Minority and majority private equity investments: firm performance and governance

This paper adds to the literature on the determinants of the effects of private equity (PE) investments. Using an original dataset of 191 target firms in Italy, we study the effects on performance and governance of the stakes acquired by the PE investor. We employ a difference-in-differences approach and compare target and control firms sharing similar characteristics and performance in the years preceding the deal. We find that PE investment has a positive effect on profitability, sales, and employment; these effects are larger for minority investments. We argue that this signals effective governance that follows from complementing rather than substituting incumbent managers in minority investments.     

Dual class shares,board of directors’ effectiveness and firm’s market value: an empirical study

This study aims to identify whether a relationship exists between the controlling shareholders’ voting power and outside directors’ effectiveness in maximizing firms’ financial performance. We analyze a panel data with 3057 observations for the 2000–2012 period using a random effects model, logit and probit regressions, and the two-stage model of Heckman in the Brazilian stock market. Our findings show that firms whose controlling shareholders use dual class shares to leverage their voting power have less independence from the board and worse financial performance and market value. Further, the percentage of outside directors tends to be ineffective in increasing the firm’s value, and in changing the firm’s chief executive officer (CEO) when (1) the controlling shareholder’s voting power is leveraged, or (2) when the CEO assumes a position on the board of directors simultaneously. We interpreted that these results are in line with the arguments in favor of the existence of a new agency cost, which is related to the undue obedience of board members to authority, such as the largest controlling shareholder or the CEO in Brazilian listed firms.     

Evaluating the Evaluators: Should Investors Trust Corporate Governance Metrics Ratings?

Companies are under increasing pressure to have their corporate governance rated by an independent corporate governance metrics firm, such as Institutional Shareholder Services (ISS) or Governance Metrics International (GMI). These rating firms claim to be able to determine how effective and responsive a company’s board is. Institutional investors have begun using these board governance ratings when deciding which firms to include in their stock portfolios. This paper considers whether investors, many of whom claim to be socially responsible, should be relying upon board governance metrics. We find that these metrics are not good indicators of either the quality of a firm’s earnings or of its ethics.     

On 3-Stage Clos Networks with Different Nonblocking Requirements on Two Types of Calls

Hwang and Lin introduced a new nonblocking requirement for 2-cast traffic which imposes different requirements on different types of coexisting calls. The requirement is strictly nonblocking for point-to-point calls among the 2-cast traffic, and is rearrangeable for genuine 2-cast calls. They conjectured that the 3-stage Clos network C(n,n,r,r,2n) satisfies the above requirement. We prove that C(n,n,4,r,2n) satisfies the above requirement.Supported in part by NSC91-2115-M009-002.Supported in part by the National Science Council under grant NSC91-2115-M009-010 and by the Li-Li-Tai-Yang Network Research Center of National Chiao Tung University.     

Community is not a Place but a Relationship<Superscript>1</Superscript>: Lessons for Organizational Development

The premise of this article is that organizations need to be “organized” differently if we want to re-invigorate the power of community in contemporary life. A central theme within the current reform movement toward restorative justice is the devolution of authority from formal governmental systems to community. In order to effectively socialize young people, communities and families must perform certain functions well. As more and more societal activities take place within organizations, we face the dilemma that the weakened communities create a demand for increasing involvement of public organizations in the life of the community. Yet modern organizations do not effectively perform functions unique to families and communities. Drawing on insights from a unique community-system partnership in restorative peacemaking circles, this paper argues we may need to reinvent our organizations so that they learn to behave as members of the community. ¹This apt phrase and fundamental insight about the meaning of community came from the seminal article by Paul McCold and Benjamin Wachtel (1998).     

