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Hedge Funds and Corporate Governance

Does having a hedge fund as a substantial shareholder improve corporate governance? Unlike other institutional investors, hedge funds are not afraid to (a) take large stakes in companies and (b) be activist in their ownership i.e., they attempt to exert influence on CEOs.  A recent court case brought against Apple by one of its shareholders, Greenlight Capital, a hedge fund run by David Einhorn, nicely illustrates the way in which hedge funds try to influence companies in which they have stakes. Greenlight Capital is trying to get Apple to return some of its $137 billion cash pile (two-thirds of its balance sheet) to shareholders. Apple has been hoarding cash since 1995 and in 2012 paid its first dividend in 17 years.  Apple has by far the largest cash pile of any corporation in the world - click here

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How Valuable Are Connections?

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Bank Runs in Greece

Deposit withdrawals in Greece have been substantial over the past two years.  However, the failure of Greece's politicians to form a coalition government has resulted in deposit withdrawals accelerating - click here and here for more on this.  Depositors are rightly concerned about the exit of Greece from the euro and the subsequent devaluation of their deposits.  The puzzle for me and many others is why are there so many deposits still remaining in the Greek banking system.  One reason is that the Greek banking system is being kept alive by massive injections of money from the ECB.  Will the ECB continue to support the Greek banking system in the face of a mass withdrawal of deposits?  I doubt that there is the political will in Germany for this as the Bundesbank already has a huge exposure to Greece (as well as Spain and Italy) through the ECB's internal Target 2 system.