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Ideology matters. Since the 1980s stockholder primacy has been the dominant ideology shaping corporate law. As a result, case law, director conduct, and our understanding of "best governance practices" have all been viewed under a single prism: how do these rules impact stockholder value? Even the recent debate over corporate purpose has largely been limited to stockholders, directors, and (of course) academics. Excluded from the debate are the vast majority of the population that owns little or no stock, as well as other corporate stakeholders such as employees and communities. This article considers how the discussion of corporate purpose is limited by stockholder primacy, and how a true debate over corporate purpose may require a reconsideration of the dominant ideology over stockholder purpose. [ABSTRACT FROM AUTHOR]

Equity compensation and company share buybacks are complementary: Equity compensation share issuances increase outstanding shares; buybacks decrease outstanding shares. Yet, the two types of transactions require very different approval processes and securities and financial disclosures, and generate different financial and tax results, all of which are described in this article, and illustrated by data collected from fifty-nine of America's largest public companies. This article encourages critics of buybacks to consider the complexity and interrelationship of buybacks and equity compensation. [ABSTRACT FROM AUTHOR]

This paper addresses whether the adoption of Japanese financial practices by U.S. corporations can be used as a basis for encouraging U.S. managers to promote the interests of their (human) organizations over those of stockholders. An historical overview is provided of how the corporate organization in each country evolved and the corresponding development of managers' responsibilities to the corporate organization versus shareholders. These concepts are then examined within the context of each country's contemporary corporate financial structure and the corresponding financial responsibilities of managers to the corporate organization versus shareholders A discussion is then provided of whether the values embodied in each system would affect the ability of the United States to encourage a more "corporate-oriented" ethic to its managers by adopting Japanese financial practices. [ABSTRACT FROM AUTHOR]

This article compares the liability, stockholders' equity and asset reduction treatments in terms of classification accuracy for several combinations of financial ratios in the U.S. The results were consistent for all of the combinations. No differences in classification accuracies for financial ratios calculated under the three treatments of deferred income taxes were found. Both partial allocation and discounting of the deferred income tax liability have been proposed. The results of the study suggest that further consideration of each proposal is warranted. First, one possible explanation of these results is that no one user treatment is employed exclusively in decision making. Other factors affecting a rating decision may also be affecting the treatment of the deferred taxes. The results are consistent with the notion that deferred taxes are not relevant in rating decision, or that the nondiscounted amount renders the information useless. If further research determines that the amounts are not relevant in users' decision making, then elimination of the deferred tax disclosures should be considered. If additional study determines that the nondiscounted amount renders the information useless, even though the concept is relevant, then a requirement for reporting discounted amounts should be considered.

This article reports on findings of a study of the association between share values or returns and reconciliation to the U.S. GAAP as disclosed in Form 20-F, the annual report filed with the Securities and Exchange Commission (SEC) by non-U.S. registrants. The authors analyze the income and shareholders' equity reconciliation in initial registration statements of non-U.S. registrants. The authors provide an overview of the continuing policy debate between the New York Stock Exchange (NYSE) and the SEC. The results of the study implied that several of the value-relevant information in the SEC-mandated disclosures is available to the market from other sources.

The article compares the value relevance of U.S. generally accepted accounting principles (GAAP) with those of foreign business enterprises using the U.S. Securities and Exchange Commission's Form 20-F reconciliation requirements. The Form 20-F reconciliations provide information on the value relevance of information captured through different GAAP regimes. The reconciliations are a means to create international disclosure regulation and insure that all financial statements contain information that is valuable to capitalists and financiers.

Many common types of financial contracts incorporate options with extendible maturities. This paper derives closed-form expressions for options that can be extended by the optionholder and presents a number of applications including the valuation of American options with stochastic dividends, junk bonds, and shared-equity mortgages. We also derive closed-form expressions for writer-extendible options and discuss the writer's economic incentives for extending an out-of-the-money option. We apply these results to show that corporate debtholders have a strong incentive to extend the maturity of defaulting debt if there are liquidation costs. We model and solve the debtholders' optimal extension problem and show that the possibility of an extension can induce shareholders in highly levered firms to accept negative NPV projects. [ABSTRACT FROM AUTHOR]

The article reports on a study relating to U.S. inflation and public utility inflation in the 1950's. The study indicates that returns to utility stockholders have generally kept pace with inflation. Utility assets constitute 20% of the total assets of all non-financial corporations in the U.S. Total revenue of public utility companies in 1958 approximated 6.9% of the disposable personal income. Public utilities have consumed 40-50% of all new corporate security issues. Experts speculate that the enormous expansion of physical assets combined with the relatively small role of retained earnings creates a dependence on external capital.

