URL: http://www.sciencedirect.com/science/article/B6VFK-4V71K60-1/2/33831404357e3e5fdfca93d0f9b3d73c
Reference Type: Journal Article
Record Number: 29026
Author: W. Abdallah and M. Goergen
Year: 2008
Title: Does corporate control determine the cross-listing location?
Journal: Journal of Corporate Finance
Volume: 14
Issue: 3
Pages: 183-199
Short Title: Does corporate control determine the cross-listing location?
ISSN: 0929-1199
Keywords: G32
G34
G39
Cross-listing
Corporate governance
Corporate control
Investor protection
Abstract: This paper explains the choice of the cross-listing location with particular emphasis on the level of investor protection provided by the host market. We find that firms with concentrated control, with a higher level of risk and those with more pronounced financing needs cross-list on a market with better investor protection. We also find support for the bonding hypothesis as firms from markets with weak shareholder protection tend to cross-list on markets with significantly higher shareholder protection.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.03.003
URL: http://www.sciencedirect.com/science/article/B6VFK-4S6P1YH-2/2/3b85a0967ae193c0d4239b40168365d4
Reference Type: Journal Article
Record Number: 29128
Author: R. K. Aggarwal and A. A. Samwick
Year: 2006
Title: Empire-builders and shirkers: Investment, firm performance, and managerial incentives
Journal: Journal of Corporate Finance
Volume: 12
Issue: 3
Pages: 489-515
Short Title: Empire-builders and shirkers: Investment, firm performance, and managerial incentives
ISSN: 0929-1199
Keywords: Executive compensation
Investment
Firm performance
Abstract: We consider the equilibrium relationships between incentives from compensation, investment, and firm performance. In an optimal contracting model, we show that the relationship between firm performance and managerial incentives, in isolation, is insufficient to identify whether managers have private benefits of investment, as in theories of managerial entrenchment. We estimate the joint relationships between incentives and firm performance and between incentives and investment. We provide new results showing that investment is increasing in incentives. Further, in contrast to previous studies, we find that firm performance is increasing in incentives at all levels of incentives. Taken together, these results are inconsistent with theories of overinvestment based on managers having private benefits of investment. These results are consistent with managers having private costs of investment and, more generally, models of underinvestment.
Notes: doi: DOI: 10.1016/j.jcorpfin.2006.01.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4J9MST0-1/2/3086682318aa545438ded3aff3fdc369
Reference Type: Journal Article
Record Number: 29133
Author: A. Agrawal, C. R. Knoeber and T. Tsoulouhas
Year: 2006
Title: Are outsiders handicapped in CEO successions?
Journal: Journal of Corporate Finance
Volume: 12
Issue: 3
Pages: 619-644
Short Title: Are outsiders handicapped in CEO successions?
ISSN: 0929-1199
Keywords: Outsiders
CEO successions
Handicapping
Abstract: We argue that outsiders are handicapped (chosen only if markedly better than the best insider) in Chief Executive Officer (CEO) successions to strengthen the incentive that the contest to become CEO provides inside candidates. Handicapping implies are that a firm will be more likely to choose an insider to succeed to the CEO position where insiders are more comparable to each other, where outsiders are less comparable to insiders, and where there are more inside candidates. We assess these predictions using a data set containing more than 1,000 observations on CEO succession in large U.S. firms over the period 1974-1995 and a novel measure of the comparability of insiders that identifies those firms with a product or line of business organizational structure. Our evidence is consistent with each prediction. We also explore more carefully our organizational structure variable. We find that where firms switch to a product or line of business structure (making insiders more comparable) the likelihood of outsider succession falls. And we consider the possibility that managers from firms with a product or line of business structure may be more likely to be chosen CEO because their experience as divisional head better prepares them for a CEO's duties. Two tests suggest that this is not the source of our finding that these firms are more likely to promote insiders to be CEO. The first test finds that controlling for prior experience managing a business (a division or a firm) among inside candidates to be CEO, those firms organized along product lines remain more likely to promote from within. The second test finds that when outsiders are chosen CEO, these outsiders do not come disproportionately from firms with a product or line of business structure.
