Your 5-minute guide to banking
Banks now get a big chunk of their revenue from those little fees they charge you. But a savvy consumer can avoid paying up.

Shareholder Rights, Boards, and CEO Compensation

I analyze the role of executive compensation in corporate governance. As proxies for corporate governance, I use board size, board independence, CEO-chair duality, institutional ownership concentration, CEO tenure, and an index of shareholder rights. The results from a broad cross-section of large U.S. public firms are inconsistent with recent claims that entrenched managers design their own compensation contracts. The interactions of the corporate governance mechanisms with total pay-for-performance and excess compensation can be explained by governance substitution. If a firm has generally weaker governance, the compensation contract helps better align the interests of shareholders and the CEO.

Time to buy or refinance a home?
New Fed efforts to prop up the housing market have pushed average rates on 30-year fixed mortgages to an all-time low – but both diving in and waiting have risks.

A ‘crazy complex’ credit for homebuyers
The federal stimulus law has sweetened the tax credit for first-time homebuyers, making it as much as $8,000. But deciphering the changes is far from easy.

Why biggest losers are the best buys
Technology and emerging markets are risky, beaten-down sectors. Here’s why these areas will likely bounce back first — and lead the way to a stronger market overall.

Do Shareholders Vote Strategically? Voting Behavior, Proposal Screening, and Majority Rules

We analyze how shareholders screen management proposals at annual general meetings. First, we use a simple model of strategic voting to develop a theoretical benchmark of effective information aggregation through voting. Then, we derive testable implications and provide structural estimates of the model parameters. The main conclusions are that shareholders vote strategically and that proposal screening increases value. Shareholders largely neutralize the lock-in effect of supermajority rules, thereby preventing the incorrect rejection of proposals.

Editorial Statistics

Resolving Macroeconomic Uncertainty in Stock and Bond Markets

We establish an empirical link between the ex-ante uncertainty about macroeconomic fundamentals and the ex-post resolution of this uncertainty in financial markets. We measure macroeconomic uncertainty using prices of economic derivatives and relate this measure to changes in implied volatilities of stock and bond options when the economic data is released. Higher macroeconomic uncertainty is associated with greater reduction in implied volatilities following the news release. It is also associated with increased volume and decreased open interest in option markets after the release, consistent with market participants using financial options to hedge or speculate on macroeconomic news.

Dow jumps 497 on bank plan, home sales
Financials lead a huge rally as the Geithner plan to buy banks’ toxic assets wins cheers. Techs and energy shares also jump. The S&P 500 may rally to 900; March could be the best month for the index since 1987. Existing-home sales unexpectedly rise.