In 2012, Congress passed Moving Ahead for Progress in the 21st Century (MAP-21), which changed the ERISA pension funding rules such that mandatory pension contributions decreased. Advocates for the bill argued that reducing mandatory contributions would increase firms' investment. In contrast, I do not find an average increase in investment among the firms benefiting from MAP-21. Rather, I find that firms either hold pension funding relief on their balance sheets as liquid assets or pay out pension funding relief to shareholders. To the extent that managers increase investment in response to MAP-21, it is concentrated in firms with weak governance or ineffective internal controls. [ABSTRACT FROM AUTHOR]

The article presents an insight into the article "Team Production Theory of Corporate Law" by professors Margaret Blair and Lynn Stout that was the main focus of the periodical's Sixth Annual Berle Symposium. Topics discussed include the team production theory of a corporate firm of the U.S., intellectual property rights, and equity compensation of shareholders.

Shareholder activism is not a privilege--it is a right and a responsibility. When we invest in a company, we own part of that company and we are partly responsible for how that company progresses. If we believe there is something going wrong with the company, then we, as shareholders, must become active and vocal. [ABSTRACT FROM AUTHOR]

FIN No. 48, Accounting for Uncertainty in Income Taxes (FASB 2006), requires firms to disclose tax reserves and to record changes in tax reserves at adoption of FIN No. 48 as cumulative effect adjustments in stockholders' equity. We predict that between the enactment and adoption of FIN No. 48, relative to historical levels, firms settle disputes more often to potentially decrease visibility to the IRS and release reserves more often to reduce scrutiny and increase earnings (as opposed to retained earnings). We analyze 2005 and 2006 10-Qs and 10-Ks for the 100 largest nonfinancial, nonutility firms followed by analysts. Between enactment and adoption of FIN No. 48, relative to historical levels, firms report more settlements with tax authorities and release reserves more frequently. In addition, firms with higher IRS deficiencies are more likely to settle disputes. Between enactment and adoption of FIN No. 48, firms increased earnings by releasing $4.4 billion of tax reserves, nearly equaling the $4.5 billion released at adoption. [ABSTRACT FROM AUTHOR]

We examine variation in relative use of equity-based compensation (equity mix) across firms from different legal environments by studying 381 non-US firms from 43 countries during the 1996-2000 period. These firms are from countries that provide varying degrees of legal protection for shareholders. The data indicate association between equity mix and the degree of legal protection of shareholder rights. Specifically, firms use relatively more equity-based compensation if in a legal environment where shareholder rights are more strongly protected and where laws are more effectively enforced. These findings add to the literature demonstrating a relationship between institutional factors and financial decisions. [ABSTRACT FROM AUTHOR]

Manuscript Type: Empirical Research Question/Issue: Recent dynamics in the institutional and market environment facilitated the propagation of equity incentive plans outside the US and the UK. This study sheds light on the reasons behind the diffusion of these plans in Italy, a country where companies are usually controlled by a blockholder and these instruments were almost absent. Research Findings/Results: To gain a deep understanding of the phenomenon, we collected data on both the diffusion and the technical aspects of equity incentive plans adopted by Italian listed companies in 1999 and 2005. The results show that 1) the determinant of their adoption is the firm size, rather than the absence of a controlling shareholder; 2) these plans are not extensively used to extract company value, although few cases suggest this possibility; and 3) plans' characteristics generally comply with the requirements in tax law, so that fiscal benefits can be accessed. Theoretical Implications: Our findings contribute to the expansion of the traditional knowledge about reasons behind the adoption of equity incentive plans outside Anglo-Saxon countries. Further, they provide support for a symbolic perspective of corporate governance, according to which the introduction of new governance practices may not imply substantive governance reforms. Practical Implications: Our study recommends that policymakers improve the disclosure rules about these plans and avoid the introduction of fiscal benefits that provide an incentive to promote some compensation schemes over others. Moreover, our results encourage members of remuneration committees to pay attention to specific characteristics of the plans. [ABSTRACT FROM AUTHOR]