Notes: doi: DOI: 10.1016/j.jcorpfin.2004.04.005
URL: http://www.sciencedirect.com/science/article/B6VFK-4DXSRMV-2/2/087b5cc26feecebe513b41af9c53d683
Reference Type: Journal Article
Record Number: 29367
Author: J. Aharony, H. Falk and C.-J. Lin
Year: 1996
Title: Changes in ownership structure and the value of the firm: The case of mutual-to-stock converting thrift institutions
Journal: Journal of Corporate Finance
Volume: 2
Issue: 3
Pages: 301-316
Short Title: Changes in ownership structure and the value of the firm: The case of mutual-to-stock converting thrift institutions
ISSN: 0929-1199
Keywords: Organizational changes
Voting rights
Mutual thrift institutions
IPO
Abstract: This study examines some economic and organizational changes resulting from the conversion of mutual thrift institutions (MTI) to publicly traded stock charter corporations. We focus on the relation between the initial value of the converted firm and (i) subscription decisions by management and by regular depositors, and (ii) the employment of a prestigious underwriter or auditor. Whereas the proportion of managerial subscriptions displays a convex relation with the firm's initial value, the relation between the regular depositor subscription and the converted firm's value is linear and positive. The status of the underwriter or auditor is unrelated to the value of the converted firm. These findings are attributed to the regulatory setting governing the MTI conversion process, constraints on ownership holdings and the oversight function of the regulator.
Notes: doi: DOI: 10.1016/0929-1199(95)00013-5
URL: http://www.sciencedirect.com/science/article/B6VFK-4177RYD-4/2/1801ee0a2cdf73a5a7502c9ff90ee2dc
Reference Type: Journal Article
Record Number: 29085
Author: A. S. Ahmed and R. A. Schneible Jr
Year: 2007
Title: The impact of regulation Fair Disclosure on investors' prior information quality -- Evidence from an analysis of changes in trading volume and stock price reactions to earnings announcements
Journal: Journal of Corporate Finance
Volume: 13
Issue: 2-3
Pages: 282-299
Short Title: The impact of regulation Fair Disclosure on investors' prior information quality -- Evidence from an analysis of changes in trading volume and stock price reactions to earnings announcements
ISSN: 0929-1199
Keywords: Fair Disclosure Regulation
Information quality
Trading volume
Abstract: We document that Regulation Fair Disclosure has reduced differences in information quality between investors prior to quarterly earnings announcements consistent with the intent of the regulation. This reduction is driven by small firms and high technology firms, rather than the large firms targeted by the SEC, which suggests that selective disclosure among large firms may have been much more limited than what was presumed by proponents of FD. In addition, we document that FD has decreased the average information quality of investors in small and high technology firms in the period prior to an earnings announcement while having no lasting effect on other firms. Taken together these two results suggest that, for small and high technology firms, FD succeeded in eliminating selective disclosure but also lowered the average quality of information available about these firms.
Notes: doi: DOI: 10.1016/j.jcorpfin.2006.11.003
URL: http://www.sciencedirect.com/science/article/B6VFK-4MVDVG5-1/2/47363a84f2b01e40295731859294f72b
Reference Type: Journal Article
Record Number: 29098
Author: S. Ahn and M. D. Walker
Year: 2007
Title: Corporate governance and the spinoff decision
Journal: Journal of Corporate Finance
Volume: 13
Issue: 1
Pages: 76-93
Short Title: Corporate governance and the spinoff decision
ISSN: 0929-1199
Keywords: Diversification discount
Corporate spinoff
Corporate governance
Agency problem
Abstract: Using a sample of 102 spinoffs in the period 1981 to 1997, we investigate the relation between corporate governance and the spinoff decision. Diversified firms conducting a spinoff have characteristics previously hypothesized to be associated with more effective corporate governance, such as greater ownership by outside board members, more heterogeneous boards, and fewer board members, in comparison to a set of peer firms. Post spinoff, relative valuation measures increase a significantly greater extent than for peer firms. These findings are consistent with the view that agency problems are a contributing factor in firms maintaining value destroying diversification strategies.
Notes: doi: DOI: 10.1016/j.jcorpfin.2006.03.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4JW122D-1/2/521c7ef0974586d1849141b122fec151
Reference Type: Journal Article
Record Number: 29156
Author: V. A. Aivazian, Y. Ge and J. Qiu
Year: 2005
Title: Can corporatization improve the performance of state-owned enterprises even without privatization?
Journal: Journal of Corporate Finance
Volume: 11
Issue: 5
Pages: 791-808
Short Title: Can corporatization improve the performance of state-owned enterprises even without privatization?
ISSN: 0929-1199
Keywords: Privatization
Corporatization
State-owned enterprises
Abstract: This paper examines an important reform program in China concerning State Owned Enterprises (SOEs), namely, corporatization without privatization. It finds that corporatization has had a significantly positive impact on SOE performance. It further shows that the sources of efficiency engendered by corporatization can be traced to the reform of the internal governance structure of these firms. The results indicate that, even without privatization, corporate governance reform is potentially an effective way of improving the performance of SOEs; such reforms represent a policy alternative for countries seeking to restructure SOEs without massive privatization. The results also suggest that it may be optimal for governments to carry out corporatization of SOEs before eventual privatization.
