Monthly Archives: December 2017

Managerial Liability and Corporate Innovation: Evidence from a Legal Shock

Liandong Zhang is Professor of Accounting, Singapore Management University. This post is based on a recent paper by Professor Zhang; Yuyan Guan, Associate Professor at City University of Hong Kong; Liu Zheng, Associate Professor at City University of Hong Kong; and Hong Zou, Associate Professor of Finance at University of Hong Kong.

Innovation is vital to the development of core competitive advantages of a firm and to the economic growth of a country (Solow, 1957). By nature, innovation is a risky, costly, and long-term process fraught with failures (Holmstrom, 1989). A salient difficulty that has long been noted by both academics and practitioners is that risk-averse company directors and officers (D&Os) tend to be reluctant to commit to investment in risky research and developments (R&D) even though such investments may create long-term value (Aghion, Van Reenen and Zingales, 2013; Barton and Wiseman, 2015). As Jensen has highlighted, an important source of D&Os’ reluctance is the potential litigation risk. In particular, some investors may have a low tolerance of innovation failures and the resulting lackluster performance, and may challenge a firm’s innovation inefficiency, as can be seen from the following example.

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The ICO Gold Rush

Dirk A. Zetzsche is ADA Chair in Financial Law at the University of Luxembourg and Director of the Center for Business & Corporate Law at Heinrich Heine University in Duesseldorf; Ross Buckley is Scientia Professor and King & Wood Mallesons Chair of International Finance Law at the University of New South Wales; and Douglas Arner is Kerry Holdings Professor in Law at the University of Hong Kong. This post is based on a recent paper by Professor Zetzsche, Professor Buckley, Professor Arner, and Linus Föhr, Research Assistant at the University of Luxembourg.

Initial coin offerings (ICOs) typically use blockchain technology to offer tokens that confer some rights in return, most often, for cryptocurrency. They can be seen as effectively a conjunction of crowdfunding and blockchain.

In the past 18 months more than 1,000 ICOs have raised more than USD 3 billion. While these numbers do not indicate a global phenomenon, the growth rate is accelerating, with more raised in the latest six months than in the previous 3 years together.

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Do Managers Give Hometown Labor an Edge?

Scott Yonker is Assistant Professor & Lynn Calpeter Faculty Fellow in Finance at the Dyson School of Applied Economics and Management at Cornell University. This post is based on his recent article, recently published in the Review of Financial Studies.

Anyone who has been in the workforce has likely either experienced or known someone who has felt the effects of employee favoritism. Whether it is getting passed over for a promotion because your competition was the CEO’s college buddy or being spared from downsizing because your supervisor knew that you, unlike your co-workers, had mouths to feed at home. The pervasive view in economics is that favoritism leads to inefficient human resource allocation and ultimately destroys firm value. However, there is very little direct evidence that top managers (CEOs) at U.S. firms systematically favor some employees over others. In my article, Do Managers Give Hometown Labor an Edge?, which was recently published in the Review of Financial Studies, I test for evidence of employee favoritism by CEOs of large U.S. firms.

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Weekly Roundup: November 23-30, 2017


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This roundup contains a collection of the posts published on the Forum during the week of November 23-30, 2017.

Peer Information and Empowered Voters: Evidence from Voting on Shareholder Proposals


Analysis of SEC Shareholder Proposal Guidance



Comparison of House and Senate “Tax Cuts and Job Acts” Bills


Finance and Corporate Innovation: A Survey


Gender Diversity Index



Cybersecurity Risks in M&A Transactions


Founder Replacement and Startup Performance


Analysis of Section 220 Demand Request


Horizontal Shareholding and Antitrust Policy


Analysis of ISS’ QualityScore Updates




Does Financial Misconduct Affect the Future Compensation of Alumni Managers?


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