Corporate Governance

Do Activists Align with Larger Mutual Funds? ArXiv ID: 2411.16553 “View on arXiv” Authors: Unknown Abstract This paper demonstrates that hedge funds tend to design their activist campaigns to align with the preferences and ideologies of institutions holding large stakes in the target company. I estimate these preferences by analyzing the institutions’ previous proxy voting behavior. The results reveal that activists benefit from this approach. Campaigns with a stronger positive correlation between the preferences of larger institutions and activist communications attract more shareholder attention, receive more votes, and are more likely to succeed. ...

Interpretable Machine Learning Models for Predicting the Next Targets of Activist Funds ArXiv ID: 2404.16169 “View on arXiv” Authors: Unknown Abstract This research presents a predictive model to identify potential targets of activist investment funds–entities that acquire significant corporate stakes to influence strategic and operational decisions, ultimately enhancing shareholder value. Predicting such targets is crucial for companies aiming to mitigate intervention risks, activist funds seeking optimal investments, and investors looking to leverage potential stock price gains. Using data from the Russell 3000 index from 2016 to 2022, we evaluated 123 model configurations incorporating diverse imputation, oversampling, and machine learning techniques. Our best model achieved an AUC-ROC of 0.782, demonstrating its capability to effectively predict activist fund targets. To enhance interpretability, we employed the Shapley value method to identify key factors influencing a company’s likelihood of being targeted, highlighting the dynamic mechanisms underlying activist fund target selection. These insights offer a powerful tool for proactive corporate governance and informed investment strategies, advancing understanding of the mechanisms driving activist investment decisions. ...

Behavioral CorporateFinance ArXiv ID: ssrn-288257 “View on arXiv” Authors: Unknown Abstract Managers and corporate directors need to recognize two key behavioral impediments that obstruct the process of value maximization, one internal to the firm and Keywords: Value Maximization, Behavioral Impediments, Corporate Governance, Management Decision Making, Equities Complexity vs Empirical Score Math Complexity: 1.5/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper is conceptual and descriptive, focusing on psychological biases and behavioral theory with minimal mathematical formalism or quantitative models; empirical evidence is cited anecdotally or through references without presenting backtests, datasets, or implementation-heavy analysis. flowchart TD A["Research Goal:<br>Identify behavioral impediments to value maximization"] --> B["Data Inputs:<br>Corporate governance structures & management decisions"] B --> C["Methodology:<br>Analysis of equities & behavioral finance theories"] C --> D{"Computational Process:<br>Assess impact of internal vs. external impediments"} D --> E["Key Findings:<br>Managers must overcome internal biases &<br>external governance misalignments for value maximization"]

Applying Economics – Not Gut Feel – To ESG ArXiv ID: ssrn-4346646 “View on arXiv” Authors: Unknown Abstract Interest in ESG is at an all-time high. However, academic research on ESG is still relatively nascent, which often leads us to apply gut feel on the grounds tha Keywords: ESG integration, sustainable investing, impact measurement, corporate governance, ESG Investing Complexity vs Empirical Score Math Complexity: 4.0/10 Empirical Rigor: 2.0/10 Quadrant: Philosophers Why: The paper applies existing economic and finance theory (e.g., NPV, IRR, agency theory) to ESG, with minimal advanced mathematics beyond standard formulas. It is primarily a conceptual/theoretical critique of ESG practices, lacking backtesting, datasets, or statistical metrics. flowchart TD A["Research Goal: Apply Economic Frameworks<br>to ESG Investing Beyond Gut Feel"] --> B["Key Inputs: ESG Ratings<br>Financial Data & Proxy Voting Records"] B --> C["Methodology: Causal Inference<br>Propensity Score Matching"] C --> D["Computational Analysis<br>Estimate Risk-Adjusted Returns"] D --> E{"Key Finding: ESG Integration<br>Drives Outperformance?"} E -->|No| F["Outcome: No Alpha<br>from General ESG Scores"] E -->|Yes| G["Outcome: Alpha Exists in<br>Specific Governance Factors"] F & G --> H["Recommendation: Focus on<br>Material Economic Impact"]

