Private Meetings of Public Companies Thwart Disclosure Rules
| Published: | January 16, 2012 |
|---|---|
| Feature: | Research & Ideas |
| Forum: | open for comment; 6 Comments posted |
Despite a federal regulation, executives at public firms still spend a great deal of time in private powwows with hedge fund managers. Eugene F. Soltes and David H. Solomon suggest that such meetings give these investors unfair advantage.
Published in 2011
Are There Too Many Safe Securities? Securitization and the Incentives for Information Production
| Authors: | Samuel G. Hanson and Adi Sunderam |
|---|---|
| Published: | December 8, 2011 |
| Paper Release Date: | November 2011 |
| Feature: | Working Papers |
| Forum: | closed | 0 Comments posted |
Markets for near-riskless securities have suffered numerous shutdowns in the last 40 years, with the recent financial crisis the most prominent example. This suggests that instability could be a general characteristic of such markets, not just a one-time problem associated with the subprime mortgage crisis. Professors Samuel G. Hanson and Adi Sunderam argue that the infrastructure and organization of professional investors are in part determined by the menu of securities offered by originators. Since robust infrastructure is a public good to originators, it may be underprovided in the private market equilibrium. The individually rational decisions of originators may lead to an infrastructure that is overly prone to disruptions in bad times. Policies regulating originator capital structure decisions may help create a more robust infrastructure.
What's Government's Role in Regulating Home Purchase Financing?
| Q&A with: | David S. Scharfstein |
|---|---|
| Published: | February 24, 2011 |
| Feature: | Op-Ed |
The Obama administration recently proposed housing finance reforms to wind down Fannie Mae and Freddie Mac and bring private capital back to the mortgage markets. HBS professor David Scharfstein and doctoral student Adi Sunderam put forth a proposal to replace Fannie and Freddie and ensure a more stable supply of housing finance.
Lawful but Corrupt: Gaming and the Problem of Institutional Corruption in the Private Sector
| Author: | Malcolm S. Salter |
|---|---|
| Published: | February 2, 2011 |
| Paper Release Date: | December 2010 |
| Feature: | Working Papers |
In the business world, "gaming" refers to the act of subverting the intent of rules or laws without technically breaking them--a skillful if unsavory way to achieve private gain. Harvard Business School professor emeritus Malcolm S. Salter explores how gaming the system can lead to institutional corruption, citing examples from Enron and early efforts by some banks to game the implementation of the Dodd-Frank financial reform act.
Does Shareholder Proxy Access Improve Firm Value? Evidence from the Business Roundtable Challenge
| Authors: | Bo Becker, Daniel B. Bergstresser, and Guhan Subramanian |
|---|---|
| Published: | January 11, 2011 |
| Paper Release Date: | November 2010 |
| Feature: | Working Papers |
In August 2010, the Security and Exchange Commission announced a highly anticipated rule that would make it easier for investors to nominate new board members and get rid of existing ones. It allowed shareholders to have their board candidates included in the company's proxy materials--if those shareholders had owned at least 3 percent of the firm's shares for at least the prior three years. On October 4, the SEC unexpectedly and indefinitely postponed the implementation of that rule, pending the outcome of a lawsuit aimed at overturning it. This paper gauges the significance of the proxy access rule by measuring whether certain firms gained or lost market value on news of the delay. Research was conducted by Harvard Business School professors Bo Becker, Daniel Bergstresser, and Guhan Subramanian.
Published in 2010
Decoding Inside Information
| Authors: | Lauren Cohen, Christopher Malloy, and Lukasz Pomorski |
|---|---|
| Published: | December 8, 2010 |
| Paper Release Date: | October 2010 |
| Feature: | Working Papers |
Price setters and regulators face a difficult challenge in trying to understand the stock trading activity of corporate insiders, especially when it comes to figuring out whether the activity is a good indicator of the firm's financial future. This National Bureau of Economic Research paper discusses how to distinguish "routine" trades (which predict virtually no information about a firm's financial future) from "opportunistic" trades (which contain a great deal of predictive power). Research was conducted by Harvard Business School professors Lauren Cohen and Christopher Malloy and Lukasz Pomorski of the University of Toronto.
How Did Increased Competition Affect Credit Ratings?
| Authors: | Bo Becker and Todd Milbourn |
|---|---|
| Published: | November 3, 2010 |
| Paper Release Date: | October 2008, revised July 2009, September 2010 |
| Feature: | Working Papers |
When Fitch Ratings took on Standard & Poor's and Moody's as an alternative credit rating agency in the 1990s, there was a general assumption that the increased competition would lead to higher-quality corporate debt ratings from the incumbents. In fact, their ratings quality declined during the 10-year study period, according to Harvard Business School's Bo Becker and Washington University's Todd Milbourn. One possible cause: competition weakens reputational incentives that drive ratings quality.
Crashes and Collateralized Lending
| Authors: | Jakub W. Jurek and Erik Stafford |
|---|---|
| Published: | October 12, 2010 |
| Paper Release Date: | April, 2010 |
| Feature: | Working Papers |
This paper presents a framework for understanding the contribution of systematic crash risk to the cost of capital for a variety of different types of securities. The framework isolates the systematic crash risk exposure of different collateral types (equities, corporate bonds, and CDO tranches), and provides a simple mechanism for allocating the cost of bearing this risk between a financing intermediary and investor. Research was conducted by Jakub W. Jurek (Bendheim Center for Finance, Princeton University) and Erik Stafford (Harvard Business School).