U.S. banks hold significantly more equity capital than required by their regulators. We test competing hypotheses regarding the reasons for this “excess” capital, using an innovative partial adjustment approach that allows estimated BHC-specific capital targets and adjustment speeds to vary with firm-specific characteristics. We apply the model to annual panel data for publicly traded U.S. bank holding companies (BHCs) from 1992 through 2006, an extended period of increasing bank capital that ended just before the subprime credit crisis of 2007–2008. The evidence suggests that BHCs actively managed their capital ratios (as opposed to passively allowing capital to build up via retained earnings), set target capital levels substantially above well-capitalized regulatory minima, and (especially poorly capitalized BHCs) made rapid adjustments toward their targets. [ABSTRACT FROM AUTHOR]

We extend here our prior work, which focused on equity decoupling ( Hu and Black, 2006, 2007, 2008 ), by providing a systematic treatment of debt decoupling and an initial exploration of hybrid decoupling. Equity decoupling involves unbundling of economic, voting, and sometimes other rights customarily associated with shares, often in ways that may permit avoidance of disclosure and other obligations. We discuss a new U.S. court decision which will likely curtail the use of equity decoupling strategies to avoid large shareholder disclosure rules. Debt decoupling involving the unbundling of the economic rights, contractual control rights, and legal and other rights normally associated with debt, through credit derivatives and securitisation. Corporations can have empty and hidden creditors, just as they can have empty and hidden shareholders. ‘Hybrid decoupling’ across standard equity and debt categories is also possible. All forms of decoupling appear to be increasingly common. Debt decoupling can pose risks at the firm level for what can be termed ‘debt governance’− the overall relationship between creditor and debtor, including creditors' exercise of contractual and legal rights with respect to firms and other borrowers. Widespread debt decoupling can also involve externalities and therefore create systemic financial risks; we explore those risks. [ABSTRACT FROM AUTHOR]

The article focuses e-proxy and its significant role on corporate governance. It relates on a current debate over shareholder's access to the issuer's proxy statement for the overstatement of the issue on making director nominations. It also several related information that need to be examined, including a brief account on shareholder's access to the issuer's proxy statement and on the proxy rules that needs to be focused. In the end, it recommends that the institutional investors and other shareholder activists should be working more through the mechanics of waging short slate proxy competition by using e-proxy solicitations.

The article focuses on the distribution of dividends of business enterprises in the U.S. It highlights the division of powers of the stock market, board of directors, and shareholders of a corporate entity. The article talks about a perfect model of achieving organizational goals with equivalent surplus distribution among the shareholders of the company. Shareholders' rights for strengthening the corporate-governance structure of the company have been discussed.

This essay challenges the primacy of shareholder value. Shareholder primacy originates not in company law, but rather in the norms and practices surrounding the rise of the hostile takeover movement in Britain and America in the 1970s and 1980s. It is less strongly institutionalised than might be supposed, because it is essentially a cultural rather than a legal point of reference. Moreover, in the course of the past decade, a shift in the content of shareholder value has occurred which reflects the stakeholder critique of that period: this reflects the idea that shareholders should exercise their power not as representatives of the market, but as agents of society as a whole. The corporate governance of the future will be centrally concerned with how this idea is worked out in practice. [ABSTRACT FROM AUTHOR]

We address three issues regarding the relationship between political party affiliation and returns in the equities markets, as measured by the NYSE Composite Index and its sub-indexes. First, we find a tendency for returns to be greater during Democratic presidential administrations; however, this result is statistically insignificant. Second, we conclude that returns during the last two years of presidential administrations are greater than during the first two years. Third, we examine the relationship between the majority party in each house of Congress and equity returns. We raise the possibility that party affiliation of Congress is a factor in explaining returns. [ABSTRACT FROM AUTHOR]

ABSTRACT: Statement of Financial Accounting Standards (SFAS) No. 130 requires companies to report comprehensive income in a primary financial statement, but allows its presentation in either a statement of comprehensive income or a statement of stockholders' equity (Financial Accounting Standards Board [FASB] 1997). In an experiment, we examine whether and how alternative presentation formats affect nonprofessional investors' processing of comprehensive-income information, specifically, information disclosing the volatility of unrealized gains on available-for-sale marketable securities. The results show that nonprofessional investors' judgments of corporate and management performance reflect the volatility of comprehensive income only when it is presented in a statement of comprehensive income. We provide evidence consistent with our psychology-based framework that these findings occur because format affects how nonprofessional investors weight comprehensive-income information and not whether they acquire this information or how they evaluate it. [ABSTRACT FROM AUTHOR]

Describes the changes in state laws regulating corporate distributions. Alternative accounting presentations for better information; Segregations in stockholders' equity; Items not included in financial statement disclosures.

