http://repub.eur.nl/res/concept/jel-G38/ Recent publications classified by JEL Code G38 en http://repub.eur.nl/static-eur/img/logo.png http://repub.eur.nl http://repub.eur.nl/res/pub/34944/ 2011-04-01T00:00:00Z Abstract. The corporate governance debate mainly deals with the effectiveness of techniques to protect shareholders from the controllers’ misbehaviour. This article takes a different approach. Focussing on self-dealing, it shows that effective strategies to protect investors from expropriation differ from country to country. However, some may be more efficient than others. The inefficiency of an effective discipline of self-dealing stems from the constraints it imposes on the discretion of controlling managers and shareholders. This article shows that both the US litigation-based model and the UK governance-based model are effective against expropriation, but their efficiency can be improved. In light of this, this article recommends restricting the influence of non-controlling shareholders to the selection of a minority of independent directors, whose task should be limited to monitoring and validating self-dealing. These findings can be extended from self-dealing to similar conflicts of interest that may lead to expropriation of shareholders, and to their regulation in other jurisdictions. Pacces, A.M. http://repub.eur.nl/res/pub/23438/ 2010-08-01T00:00:00Z Using a large firm-level dataset of 2920 IPOs from 21 countries we examine the impact of country-level institutional characteristics on the underpricing of IPOs. Through hierarchical linear modeling we are able to control for firm-specific and issue-specific characteristics and test whether country-specific institutional characteristics add explanatory power to explain the level of underpricing. Our results show that about 10% of the variation in the level of underpricing is between countries. The quality of a country’s legal framework, as measured by its level of investor protection, the overall quality of its legal system and its level of legal enforcement, reduces the level of underpricing significantly. Engelen, P-J. Essen, M. van http://repub.eur.nl/res/pub/18458/ 2010-03-19T00:00:00Z The globalization and liberalization of national economies have contributed to an increasing diffusion of Anglo-American corporate governance practices worldwide. In this dissertation, we examine the spread of two types of corporate governance beliefs: the emerging focus on board independence and a shareholder value orientation. Through a series of five studies, utilizing multiple theoretical lenses, levels of analysis and methods, we analyze developments in the formal independence of supervisory boards and a greater focus on shareholder value in the Netherlands, and examine the antecedents and consequences of these phenomena. In doing so, we contribute to the enrichment of theories on diffusion processes as well as to the understanding of key changes in the Dutch corporate governance landscape. We show that (i) substantive change has taken place in the governance of listed corporations, (ii) the technical, political and cultural contexts in which firms operate explain companies’ (non)response to prevailing corporate governance beliefs, (iii) changing corporate governance beliefs may be associated with unintended consequences and negative performance implications, and (iv) macro contextual factors have a significant impact on the aforementioned processes. Thereby, our findings highlight important avenues for further research. Furthermore, we provide directors, regulators, shareholders and other stakeholders with new insights in key corporate governance developments, in particular in the Netherlands. Bezemer, P.J. http://repub.eur.nl/res/pub/18228/ 2010-02-05T00:00:00Z Social dilemmas, or situations in which individual and collective interests collide, elicit strong emotions. But are these emotions socially functional in that they help establish cooperation? Generally, they are, as four empirical chapters showed. In dyadic relations, refusal to return a favour is best reciprocated while expressing disappointment instead of anger or no emotion. This does not even lead to a negative impression. When not recipients but observers can reciprocate cooperative acts, non-cooperation out of anger or disappointment is perceived by observers as a just action to retaliate against defectors and is therefore met cooperatively. In situations where group members have to coordinate their contributions to obtain a public good, anger signals bleaker prospects than guilt does, especially when communicated by an influential fellow group member. This makes that group members are more likely to exit the group or install a democratic leader. Guilt actually promotes successful coordination by signalling that both the person that experiences guilt and the person towards guilt is experienced will contribute, which encourages people to cooperate even when coordination is difficult. Thus, emotions are indispensable, socially informative cues that typically help to establish cooperation, facilitate coordination and implement structural solutions in social dilemmas. Wubben, M.J.J. http://repub.eur.nl/res/pub/17694/ 2009-10-23T00:00:00Z The numerous scandals in business, such as those at AIG, Tyco, WorldCom, Enron and Ahold, have made all of us concerned about the emergence of unethical and irresponsible behavior in organizations. Such widespread corruption in business and politics has, as result, prompted a growth of interest in the field of business ethics. At the same time, however, within the academic world it is also recognized that to tackle those unethical actions in an efficient way, the field of business ethics needs to integrate insights from behavioral science. In this inaugural address I focus more closely on the benefits that a behavioral approach can bring to the field of business ethics. In presenting these benefits, I draw a distinction between prescriptive and descriptive approaches and outline how the field of psychology can help in integrating these two perspectives so that we can move towards a more comprehensive understanding of behavioral business ethics. This integration is illustrated by my own research addressing how sanctioning and regulation systems affect behavior, the benefits of procedural fairness and the workings of trust repair strategies. Finally, I formulate some implications for academia, the government and economics. Cremer, D. de http://repub.eur.nl/res/pub/16209/ 2009-06-30T00:00:00Z In contrast to the classical efficient market theory, the behavioral Finance literature acknowledges that people are neither rational utility maximizers nor able to process all available information. Instead, people tend to focus on the most salient aspects of their environment and neglect other information. This dissertation studies this phenomenon through six studies on investment strategies related to investors' attention failures. In the first four chapters, I analyze whether information on companies’ environmental, social and governance (ESG) practices is valuable and efficiently incorporated in prices. If the ESG practices of a firm relate positively to its current and future earnings but a large proportion of investors is inattentive to them, rational attentive investors should be able to exploit this information. Results show that a strategy of shorting the least eco-efficient firms and investing in the most eco-efficient firms earns significantly positive abnormal returns. Initially, eco-efficient firms did not trade at a higher value but the valuation premium increased over time. On the social dimension, some aspects of human capital management (HCM) are value-relevant and priced by financial markets. However, there is no conclusive evidence that HCM is associated with positive abnormal returns. As for corporate governance, I provide evidence that investors could have exploited this information to earn positive abnormal returns. I find that well-governed firms have a significantly higher valuation than weakly governed firms implying that investors pay attention to corporate governance. The final two chapters deal with a rational investor’s optimal response to asset price bubbles, a phenomenon associated with overattention. My results show that investors face a tradeoff: they can earn positive abnormal returns by investing in the asset bubble but also face the risk of very large negative returns: crashes. I evaluate this tradeoff for downside risk-averse investors and find that riding bubbles is optimal for short-term as well as long-term investors. Günster, N.K. http://repub.eur.nl/res/pub/7876/ 2006-07-08T00:00:00Z We model and measure simultaneous large losses of the market value of insurers to understand the impact of shocks on the insurance sector. The downside risk of insurers is explicitly modelled by common and idiosyncratic risk factors. Since reinsurance is important for the capacity of insurers, we measure risk dependence among European insurers and reinsurers. The results point to a relatively low insurance sector wide risk. Dependence among insurers is higher than among reinsurers. Slijkerman, J.F.