Pouyan Foroughi

Corporate opportunity waivers let directors pursue outside ventures, weakening the duty of loyalty that supports investor confidence. Exploiting staggered state adoptions of these statutes from 2000 to 2018, we examine how blockholders, the market’s main bulwark against self-dealing, react. Public governance signals barely change; support for management proposals slips by less than one percentage point, failed director elections fall, and friendly hedge fund activism fades. Once scrutiny shifts toward the potential outcomes of private monitoring, a strikingly different picture emerges, as larger firms experience more frequent departures of independent directors, activists who once cooperated with management adopt confrontational tactics, and long-horizon investors pare their stakes, especially where diversion prospects are very high, analyst coverage is extensive, and boards are larger. Loosening fiduciary standards, therefore, gradually weakens shareholder oversight, eroding a critical governance mechanism and placing long-term firm value at risk, despite initial market optimism.

This study investigates how U.S. power sector firms respond to environmental violations identified by the EPA. Following a violation, affected plants adopt mitigation strategies such as reducing electricity generation, improving fuel quality, lowering coal use, installing scrubbers, upgrading pollution controls, and investing in energy-efficient generators. These actions are supported by economies of scale and public subsidies. At the firm level, violations are associated with increases in assets, capital expenditures, long-term debt, operating revenue, and electricity prices. However, operating and net income remain stable, suggesting that firms pass much of the compliance cost to consumers. While these responses contribute to environmental improvement, the accompanying rise in electricity prices raises concerns about social equity, particularly for households least able to absorb higher energy costs. Overall, the findings highlight a broader ethical and policy dilemma: efforts to enforce environmental accountability may disproportionately burden vulnerable populations.

We study the relationship between mutual fund management’s direct experience with extreme environment events and the fund’s voting behavior on environmental issues. We find that higher air pollution in a fund’s home county increases its propensity to vote in support of shareholders’ environmental proposals. The effect is weakened by fund manager turnovers, and managers’ affiliation with the Republican Party. Conversely, the effect is stronger for more highly contested environmental proposals. Overall, our results suggest that mutual fund management’s direct experience with extreme environment events plays a significant role in motivating the fund’s environmental engagements.

Analyzing the complex financial landscape of multi-segment conglomerates requires a more nuanced approach than that required for single-segment firms. This paper reveals that conglomerates strategically enhance their transparency by voluntarily disclosing more information to compensate for their business complexity. This finding is particularly pronounced when there is an increased demand for information from stakeholders and analysts or when the executive pay-performance sensitivity is higher. By strategically embracing transparency, conglomerates transform the complexities inherent in their financial reporting into a catalyst for higher valuation and lower capital costs. Overall, our study demonstrates that multi-segment firms tactically deploy voluntary disclosure to navigate their intricate business environment effectively.

Firms in the same networks tend to have similar corporate governance practices. However, it is difficult to disentangle peer effects, where governance practices propagate from one firm to another, from selection effects, where firms with similar governance preferences self-select into linked groups. Studying board-interlocked firms, we utilize a novel instrument based on the staggered adoption of universal demand laws across states to identify causal peer effects in firms’ decisions concerning CEO compensation, CEO duality, and anti-takeover provisions. Our results provide support for the existence of peer effect in the adoption of anti-takeover provisions. We find that the entrenchment index (E-Index) of a firm increases by 0.33 points for every point increase in the E-Index of firms in the same board interlock network. The impact of universal demand laws on the interlocking directors’ prior experience in passing these provisions is a likely mechanism explaining these effects.

Using a parsimonious measure of investor protection constructed from fund organizational characteristics, this paper documents that companies targeted by activists with better investor protection structures outperform those targeted by those with poor investor protection structures by roughly 10% per year. The outperformance is observed only for active targets for which Schedule 13Ds are filed, not for passive Schedule 13G investments, indicating that the effect is not explained by a superior target-selection ability. The evidence suggests that funds with better investor protection achieve increased profitability and valuation ratio of their targets by reducing agency costs, improving corporate governance, and collaborating with other large institutional investors.