The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Taking a View: Corporate Speculation, Governance, and Compensation
Published: 09/04/2007 | DOI: 10.1111/j.1540-6261.2007.01279.x
CHRISTOPHER C. GÉCZY, BERNADETTE A. MINTON, CATHERINE M. SCHRAND
Using responses to a well‐known confidential survey, we study corporations' use of derivatives to “take a view” on interest rate and currency movements. Characteristics of speculators suggest that perceived information and cost advantages lead them to take positions actively; that is, they do not speculate to increase risk by “betting the ranch.” Speculating firms encourage managers to speculate through incentive‐aligning compensation arrangements and bonding contracts, and they use derivatives‐specific internal controls to manage potential abuse. Finally, we examine whether investors reading public corporate disclosures are able to identify firms that indicate speculating in the confidential survey; they are not.
Vote Trading and Information Aggregation
Published: 11/28/2007 | DOI: 10.1111/j.1540-6261.2007.01296.x
SUSAN E.K. CHRISTOFFERSEN, CHRISTOPHER C. GECZY, DAVID K. MUSTO, ADAM V. REED
The standard analysis of corporate governance assumes that shareholders vote in ratios that firms choose, such as one share‐one vote. However, if the cost of unbundling and trading votes is sufficiently low, then shareholders choose the ratios. We document an active market for votes within the U.S. equity loan market, where the average vote sells for zero. We hypothesize that asymmetric information motivates the vote trade and find support in the cross section. More trading occurs for higher‐spread and worse‐performing firms, especially when voting is close. Vote trading corresponds to support for shareholder proposals and opposition to management proposals.