Tareque Nasser

Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation

We find that the presence of independent directors who are blockholders (IDBs) in firms promotes better CEO contracting and monitoring, and higher firm valuation. Using a panel of about 11,500 firm-years with a unique, hand-collected dataset on IDB-identity and a novel instrument, we find that firms with IDBs have lower excess CEO pay, lower flow and stock of CEO equity incentives, and higher valuations. These effects are substantial and robust. Our findings imply that by making it easier for blockholders to obtain a board seat, proxy access rules or bylaws can benefit shareholders.

Multiple Lead Underwriter IPOs and Firm Visibility

One of the primary goals of a firm going public is to create a greater visibility to investors in general. Using a sample of 809 IPOs from 2001–2010, we empirically examine and find that multiple lead underwriters (MLUs) have greater visibility through our five pre- and post-IPO visibility measures. This also holds after accounting for potential endogeneity. Also, MLU-IPOs do not have more underpricing. Our results suggest that issuers with MLUs can increase the firm’s familiarity to the investment community and expand their investor base, and this increased firm visibility is not a trade-off for a greater level of underpricing.

Can Paying Taxes Substitute for Corporate Social Responsibility? Evidence from Socially Responsible Investment Funds

We examine whether corporate tax avoidance impacts the investment decisions of socially responsible investment (SRI) funds. After controlling for corporate social responsibility (CSR) constructs, we find that investment by SRI funds is negatively associated with corporate tax avoidance. Further analysis indicates that greater tax avoidance leads to less SRI fund investment particularly in firms with CSR concerns, greater managerial entrenchment, and greater earnings management. Our results suggest that socially responsible investors consider corporate tax avoidance an important aspect of CSR. The results are consistent with recent findings in the literature that corporate tax avoidance is a part of corporate culture, and that corporate insiders view tax avoidance and CSR as substitutes. When corporate culture is likely to promote less responsible activities and greater agency issues in the firm, corporate tax avoidance deters investment by socially responsible investors. However, tax avoidance does not deter investment by social responsible investors in firms with a strong CSR reputation.We examine whether corporate tax avoidance impacts the investment decisions of socially responsible investment (SRI) mutual funds. After controlling for corporate social responsibility (CSR) constructs, we find that investment by SRI funds is positively associated with paying corporate taxes. Whereas corporate tax avoidance does not affect SRI fund investment in firms with a strong CSR reputation, greater tax avoidance leads to significantly less SRI fund investment in firms as their CSR reputation weakens. These results hold after accounting for selection bias, controlling for earnings management and managerial entrenchment, and performing several robustness checks. Our findings suggest that socially responsible investors consider corporate tax avoidance an important aspect of CSR and they are consistent with recent findings in the literature that corporate insiders view paying taxes and CSR as substitutes.

Do Mutual Funds Consider Tax Avoiding Firms Too Risky

We document evidence that mutual funds, on average, are averse to investing in tax-avoiding firms, which seems anomalous given mutual fund managers’ incentive structure. Our results remain unchanged when we address endogeneity concerns using several methods, including identification through instrumental variables, difference-in-differences, and matching methodologies, and after running a litany of robustness checks. We also find that poor-performing mutual funds reduce their ownership in tax-avoiding firms, a result inconsistent with both fund managers’ incentive and diversification motives. Furthermore, mutual funds’ aversion to tax-avoiding firms persists regardless of the mutual funds’ investment horizons.

Investors and Choice Overload: Evidence from IPOs

This paper provides evidence consistent with retail investors experiencing choice overload when presented with an increasing number of IPOs to choose from. We find that both the average first day return and trading volume are lower in weeks with higher number of IPOs. However, with more IPOs, average return during the week following the first day of trading is higher. These findings suggest that proliferation of choices either debilitates or delays investor participation due to cognitive limitations.

Insider Trading and Large Chapter II Bankruptcies: 1995–2006

Several large firms that have filed for bankruptcy in recent years had been engaged in unscrupulous accounting and business practices, including, but not limited to, insider trading. For instance, several executives of World Com were either convicted or confessed to fraud and illegal insider trading. Bernard Ebbers, World Com’s chief executive, was sentenced to 25 years in prison for orchestrating his

Bank Mergers and Insider Trading

11 billion fraud of the bankrupted telecommunication giant.’ Similarly, some Enron executives confessed to fraud and illegal insider trading and were convicted for their crimes. As a result of World Com and Enron debacles, lawmakers passed the Sarbanes-Oxley Act (SOX) that focused on corporate governance. Insider trading is one aspect of corporate governance that needs to be examined. In this chapter we explore insider trading in large U.S. publicly traded firms with assets of

Insider Trading in Takeover Targets

1 billion or more that filed for Chapter 11 bankruptcy protection.

Corporate Financial and Investment Policies in the Presence of a Blockholder on the Board

Recent corporate scandals, together with the effects of globalization, have led to an increasing interest in corporate governance issues. Little attention has been paid, however, to international laws and recommendations dealing with corporate governance in banking from a global perspective. This impressive international set of expert contributors – academics, practitioners and regulators – remedies the lack of attention by examining the various issues and concerns of this important topic.