A privately-informed sender can commit to any disclosure policy towards a receiver. We show that full disclosure is optimal under a sufficient condition with some desirable properties. First, it speaks directly to the utility functions of the parties, as opposed to the indirect utility function of the sender; this makes it easily interpretable and verifiable. Second, it does not require the sender's payoff to be a function of the posterior mean. Third, it is weaker than the known conditions for some special cases. With this, we show that full disclosure is optimal under modeling assumptions commonly used in principal-agent papers.

We consider the problem of a decision-maker who seeks for advice from several experts. The experts have reputation concerns which generate incentives to herd on the prior belief about the state of the world. We address the following question: Should the experts be allowed to exchange their information before providing advice ("collective expertise") or not ("independent expertise")? We show that collective expertise is more informative than independent expertise under low prior uncertainty about the state and less informative otherwise. We also argue that collective expertise gains advantage as the number of experts grows.

We analyze how reputation concerns of a partially informed decision maker affect her ability to extract information from reputation-concerned advisors. Too-high decision maker’s reputation concerns destroy her incentives to seek advice. However, when such concerns are low, she is tempted to solicit advice regardless of her private information, which can undermine advisors’ truth-telling incentives. The optimal strength of the decision maker’s reputation concerns maximizes advice-seeking while preserving advisors’ truth-telling. Prior uncertainty about the state of nature calls for a more reputation-concerned decision maker. Higher expected competence of advisors may worsen information aggregation, unless the decision maker’s reputation concerns are properly adjusted.

When is transparency optimal in principal-agent relationships? We consider the following setting. The principal has private, payoff-relevant information about the potential of the project. She can share this information with the agent and can commit to any information structure. Positive news motivate the agent, while bad news depress effort. Under rather mild and natural restrictions on the utility functions of the parties, we obtain interpretable and easily verifiable sufficient conditions for the optimality of full disclosure. We also show that full disclosure is optimal under some modeling assumptions commonly used in applied principal-agent papers. JEL classification: D82, D83

I study a career concerns model in which the principal receives information about the agent’s performance from an intermediary (evaluator). I show that, in general, a biased evaluator is ex-ante optimal for the principal. The ex-ante optimal bias solves the tradeoff between ex-post optimality of the principal’s decisions about the agent and incentive provision. It is “anti-agent” (“pro-agent”) when the agent has an a priori high value (low value) for the principal. It increases with the strength of the agent’s career concerns and decreases with the degree of uncertainty about his ability. Delegating decisions to the evaluator dominates communication with her when ex-ante optimality calls for a sufficiently large bias.

I model the choice between a negotiated block trade and a public tender offer as means of acquiring control in a firm with a large minority blockholder. Potential acquirers differ in their (privately known) value-creation ability. In equilibrium, block trades are made by lower ability acquirers compared to tender offers. The equal opportunity rule (EOR) and the "freezeout" rule are complements in promoting efficiency of control transfers. Stronger investor protection may hamper value-increasing takeovers when the EOR is present. The model also delivers predictions about announcement returns and the incidence of block trades and tender offers under different legal regimes.

We model the decision of an entrepreneur, seeking outside financing, on whether to sell a large equity share to a blockholder. A conventional theoretical rationale for the presence of an outside blockholder is mitigation of the agency problem via monitoring. Our model provides a novel insight: outside blockholders may be attracted by entrepreneurs with low, rather than high, agency problems in order to signal their low propensity to extract private benefits. Our result yields a new interpretation of an often documented positive relationship between outside ownership concentration in a firm and its market valuation: it may be driven by “sorting” rather than by the direct effect of monitoring. We show that the positive correlation may arise even if the blockholder derives private benefits and has no positive impact on the value of small shares. Our analysis also helps to explain why the market reacts more favorably to private placements of equity as opposed to public issues.

Recent empirical research suggests that country-level and firm-level governance institutions are substitutes with respect to their effect on firm value. In this paper we demonstrate that during a crisis these institutions may actually become complements. Specifically, we find that the decline in companies’ valuation during the financial crisis of 2007–2009 was more sensitive to firm-level transparency in countries with stronger investor protection. We propose a theoretical model that reconciles our findings with the results in the literature. In our model, during “normal times” strong firm-level governance is crucial to attract outside financing in countries with weak investor protection, but is less important in countries with good investor protection. During a crisis, however, investment opportunities decline even in countries with strong investor protection, and, as a result, relative importance of firm-level governance increases in such places.

Should outside blockholders be more common in countries with weaker shareholder protection? I show that there can be a U-shape dependence of the outside ownership concentration on the quality of shareholder protection. This result is in line with the recent empirical evidence questioning the traditional law-and-finance view. In my model, a lower cost of private benefit extraction makes outside monitoring less desirable for an entrepreneur, thereby calling for a smaller outside blockholder's share. However, a low blockholder's share may provoke collusion between the entrepreneur and the blockholder, which hampers raising funds from dispersed shareholders. This trade-off yields the described U-shape relationship. (JEL: G32, K22)

I study transfers of control in a firm having atomistic shareholders and one dominant minority blockholder (incumbent). A potential acquirer can try to negotiate a block trade with the incumbent. If the negotiations are successful, the control changes hands via a block trade. If the negotiations fail, the acquirer can launch a public tender offer. According to empirical evidence, both types of transactions occur in the market. However, the existing models that allow for both types of control transfer ultimately obtain that the incumbent and the acquirer always negotiate a block trade in equilibrium. By introducing asymmetry of information about the acquirer's ability to generate value, I bring imperfections into the bargaining between the acquirer and the incumbent, which allows me to generate either a block trade or a tender offer as the game outcome. In equilibrium, high ability acquirers take over the firm by means of a tender offer, intermediate ability acquirers negotiate a block trade, and low ability acquirers do not attempt any transaction. This result provides an immediate explanation for a generally higher target's stock price reaction to tender offers as compared to block trade announcements. The model also explains why takeover premiums are generally higher in countries with stronger legal protection of shareholders and predicts that better shareholder protection should result in a higher stock price reaction to block trade announcements as well. Finally, the model predicts how, for a given incumbent's share, the choice between a tender offer and a block trade is affected by the legal shareholder protection.

