Yakov Amihud, Markus M. Schmid & Steven Davidoff Solomon, Do Staggered Boards Affect Firm Value?, — Iowa Law Review — (forthcoming 2017)

We attempt to resolve conflicting empirical results in studies on the wealth effects of staggered boards by addressing issues of endogeneity, omitted variable bias and functional form. In a sample of up to 2,961 firms from 1990 to 2013 we find that additional variables provide significant explanatory power for the (negative) wealth effects of staggered firms found in prior studies, and their inclusion makes the effect of a staggered board on firm value insignificant. When we control for endogeneity by the instrumental variable method, we find again that the staggered board has no significant effect on firm value. Our results suggest caution about legal solutions which advocate wholesale adoption or repeal of the staggered board and instead evidence an individualized firm approach, and provide some measure of skepticism for law-related corporate governance proposals generally.

Suresh Nallareddy, Robert Pozen & Shivaram Rajgopal, Consequences of Mandatory Quarterly Reporting: The U.K. Experience (2017)

… We exploit the start of mandatory quarterly reporting by the Financial Conduct Authority (FCA) in 2007 and the end of the requirement in 2014 in the United Kingdom to examine corporate and capital market behavior. After imposition of mandatory quarterly reporting in 2007, we find (i) a dramatic decline in the number of companies that issue reports with quantitative information (defined as including both sales and earnings numbers for the quarter); (ii) a substantial increase in companies announcing managerial guidance for the upcoming year’s earnings or sales; and (iii) an increase in analyst following for all sample companies. However, using a difference-in-differences analysis, we find that the imposition of mandatory quarterly reporting has virtually no impact on firms’ investment decisions. Companies that voluntarily moved back from quarterly to semi-annual reporting after 2014 have experienced a reduction in analyst coverage, but no detectable increases in their levels of corporate investments.

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Lawrence Glosten, Suresh Nallareddy & Yuan Zou, ETF Trading and Informational Efficiency of Underlying Securities

Using a large cross-section of ETF holdings data from January 2004 to December 2013, we document that an increase in ETF trading is accompanied by an increase in price informational efficiency of the underlying stocks, as reflected in the increase in the relation between stock returns and earnings news. The effect of ETF trading on information efficiency should be conditional on the information environment and the degree of capital market competition. Consistent with expectations, when we conduct the information efficiency tests within different segments of the market, we find significant and improved informational efficiency among small firms (firms with market capitalization below the NYSE 50th percentile), stocks with low analyst following (firms with analyst following below the 75th percentile), and stocks with imperfectly competitive equity markets (number of shareholders below the 75th percentile). In contrast, we are unable to document such improvement for big firms, stocks with high analyst following, and for stocks with perfectly competitive equity markets.