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- 2021
- Article
The Sustainable Corporate Governance Initiative in Europe
By: Mark Roe, Holger Spamann, Jesse M. Fried and Charles C.Y. Wang
In July 2020, the European Commission published the “Study on directors’ duties and sustainable corporate governance” by EY. The Report purports to find evidence of debilitating short-termism in EU corporate governance and recommends many changes to support sustainable...
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- 2020
- Working Paper
Short-Termism, Shareholder Payouts, and Investment in the EU
By: Jesse M. Fried and Charles C.Y. Wang
Investor-driven “short-termism” is said to harm EU public firms' ability to invest for the long term, prompting calls for the EU to better insulate managers from shareholder pressure. But the evidence offered—in the form of rising levels of repurchases and dividends—is...
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- Article
Are Buybacks Really Shortchanging Investment?
By: Jesse M. Fried and Charles C.Y. Wang
It’s no secret that the American economy is suffering from the twin ills of slow growth and rising income inequality. Many lay the blame at the doors of America’s largest public corporations. The charge? These firms prefer to distribute cash generated from their...
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- January 2018 (Revised April 2021)
- Case
Capital Allocation at HCA
By: W. Carl Kester and Emily R. McComb
In early 2017, HCA Holdings, an investor-owned hospital management company, faced a strategically important capital allocation decision. After the exit of its private equity sponsors in 2016, HCA had to determine how best to allocate its substantial annual free cash...
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Keywords:
Capital Allocation;
Cash Distribution Policy;
Dividends;
Share Repurchases;
Growth Strategy And Execution;
Growth Investing;
Capital Expenditures;
Debt Management;
Debt Reduction;
Debt Policy;
Hospital Management;
Investor-owned Hospital Chains;
Capital Budgeting;
Capital Structure;
Cash Flow;
Corporate Finance;
Decision Choices and Conditions;
Health Industry;
United States
- May 2017
- Supplement
Battle for the Soul of Capitalism: Unilever and the Kraft Heinz Takeover Bid (B)
By: William W. George and Amram Migdal
This (B) case describes the aftermath of Unilever’s February 2017 rejection of Kraft Heinz Company’s (KHC)/3G Capital’s (3G) unsolicited $143 billion takeover offer. In an effort to defend itself against future attempts by KHC/3G or other suitors, Unilever announced on...
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- 2016
- Article
The Federal Reserve's Balance Sheet as a Financial-Stability Tool
By: Robin Greenwood, Samuel Gregory Hanson and Jeremy C. Stein
We argue that the Federal Reserve should use its balance sheet to help reduce a key threat to financial stability: the tendency for private-sector financial intermediaries to engage in excessive amounts of maturity transformation—i.e., to finance risky assets using...
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- March 2016
- Article
Dividends as Reference Points: A Behavioral Signaling Approach
By: Malcolm Baker, Brock Mendel and Jeffrey Wurgler
We outline a dividend signaling model that features investors who are averse to dividend cuts. Managers with strong unobservable cash earnings separate by paying high dividends but retain enough to be likely not to fall short next period. The model is consistent with a...
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Keywords:
Investment
- 2016
- Article
Cloaked Trading
By: Lauren Cohen, Dong Lou and Christopher J. Malloy
Using a novel, proprietary database of micro-level trading activities by asset managers, we show strong evidence of asset managers engaging in strategic trading in order to “cloak” their most valuable trades. This takes the form, for instance, of a manager who sells...
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- June 2015
- Supplement
Generating Higher Value at IBM (A): EPS Forecasting Model
By: Benjamin C. Esty and Scott Mayfield
This case analyzes IBM's financial performance and its capital allocation decisions over a 10-year period from 2004-2013, during which IBM returned more than $140B to shareholders through a combination of dividends and share repurchases. During this time, CEO Sam...
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- June 2015 (Revised September 2017)
- Supplement
Generating Higher Value at IBM
By: Benjamin C. Esty and Scott Mayfield
This case analyzes IBM's financial performance and its capital allocation decisions over a 10-year period from 2004-2013, during which IBM returned more than $140B to shareholders through a combination of dividends and share repurchases. During this time, CEO Sam...
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- May 2015 (Revised September 2017)
- Case
Generating Higher Value at IBM (A)
By: Benjamin C. Esty and E. Scott Mayfield
This case analyzes IBM's financial performance and its capital allocation decisions over a 10-year period from 2004-2013, during which IBM returned more than $140B to shareholders through a combination of dividends and share repurchases. During this time, CEO Sam...
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- Article
Agency Costs, Mispricing, and Ownership Structure
By: Sergey Chernenko, C. Fritz Foley and Robin Greenwood
Standard theories of corporate ownership assume that because markets are efficient, insiders ultimately bear all agency costs that they create and therefore have a strong incentive to minimize conflicts of interest with outside investors. We argue that if equity is...
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- November 2012 (Revised January 2014)
- Case
HCA, Inc. LBO Exit
This case discusses the events following the 2006 $33.2 billion buyout of Hospital Corporation of America (HCA) by a consortium of private equity firms, including Bain Capital, KKR, and Merrill Lynch's private equity arm. The case highlights some of the core features...
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- April 2012
- Background Note
Note: Net Cash, Share Repurchases and EPS Growth
How companies with large net cash positions can enhance earnings/share through share repurchase in an environment of low interest rates.
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- April 2012
- Article
Share Issuance and Factor Timing
By: Robin Greenwood and Samuel G. Hanson
We show that characteristics of stock issuers can be used to forecast important common factors in stocks' returns such as those associated with book-to-market, size, and industry. Specifically, we use differences between the attributes of stock issuers and repurchasers...
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- March 2011
- Article
What Do Dividends Tell Us About Earnings Quality
By: Douglas Skinner and Eugene F. Soltes
Over the past 30 years, there have been significant changes in the distribution of earnings (cross-sectional variation has increased, with increasing left skewness) as well as in corporate payout policy, with many fewer firms paying dividends and the emergence of stock...
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Keywords:
Distribution;
Business Earnings;
Change;
Policy;
Stocks;
Investment Return;
Performance Consistency;
Quality
- 2010
- Other Unpublished Work
Share Issuance and Factor Timing
By: Robin Greenwood and Samuel Hanson
We show that characteristics of stock issuers can be used to forecast important common factors in stocks returns such as those associated with book-to-market, size, and industry. Specifically, we use differences between the attributes of stock issuers and repurchasers...
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- September 2010
- Article
Bank Lending During the Financial Crisis of 2008
This paper documents that new loans to large borrowers fell by 47% during the peak period of the financial crisis (fourth quarter of 2008) relative to the prior quarter and by 79% relative to the peak of the credit boom (second quarter of 2007). New lending for real...
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- June 2010 (Revised November 2013)
- Case
Momentive Performance Materials, Inc.
By: Victoria Ivashina and David Scharfstein
After nearly violating its loan covenants in 2009, Momentive Performance Materials, backed by its financial sponsor Apollo Global Management, took a variety of actions to restructure its debt. The restructuring steps included an open market repurchase of publicly held...
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- January 2010 (Revised October 2011)
- Case
The Congressional Oversight Panel's Valuation of the TARP Warrants (A)
The Congressional Oversight Panel wants to value the warrants issued to the government in connection with the TARP investments of 2008, in order to increase the transparency of options repurchases. The case describes the methodology used to value the warrants. Students...
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