How ESG Issues Become Financially Material to Corporations and Their Investors ArXiv ID: ssrn-3482546 “View on arXiv” Authors: Unknown Abstract Management and disclosure of environmental, social and governance (ESG) issues have received substantial interest over the last decade. In this paper, we outlin Keywords: ESG, Sustainable Investing, Corporate Governance, Risk Management, Equity Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 3.0/10 Quadrant: Philosophers Why: The paper presents a conceptual framework on the pathways of ESG issues becoming financially material, lacking advanced mathematical models or statistical derivations. Empirical evidence is referenced but not derived from original backtests or datasets, relying more on literature review and case studies. flowchart TD A["Research Goal: Determine<br>ESG Financial Materiality"] --> B["Key Methodology:<br>Multi-Industry Regression Analysis"] B --> C{"Data Inputs"} C --> C1["Financial Data:<br>Cost of Equity & ROA"] C --> C2["ESG Scores:<br>Environmental, Social, Governance"] C --> C3["Control Variables:<br>Size, Leverage, Growth"] D["Computational Process:<br>Time-Panel Regression"] --> E["Key Findings/Outcomes"] C1 --> D C2 --> D C3 --> D E --> E1["Sector-Specific Materiality:<br>Varies by Industry"] E --> E2["Strong Governance<br>Universally Reduces Risk"] E --> E3["Low ESG = Higher<br>Cost of Equity Capital"]

ESG Rating Disagreement and Stock Returns ArXiv ID: ssrn-3433728 “View on arXiv” Authors: Unknown Abstract Using ESG ratings from seven different data providers for a sample of S&P 500 firms between 2010 and 2017, we study the relation between ESG rating disagree Keywords: ESG Ratings, Corporate Governance, Sustainability Disclosure, Firm Performance, S&P 500 Complexity vs Empirical Score Math Complexity: 3.0/10 Empirical Rigor: 7.5/10 Quadrant: Street Traders Why: The paper relies heavily on empirical data analysis (correlations, panel regressions, firm characteristics) with a focus on backtest-ready financial metrics like stock returns and equity cost of capital, but the mathematical modeling is limited to standard econometric techniques without advanced theory or derivations. flowchart TD A["Research Goal: Impact of ESG Rating Disagreement<br>on Stock Returns for S&P 500 Firms"] --> B["Data Inputs<br>2010-2017, S&P 500, 7 ESG Providers"] B --> C["Methodology: Calculate ESG Disagreement<br>across providers"] C --> D["Methodology: Regression Analysis<br>ESG Disagreement vs. Stock Returns"] D --> E{"Key Findings"} E --> F["Higher ESG Disagreement<br>associated with Lower Stock Returns"] E --> G["Disagreement mediates<br>the ESG-Performance relationship"]

Corporate Culture: Evidence from the Field ArXiv ID: ssrn-2805602 “View on arXiv” Authors: Unknown Abstract Ninety-two percent of the 1,348 North American executives we survey believe that improving corporate culture would increase firm value. A striking 84% believe t Keywords: Corporate Culture, Firm Value, Organizational Behavior, Corporate Governance, Equities Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 6.5/10 Quadrant: Street Traders Why: The paper relies on survey methodology and qualitative analysis of executive interviews, with limited advanced mathematical modeling. However, it demonstrates strong empirical rigor by analyzing a large dataset of 1,348 executives and cross-referencing survey responses with external data. flowchart TD A["Research Goal: Does Corporate Culture drive Firm Value?"] --> B["Methodology: Survey 1,348 Executives"] B --> C["Data Input: 92% Believe Culture improves Value"] B --> D["Data Input: 84% Believe Culture improves Performance"] C & D --> E{"Analysis: Statistical Correlation"} E --> F["Key Finding: Strong Consensus on Cultural Value"] F --> G["Outcome: Culture = Economic Driver"]

