However, we cannot document that GHG emission mitigation actions add to firm value. The value maximizing nature of such actions seems to be moderated by the nature and quality of corporate governance in a firm perhaps especially as absent any industry-wide regulatory requirements there is no direct link between such GHG mitigating actions and shareholder wealth maximization.

Lehman's and Lemons: A Study of Institutional Investment in U.S. Firms

We examine the impact of institutional investment on Tobin’s Q for the period 2004 to 2008. We provide further evidence of the heterogeneity of various institutional owners’ willingness to monitor by examining their corporate holdings. We isolate a special role for the four failed banks: Lehman’s, Bear Stearns, Merrill Lynch, and Wachovia. We find that these banks pursued investment strategies that favored risky firms and entrenched management, although this is less certain for Merrill Lynch. We conclude that for the most part these banks pursued short-term profits and that failures in corporate governance were important in fueling the 2008 financial crisis.

When Do Owners Make A Difference? A Comparison of Market-Centered versus Bank-Centered Governance

Our analysis examines whether concentrated ownership works differently in two distinct governance regimes: market-centered (US firms) and bank-centered (Japanese Keiretsu firms). We also investigate whether the impact of ownership concentration varies depending on economic conditions. We propose that the impact of concentrated ownership is not homogeneous over all ownership levels. We argue that as ownership stakes rise, owner monitoring can turn to owner entrenchment. The empirical methodology employed in this research allows us to detect such inflection points. Our results for the US sample of firms suggests that in weaker economic times, concentrated ownership produces greater entrenchment effects as opposed to monitoring effects, in general. However, among Keiretsu firms, we observed a marked orientation toward monitoring during periods of slower economic growth.