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We examine the relationship between the Governance Index (G-Index) and convertible bond use by firms, specifically in the presence or absence of covenants. We find that the better the shareholder governance (lower G-Index) of firms, the more they are likely to issue convertible instead of straight bonds. More importantly, we find that the complementary relationship between shareholder governance and convertible bond use is driven by the existence of certain covenants attached to these convertible securities. We also find that this effect is accentuated in firms with smaller size, higher market-to-book, R&D and intangibles as well as higher beta. We conclude that this link between strong shareholder rights and increased convertible bond use is conditional on the presence of covenants and therefore shows the important interaction of these three governance mechanisms. In addition, this triple link being emphasized in firms with higher agency costs and adverse selection problems is consistent with value-maximizing use of convertible bonds.

We study innovation in newly public firms and find that VC-backing negatively impacts patent production and citations within the initial years of an IPO. Finding this effect to be more pronounced at firms with higher innovation activity pre-IPO, we conclude that this adverse impact is a consequence of VCs timing the IPOs of their portfolio companies in such a way that patents reach a high right before the IPO followed by a natural decline post-IPO. Additionally, VC-backing leads to higher growth in sales and productivity after going public pointing to a shift in VC focus post-IPO. We address endogeneity concerns with an instrumental variables approach.

Voluntary disclosures play an increasingly larger role in the corporate world, yet their implications remain controversial. On the one hand, voluntary disclosures create value by decreasing information asymmetry between managers and investors. On the other hand, they may be used opportunistically by the managers in capital market transactions and corporate development activities. We contribute to this debate by examining the effect of firms' voluntary disclosures of corporate governance ratings on the timing and performance of seasoned equity offerings (SEOs) and acquisitions. We conduct our analyses within the context of Turkey, one of the countries in which corporate governance scores are obtained on a voluntary basis. We find that firms which voluntarily disclose their governance ratings are less likely to undertake both SEOs and acquisitions which are commonly associated with managerial opportunism. Furthermore, these firms experience higher abnormal stock returns from the announcement of SEOs and acquisitions suggesting that voluntary disclosures of governance ratings provide credible signals to investors.

Bu calismada Borsa Istanbul’da 2009-2015 arasi islem goren 122 imalat firmasindaki icra kurulu baskaninin (CEO) ogrenim gecmisi ile firma performansi arasindaki iliski incelenmistir. Faaliyet performansi ve piyasa bazli performans olmak uzere iki farkli performans olcusu analiz edilmistir. Bulgularimiza gore icra kurulu baskani muhendislik kokenli olan firmalar, icra kurulu baskani diger ogrenim gecmislerinden olan firmalara kiyasla varliklarin getirisi bakimindan daha yuksek faaliyet performansi gostermektedir. Ayrica, icra kurulu baskani muhendis olan firmalar Tobin’s Q orani bakimindan da daha iyi piyasa bazli performans gostermektedir. Muhendislik kokenli icra kurulu baskani sahibi olma ile firma performansi arasinda gostermis oldugumuz pozitif iliski, firma duzeyindeki cesitli kontrol degiskenlerinin cok degiskenli analizimize dahil edilmesinden etkilenmemektedir. Ayrica bu pozitif iliski daha kucuk boyutlu halka acik imalat firmalari icin daha belirgindir.

Venture capitalists (VCs) often serve on the board of mature public firms long after their initial public offering (IPO), even for companies that were not VC-backed at the IPO. Board appointments of VC directors are followed by increases in research and development intensity, innovation output, and greater deal activity with other VC-backed firms. VC director appointments are associated with positive announcement returns and are followed by an improvement in operating performance. Firms experience higher announcement returns from acquisitions of VC-backed targets following the appointment of a VC director to the board. Hence, in addition to providing finance, monitoring and advice for small private firms, VCs play a significant role in mature public firms and have a broader influence in promoting innovation than has been established in the literature. The Author 2012. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

We study the relation between the educational background of chief executive officers (CEOs) and firm performance for firms traded on Borsa Istanbul (BIST) between 2009-2015. We focus on manufacturing firms and analyze two different measures of performance, namely operating performance and market-based performance. We find that firms that have CEOs with an engineering background experience higher operating performance measured by return on assets (ROA) than firms that have CEOs with other educational background. Moreover, firms with engineer CEOs also experience better market-based performance measured by Tobin’s Q. The positive association between having CEOs with an engineering background and firm performance that we document is robust to the inclusion of several firm-level control variables in our multivariate analysis. We also find that this positive relation is more pronounced for public manufacturing firms of smaller size.