The balanced growth restrictions implied by the neoclassical growth model imply that output, the private capital stock and the public capital stock share the same stochastic trend. We analyse the postwar US data on real output, real private capital stock and real public capital stock and find that the balanced growth restrictions cannot be rejected by the data. Removing the common stochastic trend from each series allows the estimation of output elasticities that is free from the spurious regression problem. The results support Aschauer's (1989) claim that, at the margin, public capital is more productive than private capital. [ABSTRACT FROM AUTHOR]

Recently, savings rates have fluctuated considerably in the USA. The implications of these movements have interested both policy makers and economists. This paper considers two reasons why savings may change: (i) a change in the economy's desired long-run capital stock, and (ii) the economy's desire to smooth its consumption through time. To identify both kinds of movements in US savings, the permanent income hypothesis (PIH) is modified to incorporate discrete breaks. Evidence suggests that discrete breaks in saving occurred during 1972-74 and again during the mid 1980s. And, when breaks are accounted for, it is found that rises (falls) in saving anticipate falls (rises) in output, suggesting that people use savings to help smooth consumption over time, consistent with the PIH. [ABSTRACT FROM AUTHOR]

This article discusses several legal provisions of dissenting stockholders under appraisal statutes of the U.S. judicial system. The problem of the dissenting stockholder and his remedies under modern appraisal statutes has been one of conflict between strong and divergent interests. If the corporation, through a vote of the majority, sold all the assets, merged, or consolidated, where it appeared that the majority had exceeded its lawful powers, those stockholders not assenting to the contemplated change might, by prompt action, have the transaction set aside, or they might sue for the value of their shares on the theory that their interest in the corporation had been converted. Some courts talked about a conversion of shareholder's share, and the remedy given was the value of his stock. For all practical purposes there had been a conversion of the property interest of the stockholder. His share, represented by his certificate, had an ascertainable value represented by definite corporeal and incorporeal property previous to the transaction illegally performed. The main line of inquiry of this article is concerned to the legal right of the dissenter to an appraisal, the difficulties encountered in the application of the statute, the problem of alternative remedies, and the valuation of dissenters' shares.

This article discusses the taxing power of the states in the U.S. Mr. Justice Field's remarks about property taxation in The Delaware Railroad Tax must be regarded as obiter, since he had previously stated that the tax before the court was not a tax on property, but one "upon the corporation itself, measured by a percentage upon the cash value of a certain proportional part of the shares of its capital stock." It is to be inferred that the tax, if one on property, would have been held to be faulty because of the method by which the amount of property in Delaware was determined.

The article discusses the results of a study made by a Sub-Committee of the Corporate Information Committee of the Financial Analysts Federation to the general adequacy and comparability of the annual shareholder reports for 1962 of 20 representative stock life insurance companies in the U.S. The report contains ratings scored on the content of the company reports in three areas with values assigned. The report found that half of the reports analyzed that most minimal standards should not be called stockholders' reports and of the 20 companies only 4 had complete income statements. It is also found that balance sheet statements were uniformly good, but only 9 companies published a complete surplus reconciliation statement explaining the year-to-year changes.

Tax allocation procedures used today produce inconsistent treatment on the balance sheet. When the asset's accounting basis is greater than the tax basis as the result of differences in timing, a credit must be carried on the balance-sheet. This credit has variously taken the form of a liability, a reduction in a fixed asset , a reduction in a deferred charge, or even an allocation of retained earnings. As previously mentioned, the major difference has been that due to depreciation. Here, the general practice has been to show the resulting credit as a non-current liability. To many accountants, this treatment is a distortion of the facts. At the moment of liability recognition for accounting purposes, no liability seems to them to exist. The liability may never come into existence, or its amount may be greater or less than the amount originally booked. An acceptable, but not widely followed, alternative has been to credit the accumulated depreciation rather than the liability account in these circumstances.

This paper emphasizes these points: 1. The minority interest is a stockholder equity interest and should be shown as such. 2. The variety of classifications presently used in showing the minority interest indicates that doubt exists as to its nature--liability, quasi-liability, or stockholder equity. 3. If the majority interest point of view is adopted, statements can be prepared from this standpoint and the minority can be brought along as a special stockholder equity interest. 4. Particularizing the minority share in retained earnings appears to be unnecessary since the total earnings is the same in the method described, and control over its disposition remains in the majority. [ABSTRACT FROM AUTHOR]