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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Search results: 4.
Words Speak Louder without Actions
Published: 07/12/2019 | DOI: 10.1111/jofi.12834
DORON LEVIT
Information and control rights are central aspects of leadership, management, and corporate governance. This paper studies a principal‐agent model that features both communication and intervention as alternative means to exert influence. The main result shows that a principal's power to intervene in an agent's decision limits the ability of the principal to effectively communicate her private information. The perverse effect of intervention on communication can harm the principal, especially when the cost of intervention is low or the underlying agency problem is severe. These novel results are applied to managerial leadership, corporate boards, private equity, and shareholder activism.
The Labor Market for Directors and Externalities in Corporate Governance
Published: 05/01/2015 | DOI: 10.1111/jofi.12287
DORON LEVIT, NADYA MALENKO
This paper studies how directors' reputational concerns affect board structure, corporate governance, and firm value. In our setting, directors affect their firms' governance, and governance in turn affects firms' demand for new directors. Whether the labor market rewards a shareholder‐friendly or management‐friendly reputation is determined in equilibrium and depends on aggregate governance. We show that directors' desire to be invited to other boards creates strategic complementarity of corporate governance across firms. Directors' reputational concerns amplify the governance system: strong systems become stronger and weak systems become weaker. We derive implications for multiple directorships, board size, transparency, and board independence.
Nonbinding Voting for Shareholder Proposals
Published: 09/21/2011 | DOI: 10.1111/j.1540-6261.2011.01682.x
DORON LEVIT, NADYA MALENKO
Shareholder proposals are a common form of shareholder activism. Voting for shareholder proposals, however, is nonbinding since management has the authority to reject the proposal even if it received majority support from shareholders. We analyze whether nonbinding voting is an effective mechanism for conveying shareholder expectations. We show that, unlike binding voting, nonbinding voting generally fails to convey shareholder views when manager and shareholder interests are not aligned. Surprisingly, the presence of an activist investor who can discipline the manager may enhance the advisory role of nonbinding voting only if conflicts of interest between shareholders and the activist are substantial.
Trading and Shareholder Democracy
Published: 11/03/2023 | DOI: 10.1111/jofi.13289
DORON LEVIT, NADYA MALENKO, ERNST MAUG
We study shareholder voting in a model in which trading affects the composition of the shareholder base. Trading and voting are complementary, which gives rise to self‐fulfilling expectations about proposal acceptance and multiple equilibria. Prices and shareholder welfare can move in opposite directions, so the former may be an invalid proxy for the latter. Relaxing trading frictions can reduce welfare because it allows extreme shareholders to gain more weight in voting. Delegating decision‐making to the board can help overcome collective action problems at the voting stage. We also analyze the role of index investors and social concerns of shareholders.