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Social progress through improved treatment of minority groups (e.g., forbidding racial or sexual harassment) may or may not spread to corporate cultures through competition. We provide a theory of corporate culture, and we show that emergent, progressive corporate cultures can displace existing, regressive ones when the prevailing wage gap is large between majority and minority groups. The model provides testable predictions on racial and gender wage gaps across firms. [ABSTRACT FROM AUTHOR]

Investors face significant barriers in evaluating the performance of investment advisors. We focus on commodity trading advisors (CTAs) and show that from 1994 to 2012, CTA excess returns to investors (i.e., net of fees) were insignificantly different from zero while gross excess returns (i.e., before fees) were 6.1%, which implies that managers captured the performance in fees. Moreover, we find that CTAs display no alpha relative to simple future strategies in the public domain. Our results have implications for all hedge fund studies in that we find the typical adjustments for biases in the hedge fund databases still leave upward bias in fund performance. [ABSTRACT FROM PUBLISHER]

Credit booms are not rare, some end in a crisis (bad booms) whereas others do not (good booms). We document that credit booms start with an increase in productivity growth, which subsequently falls faster during bad booms. We develop a model in which a crisis happens when a credit boom transits toward an information regime with careful examination of collateral. As this examination is more valuable when collateral backs projects with low productivity, crises are more likely during booms that display larger productivity declines. We test the main predictions of the model and identify the default probability as the main component of measured productivity that lies behind crises. [ABSTRACT FROM AUTHOR]

There is a tenuous link between market efficiency and economic efficiency in that stock prices are more informative when the information has less social value. We investigate this link in the context of CEO turnover. Our theoretical model predicts that, when the board's monitoring intensity and the informed trader's information decision are jointly endogenized, stock price informativeness is negatively related to the board's monitoring effort. Our empirical tests provide supporting evidence for this negative effect. Moreover, using the passage of the Sarbanes-Oxley Act (SOX) as a quasi-natural experiment, we find that SOX, while strengthening corporate governance, has a negative effect on stock price informativeness, especially among firms with complex organizational structures. [ABSTRACT FROM AUTHOR]

Commodity futures risk premiums vary across commodities and over time depending on the level of physical inventories. The convenience yield is a decreasing, nonlinear function of inventories. Price measures, such as the futures basis, prior futures returns, prior spot returns, and spot price volatilities reflect the state of inventories and are informative about commodity futures risk premiums. We verify these theoretical predictions using a comprehensive data set on 31 commodity futures and physical inventories between 1971 and 2010. We find no evidence that the positions of participants in futures markets predict risk premiums on commodity futures. [ABSTRACT FROM AUTHOR]

Under the German corporate governance system of codetermination, employees are legally allocated control rights over corporate assets through seats on the supervisory board--that is, the board of nonexecutive directors. The supervisory board oversees the management board--the board of executive directors--approves or rejects its decisions, and appoints its members and sets their salaries. We empirically investigate the implications of this sort of labor participation in corporate decision making. We find that companies with equal representation of employees and shareholders on the supervisory board trade at a 31 percent stock market discount as compared with companies where employee representatives fill only one-third of the supervisory board seats. We show that under equal representation, management board compensation provides incentives that are not conducive to furthering shareholders' interests, possibly because labor maximizes a different objective function than shareholders. We document that, under equal representation, companies have longer payrolls than their one-third representation peers have. Finally, we provide evidence that shareholders respond to the allocation of control rights to labor by linking supervisory board compensation to firm performance and by leveraging up the firm. [ABSTRACT FROM AUTHOR]

The article examines the relationship between asset price changes and the arrival of news. The price response may show a pattern which bears little similarity with the final valuation of the asset, or to the date at which information arrived, when information is hard to interpret. An example of an information structure with two traders which can display an apparently anomalous price path is provided. Information structures which differ from the standard truth-plus noise paradigm generally can lead to a rich pattern of price responses, while being consistent with rationality.

Are stock prices determined by fundamentals or can "bubbles" exist? An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behaviour. When there is asymmetric information between investors and portfolio managers, portfolio managers have an incentive to churn; their trades are not motivated by changes in information, liquidity needs or risk sharing but rather by a desire to profit at the expense of the investors that hire them. As a result, assets can trade at prices which do not reflect their fundamentals and bubbles can exist. [ABSTRACT FROM AUTHOR]

Examines the design and features of bank loans. Bank's ability to renegotiate credit terms with borrowers; Link between renegotiation and monitoring; Unique characteristics of bank loans to enhance efficiency; Borrowing and lending.