Found 6 article(s) for author 'Jesse Fried'

Jesse Fried on Inequality, Stock Buybacks, and Misplaced Fears about Short-Termism in Corporate Governance

Jesse Fried on Inequality, Stock Buybacks, and Misplaced Fears about Short-Termism in Corporate Governance March 2019. GrowthPolicy’s Devjani Roy interviewed Jesse Fried, Dane Professor of Law at Harvard Law School, on inequality, stock buybacks, and misplaced fears about short-termism in corporate governance. | Click here for more interviews like this one. Links: Jesse Fried’s faculty […]

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Short-Termism and Capital Flows

Short-Termism and Capital Flows. Jesse Fried, Charles Wang, November 2018, Paper, “During 2007-2016, S&P 500 firms distributed to shareholders $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that “short-termism” is impairing firms’ ability to invest and innovate. We show that, when taking into account both direct and indirect equity issuances, net shareholder payouts by all public firms during this period were only 41% of net income. And, in fact, during this decade investment increased substantially while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital.Link

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Do Founders Control Start-Up Firms that Go Public?

Do Founders Control Start-Up Firms that Go Public? Jesse Fried, May 2018, Paper, “Startup founders, who generally must cede control to obtain VC financing, are widely believed to regain control in the event of an IPO, à la Facebook’s Mark Zuckerberg. Indeed, the premise that founders expect to be able to reacquire control if there is an IPO underlies the leading finance theory for why venture capital cannot thrive without a robust stock market. But little is known about how frequently founders regain control via IPO. Using a sample of over 18,000 VCbacked firms, we show that founders generally do not reacquire control via IPO. In almost 60% of firms that go public, the founder is no longer CEO at IPO.Link

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Empowering Minority Shareholders and Executive Compensation: Evidence from a Natural Experiment

Empowering Minority Shareholders and Executive Compensation: Evidence from a Natural Experiment. Jesse Fried, August 2016, Paper, “We use a recent regulatory change in Israel to examine the efficacy of minority shareholder approval. In 2011, the level of minority shareholder support required for approving related party transactions, including executive compensation paid to controlling shareholders or to their relatives, increased from a third to a majority of the minority votes cast, and a new rule required renewal of this approval every three years. Comparing changes in compensation following approvals before and after the reform, we find that only the new type of approval constrains compensation, and that this effect is present only when the firm does not choose the timing of the vote.Link

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Insider Trading Via the Corporation

Insider Trading Via the Corporation, Jesse M. Fried, Autumn 2014, Paper. “A U.S. firm buying and selling its own shares in the open market can trade on inside information more easily than its own insiders because it is subject to less stringent trade disclosure rules. Not surprisingly, insiders exploit these relatively lax rules to engage in indirect insider trading: they have the firm buy and sell shares at favorable prices to boost the value of their own equity. Such indirect insider trading imposes substantial costs on public investors in two ways: by systematically diverting value to insiders and by inducing insiders to take steps that destroy economic value…” Link

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The Uneasy Case for Favoring Long-Term Shareholders

The Uneasy Case for Favoring Long-Term Shareholders. Jesse Fried, February 26, 2014, Paper. “This paper challenges a persistent and pervasive view in corporate law and corporate governance: that a firm’s managers should favor long-term shareholders over short-term shareholders, and maximize long-term shareholders’ returns rather than the short-term stock price. Underlying this view is a strongly-held intuition that taking steps to increase long-term shareholder returns will generate a larger economic pie over time. But this intuition, I show, is flawed. Long-term shareholders, like short-term shareholders, can benefit from managers destroying value…” Link

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