Facilitating access to courts for outside shareholders is often viewed as a remedy against managerial opportunism. My model shows that, when courts are biased toward managers, reducing the barriers to shareholder suits can lower efficiency because it can lead to either excessive litigation or excessive monitoring of managers by shareholders. The latter effect implies that easy shareholder litigation may lead to a greater use of substitute mechanisms of corporate governance rather than more reliance on the judiciary. I also show that easy shareholder access to manager-biased courts leads to the formation of more, rather than less, concentrated ownership structures.

In this paper we analyze interrelations between ownership structures, corporate governance and investment in three transition countries: Russia, Ukraine and Kyrgyzstan. In contrast to most empirical papers on corporate governance, we study companies with very little exposure to public financial markets. Our empirical analysis is based on two years of data obtained through large-scale surveys of firms. Ukrainian companies appear to have the best corporate governance practices, while Russian companies - the worst. We find that the relationship between ownership concentration and corporate governance is non-linear. In Russia, the relationship between the share of the largest non-state shareholder and corporate governance is either positive or insignificant when the blockholder's stake is below a certain threshold; however, a further increase in the blockholder' share is associated with worsening corporate governance. We find a similar effect in Ukraine, but only for managerial ownership. In both countries, corporate governance improves as the combined share of small shareholders grows. No robust effects of the ownership structure are found for Kyrgyz firms. Further we show that the market for corporate control seems to have little relationship to the firms' corporate governance practices. We find no link between the quality of corporate governance and either the need for outside finance or actual investments financed with outside funds in either of the three countries.

Adequate access to courts by minority shareholders is commonly viewed as an important element of a good corporate governance system. Should shareholders be provided with easy access to courts when judges are unlikely to punish opportunistic managers? It might seem that having an extra instrument of protection is always better as long as it provides some protection against managerial self-dealing. We present a model, which shows that facilitating shareholder litigation in a system where courts are biased towards managers can actually lower efficiency, as it can lead to either excessive litigation or excessive monitoring of managers by shareholders. The latter effect arises when litigation is very costly for the firm, but cheap for an individual shareholder. In this case, easy litigation does not lead to a greater reliance on the judiciary and results in more, rather than less, concentrated ownership. This is the effect of the optimal adjustment of the ownership structure to an increase in shareholders’ willingness to bring suits when courts are manager-biased. Our model implies that removing impediments to shareholder litigation in countries where courts are reluctant to protect shareholders may increase the cost of corporate governance there.

In this survey, we describe the current state of corporate governance in Russia and discuss its dynamics and prospects. We review the main mechanisms of corporate governance in the country and relate them to firms' ownership structures, financial market development and government influence. Finally, we discuss the current trends in Russian corporate governance and its prospects.

This article discusses the role of chemical energy and exergy of raw material in industrial processes. The methods for calculation of chemical energies and exergies of some kinds of raw material are described. Their influence on consumption of conventional energy forms (fuel, heat, electricity) by the complete energy balance is shown. Consideration of the chemical energy and exergy in the national energy balances is suggested.

This paper presents a model that looks at the simultaneous determination of insider ownership and Þrm-level shareholder protection as a function of a Þrm's productivity of investment, given legal (country-level) shareholder protection. In contrast to most Law and Finance literature, we distinguish between two different dimensions of legal protection: one that restricts managerial opportunism when shareholders remain passive and one that helps to ensure truthful managerial dis- closure. We Þnd that each dimension has a qualitative impact on the equilibrium link between the Þrm's productivity and both insider ownership and Þrm-level pro- tection. In turn, the effects of each dimension are also qualitatively different. The existing empirical literature provides some support for our results. At the same time, our Þndings suggest that distinguishing between various dimensions of law, as opposed to aggregating legal protection into one index, as many papers do, may greatly help in understanding the effects of a legal system. JEL classiÞcation: G32, G34, K22

In the last year attempt of Microsoft to acquire Yahoo! Yahoo!'s board of directors rejected Microsoft's offer for Yahoo's shares despite the fact that the offer had a premium above 60% over the pre-offer market price. The main argument of Yahoo!'s management was that the true value of Yahoo! under the current management was much greater than the market thought and greater than the price Microsoft offered. In order to persuade Yahoo's board to cooperate, Microsoft threatened the board to make a direct offer to Yahoo's shareholders, ignoring the board's opposition. The board remained inexorable even after Microsoft raised the offer price by a few percent. Ultimately, instead of making a direct offer to Yahoo's shareholders, Microsoft withdrew the bid, thereby reneging on its threat. Why do some takeovers succeed, while others do not, despite the fact that bidders always offer a premium over the pre-bid market price? Why do some takeovers encounter the incumbent management's opposition till the end, while others become friendly acquisitions? What is the role of intensive (public and private) communication that normally occurs between the target's management, the potential acquirer and the target's shareholders during the takeover process? For example, should the shareholders believe the management's statements about the "true value"? Should the management believe that the acquirer's threats are credible? The goal of this project would be to analyze how various information asymmetries between the parties to a takeover affect its dynamics and outcome. For example, the target's managers may be better informed about the true value of the company their management, while the target's potential value under the acquirer's management is known better to the acquirer.