nep-cfn New Economics Papers
on Corporate Finance
Issue of 2009‒12‒05
two papers chosen by
Zelia Serrasqueiro
University of the Beira Interior

  1. Underpricing and CEO Stock Options: Do Board Characteristics Matter? By Chahine, Salim; Goergen, Marc
  2. Corporate Stakeholders and Trust By Goergen, Marc

  1. By: Chahine, Salim; Goergen, Marc (Cardiff Business School)
    Abstract: This paper examines the conditions under which CEOs are able to affect the timing and the price of the stock options they are granted at the time of their firm.s IPO. Contrary to Lowry and Murphy (2007) who do not find a relationship between IPO grants and IPO underpricing, this paper finds such a relationship when board independence, the power of the CEO and venture-capital (VC) backing are taken into account. The results suggest that powerful CEOs and VCs are able to reap substantial gains from IPO options to the detriment of the shareholders.
    Keywords: stock options; board independence; venture capital involvement; CEO power; initial public offerings; underpricing; conflicts of interest; corporate governance
    JEL: G24 G30 J33
    Date: 2009–11
  2. By: Goergen, Marc (Cardiff Business School)
    Abstract: To our knowledge, this is the first paper that investigates the links between trust, the institutional setting (in terms of employment protection legislation (EPL) and investor rights) and studies the impact of all three on economic performance. In line with the previous literature (e.g. Knack and Keefer (1997), Zak and Knack (2001)), we find that trust has a positive impact on GDP per capita growth. Our novel results are twofold. First, we find that EPL and investor rights have a negative relationship and that both (although the latter to a lesser extent) are substitutes for trust. Second, all three variables have a positive effect on economic growth.
    Keywords: Corporate governance; trust; investor protection; employment protection legislation; institutions and economic growth
    JEL: G34 K20 O16
    Date: 2009–11

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