Panel Discussion
Panel Discussion
Panel Discussion
In April 2013, a colloquium was held in Riverside, California to recognize the lifetime contributions of David Mayers to
the field of finance. Dave is currently Professor Emeritus of Finance at the University of California, Riversides Anderson
Graduate School of Management. He received his Ph.D. in business administration from the University of Rochester in 1972
and has previously served on the faculties of UCLA and Ohio State University. Throughout his academic career, Dave has
authored or coauthored a number of highly impactful academic studies on asset pricing, market efficiency, insurance markets, governance, practices, and convertible debt. He served for seven years as co-editor of the Journal of Finance. Since
his formal retirement in 2007, Dave has remained an active scholar and committed research colleague. The conference in
his honor featured paper presentations by Ren Stulz, Harry DeAngelo, Richard Roll, Thomas Copeland, and Cliff Smith.
It concluded with a panel session on future directions in finance research. What follows is a transcript of the panel session.
Including discussion by Harry DeAngelo, Richard Roll, and Rene Stulz, who were among the attendees.
Richard Smith (Moderator) is the Philip L. Boyd Chair and Professor of Finance at the University of California Riverside in Riverside, CA. Edward Rice
is an Associate Professor of Finance at the University of Washington in Seattle, WA. Thomas Copeland is the Distinguished Professor of Finance at the
University of San Diego in San Diego, CA. Wayne Ferson is a Professor of Finance at the University of Southern California in Los Angeles, California.
Clifford Smith is the Louise and Henry Epstein Professor of Business Administration and Professor of Finance and Business at the Simon Business School
at the University of Rochester in Rochester, NY.
1
Smith et al. New Directions in Finance Research: A Panel Discussion in Honor of David Mayers
Smith et al. New Directions in Finance Research: A Panel Discussion in Honor of David Mayers
of your comments.
Okay, so why dont we then turn to Cliff Smith?
Governance and Organizational Architecture The
Need for a Broad Perspective
Clifford Smith: I will briefly go through some things that
weve been thinking about. One of the things that is worth
giving some additional thought to is just broadening the
scope of some of the things that we look at and think about.
When I start looking back at corporate governance issues,
I really think about it as the partitioning of decision rights
among shareholders, board members, management, and
various other groups. There is an array of systems to monitor
and evaluate performance and the methods by which these
groups are rewarded. Now, I will admit that part of the reason
that I think about things this way goes back to this book that
Jim Brickley, Jerry Zimmerman and I are working on the
sixth edition of now [5th ed., 2008]. But a lot of this goes
back to what Bill Meckling and Mike Jensen [1976] taught
in a managerial economics class in Rochester back when
Dave [Mayers] was a Ph.D. student. They were certainly
working on some of these issues before I joined the faculty.
When we discuss, in the book, what we call organization
architecture, there are three things that wed like people to
think about: the assignment of decision rights, the control
systems within the organization, and the reward system that
is being applied. When I think about corporate governance,
its basically those sorts of organizational architecture issues
at the very top of the organization.
Some of the facets that get wrapped up in these issues
are largely internal policy choices of the organization the
corporate charter, the bylaws, the organizational structure,
the accounting system, the budgeting system, the HR system,
the firms financial architecture. Others, like oversight
agencies, input and output markets, legal regulatory tax
regimes are largely external to the firm. My point is these
factors are interrelated.
One way to think about this is that there is a continuum some things are more internal, some are more external. If
we look at provisions in the charter and the bylaws, there
are considerations like ownership structure, voting rules and
takeover provisions. If we talk about board structure, there
are issues about board composition, board compensation,
and committee structure within the board. When we
think about organization structure, there are issues about
centralization versus decentralization. Business units do
I organize inside the firm by function? Do I organize by
product? Do I organize by geography? When you think
about the accounting system, there is financial reporting, but
also the internal management accounting or cost accounting
system. There is an internal audit function within the firm.
And with your HR system there is this question about fixed
Smith et al. New Directions in Finance Research: A Panel Discussion in Honor of David Mayers
Smith et al. New Directions in Finance Research: A Panel Discussion in Honor of David Mayers
References
Adelino, M., K. Lewellen, and A. Sundaram, 2013, Investment Decisions
of Nonprofit Firms: Evidence from Hospitals, Journal of Finance
forthcoming.
Kerins, F., J.K. Smith, and R. Smith, 2004, Opportunity Cost of Capital for
Venture Capital Investors and Entrepreneurs, Journal of Financial and
Quantitative Analysis 39 (No. 2), 385-405.
Chino, A., H. mi Choi, and E. Rice, 2013, Public Sector Unions and
Debtm, University of Washington Working Paper.
Koijen, R. and M. Yogo, 2013, The Cost of Financial Frictions for Life
Insurers, Chicago Booth Research Paper, Fama-Miller Working Paper,
Available at SSRN: http://ssrn.com/abstract=2031993.