A roundup of academic research from the world of IR studies
Questions
1. Chief financial officers get involved in material accounting manipulations because:
a) They succumb to pressure from their CEOs
b) They want the money
2. The quality of earnings reported by politically connected companies around the world is significantly:
a) Better than that of similar non-connected companies
b) Poorer than that of similar non-connected companies
3. Yale University investigators find evidence that, following the SEC’s 2003 proxy voting disclosure rule, mutual funds’ support for management equity incentive plans actually:
a) Rose
b) Fell
4. What effect have environmental shareholder resolutions had on the pollution management practices of US corporates?
a) Positive
b) Negative
c) Neutral
5. How much more likely are analysts to cover local IPO firms than non-local ones?
a) 25 percent
b) 51 percent
c) 67 percent
6. The percentage of analyst stock recommendation changes having a visible share price impact is:
a) 12 b) 36 c) 100
7. Among large Hong Kong firms, good corporate governance:
a) Predicts future market valuation
b) Has no impact on future market valuation
8. Institutional investors sell the stock of firms that appoint women to their boards because:
a) Profits tend to suffer
b) They are biased against women
9. A mix of different educational backgrounds in IR teams:
a) Dampens shareholder activism
b) Has no effect on shareholder activism
c) Is linked to increased shareholder activism.
Answers (one point for each)
1. ‘a’, as reported in the Journal of Accounting and Economics.
2. US researchers say ‘b’.
3. ‘a’. Rather than the expected fall, researchers observe indications of increased support, especially at firms where independent directors have the largest equity stakes.
4. ‘a’. Big companies and those in industries closer to end-user customers are among those most likely to play ball with activists.
5. ‘c’. Proximate analysts are also quicker to initiate coverage of IPO firms, according to investigators at the University of Waterloo.
6. ‘a’, according to US researchers. Changes are more likely to have a stock price impact if issued by ‘star’ analysts, issued away from consensus, accompanied by earnings forecasts and issued on growth or small-cap companies or those with high institutional ownership.
7. The question and premise are notoriously debatable, but a recent study shows firms that boost governance quality subsequently tend to see a rise in market valuation.
8. Harvard researchers find that while increases in board gender diversity tend to be followed by significant decreases in stock value, there is no effect on subsequent profitability. They conclude, therefore, that institutional investors are biased against women directors.
9. ‘a’. While financial experts still dominate IR, Dutch researchers find firms with educationally diverse IR teams, including marketing and communications experts, suffer far less from shareholder activism. n
How did you do?
1-3: You’ll never amount to anything.
4-8: You are a font of actionable trivia.
9: You spend too much time reading academic journals.
This article appeared in the July print edition of IR magazine.