Two Variations of the Minimum Steiner Problem

Given a set S of starting vertices and a set T of terminating vertices in a graph G = (V,E) with non-negative weights on edges, the minimum Steiner network problem is to find a subgraph of G with the minimum total edge weight. In such a subgraph, we require that for each vertex s S and t T, there is a path from s to a terminating vertex as well as a path from a starting vertex to t. This problem can easily be proven NP-hard. For solving the minimum Steiner network problem, we first present an algorithm that runs in time and space that both are polynomial in n with constant degrees, but exponential in |S|+|T|, where n is the number of vertices in G. Then we present an algorithm that uses space that is quadratic in n and runs in time that is polynomial in n with a degree O(max {max {|S|,|T|}–2,min {|S|,|T|}–1}). In spite of this degree, we prove that the number of Steiner vertices in our solution can be as large as |S|+|T|–2. Our algorithm can enumerate all possible optimal solutions. The input graph G can either be undirected or directed acyclic. We also give a linear time algorithm for the special case when min {|S|,|T|} = 1 and max {|S|,|T|} = 2.The minimum union paths problem is similar to the minimum Steiner network problem except that we are given a set H of hitting vertices in G in addition to the sets of starting and terminating vertices. We want to find a subgraph of G with the minimum total edge weight such that the conditions required by the minimum Steiner network problem are satisfied as well as the condition that every hitting vertex is on a path from a starting vertex to a terminating vertex. Furthermore, G must be directed acyclic. For solving the minimum union paths problem, we also present algorithms that have a time and space tradeoff similar to algorithms for the minimum Steiner network problem. We also give a linear time algorithm for the special case when |S| = 1, |T| = 1 and |H| = 2.An extended abstract of part of this paper appears in Hsu et al. (1996).Supported in part by the National Science Foundation under Grants CCR-9309743 and INT-9207212, and by the Office of Naval Research under Grant No. N00014-93-1-0272.Supported in part by the National Science Council, Taiwan, ROC, under Grant No. NSC-83-0408-E-001-021.     

Broadcast Routing with Minimum Wavelength Conversion in WDM Optical Networks

We consider dynamic routing of broadcast connections in WDM optical networks. Given the current network state, we want to find a minimum set of network nodes S such that a broadcast routing using only the nodes in S as wavelength conversion nodes can be found. This ensures that the average conversion delay from the source to all destinations is minimized. We refer to the problem as Broadcast Conversion Node Selection (BCNS) problem. We prove that BCNS has no polynomial-time approximation with performance ratio ln n for < 1 unless NPDTIME(n^{O(log log n)}) where n is the number of vertices in the input graph. We present a greedy approximation algorithm for BCNS that achieves approximation ratio 2+ln n. Simulation results show that the algorithm performs very well in practice, obtaining optimal solutions in most of the cases.     

A Tighter Extra-Resource Analysis of Online Deadline Scheduling

This paper is concerned with online algorithms for scheduling jobs with deadlines on a single processor. It has been known for long that unless the system is underloaded, no online scheduling algorithm can be 1-competitive, i.e., matching the performance of the optimal offline algorithm. Nevertheless, recent work has revealed that some online algorithms using a moderately faster processor (or extra processors) can guarantee very competitive performance Kalyanasundaram and Pruhs, 2000 or even be 1-competitive Koo et al., 2002; Lam and To, 2001. This paper takes a further step to investigate online scheduling algorithms with an even higher performance guarantee (i.e., better than 1-competitive algorithms) and in particular, presents an extra-resource analysis of the earliest-deadline-first strategy (EDF) with respect to such a higher performance guarantee.A preliminary version of this paper has been accepted by The Australian Theory Symposium on Computing, 2004.This research was supported in part by Hong Kong RGC Grant HKU-7024/01E.     

Feature Selection for Consistent Biclustering via Fractional 0–1 Programming

Biclustering consists in simultaneous partitioning of the set of samples and the set of their attributes (features) into subsets (classes). Samples and features classified together are supposed to have a high relevance to each other which can be observed by intensity of their expressions. We define the notion of consistency for biclustering using interrelation between centroids of sample and feature classes. We prove that consistent biclustering implies separability of the classes by convex cones. While previous works on biclustering concentrated on unsupervised learning and did not consider employing a training set, whose classification is given, we propose a model for supervised biclustering, whose consistency is achieved by feature selection. The developed model involves solution of a fractional 0–1 programming problem. Preliminary computational results on microarray data mining problems are reported.This research work was partially supported by NSF, NIH and AirForce grants.     

The Center Location Improvement Problem Under the Hamming Distance

In this paper, we consider the center location improvement problems under the sum-type and bottleneck-type Hamming distance. For the sum-type problem, we show that achieving an algorithm with a worst-case ratio of O(log |V|) is NP-hard, and for the bottleneck-type problem, we present a strongly polynomial algorithm.