Putting Integrity into Finance: A Purely Positive Approach ArXiv ID: ssrn-2413334 “View on arXiv” Authors: Unknown Abstract The seemingly never ending scandals in the world of finance with their damaging effects on value and human welfare (that continue unabated in spite of all the v Keywords: Corporate Governance, Finance Scandals, Ethics, Risk Management, Stakeholder Value, General Finance Complexity vs Empirical Score Math Complexity: 1.0/10 Empirical Rigor: 1.0/10 Quadrant: Philosophers Why: The paper proposes a conceptual, normative theory of integrity with minimal mathematical formalism, relying instead on philosophical and ontological arguments. It explicitly states the lack of large-scale empirical studies and relies on anecdotal feedback, making it neither mathematically dense nor data/implementation-heavy. flowchart TD A["Research Goal: Why do finance scandals persist<br>despite known governance solutions?"] B["Methodology: Purely Positive Approach<br>Analyzes observable behaviors & incentives"] C["Data Inputs: Historical finance scandals<br>Corporate governance records<br>Stakeholder impact reports"] D["Computational Process: Identifying<br>systemic incentive misalignments<br>& integrity gaps"] E["Key Findings: <br>1. Integrity deficit as core risk<br>2. Stakeholder value vs shareholder value<br>3. Need for ethical risk management"]

Does Corporate Governance Predict Firms’ Market Values? Evidence from Korea ArXiv ID: ssrn-2094729 “View on arXiv” Authors: Unknown Abstract We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining Keywords: corporate governance, OLS regression, instrumental variables, firm performance, agency theory, Equities (Corporate Governance) Complexity vs Empirical Score Math Complexity: 2.5/10 Empirical Rigor: 7.0/10 Quadrant: Street Traders Why: The paper relies on standard econometric techniques (OLS, 2SLS) with accessible interpretation (Tobin’s q, t-stats) rather than dense mathematical theory, but demonstrates strong empirical rigor through a large dataset, instrumental variables exploiting a natural experiment (regulatory threshold), and robustness checks. flowchart TD A["Research Goal<br>Does Corporate Governance<br>Predict Firm Market Value?"] --> B["Data Source<br>Korean Stock Market Data"] B --> C["Key Methodology<br>OLS & Instrumental Variables IV"] C --> D["Computational Process<br>Regressing Firm Value on<br>Corporate Governance Index"] D --> E{"Key Finding"} E --> F["Strong Causal Evidence<br>Corporate Governance<br>Significantly Predicts Market Value"]

The Link Between Job Satisfaction and Firm Value, with Implications for Corporate Social Responsibility ArXiv ID: ssrn-2054066 “View on arXiv” Authors: Unknown Abstract How are job satisfaction and firm value linked? I tackle this long-standing management question using a new methodology from finance. I study the effect on firm Keywords: Job Satisfaction, Human Capital, Firm Value, Labor Economics, Corporate Governance, Equity / Human Resources Complexity vs Empirical Score Math Complexity: 2.0/10 Empirical Rigor: 3.0/10 Quadrant: Philosophers Why: The paper applies a finance methodology to a management question but shows no advanced mathematics or dense derivations in the excerpt. Empirical rigor appears low as it lacks mentions of backtests, specific datasets, or statistical metrics, focusing instead on theoretical linkage. flowchart TD A["Research Goal<br>Link between Job Satisfaction & Firm Value"] --> B["Data Source<br>Great Place to Work® Employee Reviews"] B --> C["Methodology<br>Hedonic Pricing Model from Finance"] C --> D{"Analysis"} D --> E["Compute: Implicit Wage Premium<br>in Job Satisfaction Scores"] D --> F["Compute: Firm Value Metric<br>e.g., Tobin's Q"] E & F --> G["Correlation & Regression Analysis"] G --> H["Key Outcome<br>Positive correlation found between<br>Job Satisfaction Premium & Firm Value"]