This paper studies the mergers and acquisitions (M&As) activity of initial public offering (IPO) firms on Borsa Istanbul (BIST) that went public between 1990-2014. We find that among the 398 firms that went public 87 firms acquired other firms while 104 firms were targeted by other firms within the first five years after their IPOs. For firms that have been involved in an M&A activity, the aggregate deal volume corresponds to 16% of their market size for acquiring IPO firms, and 29% of their market size for targeted IPO firms. On average, while these IPO firms acquired 2.1 firms within five years, they were targeted by 1.7 firms. As a result, firms that convert to public ownership on BIST might participate as acquiring firms or as target firms in the subsequent M&A processes in the first five years after their IPO. Our findings indicate that firms go public on BIST mainly to provide an exit opportunity for their existing shareholders, and they accomplish this i) through the sale of existing shares to the general public in an IPO or ii) through the sale of existing shares to the acquiring firms in a post-IPO M&A.

Newly public firms make acquisitions at a torrid pace. Their large acquisition appetites reflect the concentration of initial public offerings (IPOs) in mergers and acquisitions-(M&A-) intensive industries, but acquisitions by IPO firms also outpace those by mature firms in the same industry. IPO firms’ acquisition activity is fueled by the initial capital infusion at the IPO and through the creation of an acquisition currency used to raise capital for both cash- and stock-financed acquisitions along with debt issuance subsequent to the IPO. IPO firms play a bigger role in the M&A process by participating as acquirers than they do as takeover targets, and acquisitions are as important to their growth as research and development (R&D) and capital expenditures (CAPEX). The pattern of acquisitions following an IPO shapes the evolution of ownership structure of newly public firms.

We consider several multiperiod portfolio optimization models where the market consists of a riskless asset and several risky assets. The returns in any period are random with a mean vector and a covariance matrix that depend on the prevailing economic conditions in the market during that period. An important feature of our model is that the stochastic evolution of the market is described by a Markov chain with perfectly observable states. Various models involving the safety-first approach, coefficient of variation and quadratic utility functions are considered where the objective functions depend only on the mean and the variance of the final wealth. An auxiliary problem that generates the same efficient frontier as our formulations is solved using dynamic programming to identify optimal portfolio management policies for each problem. Illustrative cases are presented to demonstrate the solution procedure with an interpretation of the optimal policies.

We show that one third of SP specifically, by significant declines in R&D outlays, capital expenditures, and innovation activity of public firms. PE director appointments are also negatively related to acquisition activities and corporate venture capital investments of public firms, but positively related to the number of joint ventures and strategic alliances with other firms. Appointments of PE professionals as directors lead to higher CEO turnover-performance sensitivity, to improvement in operating performance, and create positive announcement abnormal returns.

We study the innovation activity of firms going public and find that post-IPO innovation activity is highly associated with pre-IPO innovation activity at both venture-capital- and non-venture-capital-backed companies. Our results about non-venture-capital-backed companies that go public, which mostly have been ignored in similar studies, suggest that venture-capital-backing is not an important determinant of post-IPO innovation activity for firms with prior innovation experience. Our findings indicate that venture-capital-backing only helps companies with low pre-IPO innovation activity while companies with high pre-IPO innovation activity continue to innovate after going public whether backed by venture capital or not. We address potential endogeneity issues in a matching framework.

Using data on the backgrounds of board members of S&P companies, we show that venture capitalists (VCs) play an important role in mature public firms long after their initial public offering (IPO). Almost one-third of mature public companies have at least one VC director on their board. VC presence on the board is not limited to mature companies that were VC-backed at the time of their IPO – over one-third of mature firms with VC directors were not VC-backed at the time of their IPO. Appointments of VC directors to the board are followed by increases in R&D intensity, innovation output, and greater deal activity with other VC-backed firms. VC director appointments are associated with positive announcement returns and are followed by an improvement in operating performance. Finally, firms experience higher announcement returns from acquisitions of VC-backed targets following the appointment of a VC director to the board. Our results show that in addition to their function as providers of finance, monitoring and advice for small private firms, VCs play a significant role in mature public firms as well. Hence, we illustrate a much broader role for VCs than has been established in the literature.

By using an original hand-collected data on the professional backgrounds of board members of S&P 500, S&P MidCap and SmallCap companies, this paper presents evidence on the role of venture capitalists (VCs) in mature public companies long time after their initial public offering (IPO). We find that 30.5% of S&P firms, which have gone public almost 20 years ago, have at least one VC director on their board, suggesting that VCs' governance role extends from newly public firms to mature public firms. VCs' presence as board members is not only limited to public firms which were VC-backed at the time of their IPO. 34.8% of the firms with VC directors were not VC-backed at the time of their IPO. We find that firms with VC directors on board exhibit greater research and development (R&D) and innovation activity measured by their patenting output. There is also a significant difference in the acquisition activity of firms with VC directors and firms with no VC directors. Firms with VC directors acquire smaller, more R&D intensive and VC-backed targets. They also exhibit a greater amount of corporate venture capital (CVC) investment and form a greater number of joint ventures and strategic alliances with VC-backed firms than firms with no VC directors. Overall, this paper provides the first piece of evidence that, in addition to their role as providers of finance, monitoring and advice for small private firms, VCs also play a significant role in mature public firms, especially in promoting the R&D and innovation activity in such firms.