Published in 2009
The New Deal: Negotiauctions
| Q&A with: | Guhan Subramanian |
|---|---|
| Published: | October 26, 2009 |
| Feature: | Executive Education |
Whether negotiating to purchase a company or a house, dealmaking is becoming more complex. Harvard Business School professor Guhan Subramanian sees a new form arising, part negotiation, part auction. Call it the negotiauction. Here's how to play the game.
Published in 2007
Government's Misguided Probe of Private Equity
| Published: | March 14, 2007 |
|---|---|
| Feature: | Op-Ed |
The U.S Department of Justice has begun an inquiry into potentially anti-competitive behavior on the part of leading private equity firms. Professor Josh Lerner looks to history to underscore why this move carries the prospect of damaging what is actually an incredibly competitive industry that creates much value.
Inexperienced Investors and Market Bubbles
| Q&A with: | Robin Greenwood |
|---|---|
| Published: | February 19, 2007 |
| Feature: | Research & Ideas |
The evidence isn't conclusive, but new research from Harvard Business School suggests younger fund managers may have contributed to the tech stock bubble. Professor Robin Greenwood discusses the research paper, "Inexperienced Investors and Bubbles," and what mutual fund investors should keep in mind.
"UpTick" Brings Wall Street Pressure to Students
| Published: | February 12, 2007 |
|---|---|
| Feature: | Lessons from the Classroom |
Money managers work in a stressful, competitive pressure cooker that's hard to appreciate from the safety of a business management classroom. That's why HBS professors Joshua Coval and Erik Stafford invented upTick—a market simulation program that has students sweating and strategizing as they recreate classic market scenarios.
Published in 2006
Should CEOs of Public Companies Offer Earnings Guidance?
| Published: | February 6, 2006 |
|---|---|
| Feature: | What Do YOU Think? |
| Forum: | closed | 17 Comments posted |
A small but growing chorus of public company CEOs is deciding not to provide quarterly earnings guidance. Is this a good or bad development for shareholders, investors, analysts, the marketplace, and the company’s short- and long-term health?
Published in 2005
VCs Survey Post-Bubble Opportunities
| Published: | December 5, 2005 |
|---|---|
| Feature: | Research & Ideas |
At the annual Cyberposium conference held at Harvard Business School, venture capitalists pondered what makes for winners and losers in the new VC landscape.
Float Manipulation and Stock Prices
| Author: | Robin Greenwood |
|---|---|
| Published: | July 5, 2006 |
| Paper Release Date: | June 2005, revised February 2006 |
| Feature: | Working Papers |
When a firm reduces the number of shares available to trade, so-called float manipulation, the price of the stock is often driven up. The author uses a series of 2,000 stock split events in Japan as an experiment to understand the consequences of float manipulation for stock prices. The conclusion: Stock prices are raised significantly when there are differing opinions about the value of shares, investors are unable to sell short, and the number of outstanding shares is reduced.
A Cross-Sectional Analysis of the Excess Comovement of Stock Returns
| Author: | Robin Greenwood |
|---|---|
| Published: | July 5, 2006 |
| Paper Release Date: | April 2005 |
| Feature: | Working Papers |
This paper develops cross-sectional predictions from a model in which the excess comovement of stock returns comes from correlated demand shocks. The model is tested on 298 Nikkei index stocks and 1,458 non-index stocks for the years 1993 through 2003. The study finds that controlling for index membership, index overweighting is a significant determinant of the comovement of returns with index returns.
Published in 2004
Analyst Disagreement, Forecast Bias and Stock Returns
| Author: | Anna Scherbina |
|---|---|
| Published: | July 5, 2006 |
| Paper Release Date: | July 2004 |
| Feature: | Working Papers |
It is well documented that financial analysts' opinions are reflected in stock prices. The problem: Analysts often operate under incentives that are inconsistent with telling the truth. Retail investors, who tend to be less sophisticated, may fail to make proper adjustments for the more nuanced of the resulting biases, some of which might be reflected in market prices. To study the scope of market efficiency, Scherbina studied analysts' incentives, resulting forecast biases, and their potential impact on market prices.
Published in 2003
A Bold Proposal for Investment Reform
| Q&A with: | Paul M. Healy and Krishna G. Palepu |
|---|---|
| Published: | September 8, 2003 |
| Feature: | Research & Ideas |
Do the markets need an investor's union? Should company audits be overseen by stock exchanges? If you want to restore investor confidence, think radical reforms, say professors Paul Healy and Krishna Palepu.
Published in 1999
Where Main Street Meets Wall Street
| Published: | October 12, 1999 |
|---|---|
| Feature: | Research & Ideas |
Its phenomenal growth, based on its near-perfect fit with consumer needs and aspirations, has made the mutual fund one of this century's big success stories. How is it adapting to the age of the Internet and 21st century change? HBS Professors Jay O. Light and Peter Tufano and three alumni take a look at the state of the mutual fund industry 75 years after its beginnings in Boston's financial district.