Notes: doi: DOI: 10.1016/j.jcorpfin.2004.11.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4FNTHD9-1/2/4fb48ff2a0847591962868573ba415c6
Reference Type: Journal Article
Record Number: 29188
Author: V. A. Aivazian, Y. Ge and J. Qiu
Year: 2005
Title: The impact of leverage on firm investment: Canadian evidence
Journal: Journal of Corporate Finance
Volume: 11
Issue: 1-2
Pages: 277-291
Short Title: The impact of leverage on firm investment: Canadian evidence
ISSN: 0929-1199
Keywords: Leverage
Investment
Canada
Corporate finance
Abstract: This study examines the impact of financial leverage on the firms' investment decisions using information on Canadian publicly traded companies. It shows that leverage is negatively related to investment and that this negative effect is significantly stronger for firms with low growth opportunities than those with high growth opportunities. The paper tests the robustness of these results using alternative empirical models and, in addition, uses the instrumental variable approach to deal with the endogeneity problem inherent in the relationship between leverage and investment. The results provide support to agency theories of corporate leverage, and especially the theory that leverage has a disciplining role for firms with low growth opportunities.
Notes: doi: DOI: 10.1016/S0929-1199(03)00062-2
URL: http://www.sciencedirect.com/science/article/B6VFK-499FD74-1/2/faf81ffdc5dc8def937bdffd651fd1ef
Reference Type: Journal Article
Record Number: 28986
Author: E. Akdogu
Year: 2009
Title: Gaining a competitive edge through acquisitions: Evidence from the telecommunications industry
Journal: Journal of Corporate Finance
Volume: 15
Issue: 1
Pages: 99-112
Short Title: Gaining a competitive edge through acquisitions: Evidence from the telecommunications industry
ISSN: 0929-1199
Keywords: Competitive advantage
Mergers
Rivals
Corporate restructuring
Abstract: I study the announcement effects of all acquisitions in the recent telecom wave on both the acquirers and their industry competitors. I find evidence of negative rival returns (- 0.55%, t-stat = 2.47) by focusing on non-horizontal acquisitions where rivals are less susceptible to experience positive returns due to increased market power or expectation that some will become future targets themselves. I find that this effect is worse for closer rivals defined as having similar size and being in the same primary service area as the acquirer. Competitor returns are positively correlated with those of the acquirers suggesting that the negative impact experienced by competitors is driven by acquisitions in which the acquirer itself is earning negative abnormal returns. Results are broadly consistent with the Competitive Advantage Hypothesis that posits acquisitions are a means of corporate restructuring in a changing environment, awarding the acquirer a competitive edge and thereby making these acquisitions costly for their non-merging competitors.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.09.003
URL: http://www.sciencedirect.com/science/article/B6VFK-4TGHN99-1/2/df9eca0121ef6c8daa102a6f8d182efe
Reference Type: Journal Article
Record Number: 29101
Author: N. Aktas, E. de Bodt and J.-G. Cousin
Year: 2007
Title: Event studies with a contaminated estimation period
Journal: Journal of Corporate Finance
Volume: 13
Issue: 1
Pages: 129-145
Short Title: Event studies with a contaminated estimation period
ISSN: 0929-1199
Keywords: Event study
Unrelated events
Markov switching regression model
Abstract: Event studies are an important tool for empirical research in Finance. Since the seminal contribution of Fama et al. [Fama, E., Fisher, L., Jensen, M., Roll, R., 1969. The adjustment of stock prices to new information. International Economic Review 10, 1-21], there have been many enhancements to the classical test methodology. Somewhat surprisingly, the estimation period has attracted less interest. It is usually routinely determined as a fixed window prior to the event announcement day. In this study, we propose a test that reduces the impact of potentially unrelated events during the estimation period. Our proposition is based on a two-state version of the classical market model as a return-generating process. We present standard specification and power analyses. The results highlight the importance of explicitly controlling for unrelated events occurring during the estimation window, especially in the presence of event-induced increase in return volatility.
Notes: doi: DOI: 10.1016/j.jcorpfin.2006.09.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4MBCJJ6-1/2/15573909f3855d55e47bcf34c5286baa
Reference Type: Journal Article
Record Number: 28976
Author: N. Aktas, E. de Bodt and R. Roll
Title: Learning, hubris and corporate serial acquisitions
Journal: Journal of Corporate Finance
Volume: In Press, Corrected Proof
Short Title: Learning, hubris and corporate serial acquisitions
ISSN: 0929-1199
Keywords: Learning
Hubris
Merger and acquisition
Serial acquisitions
Abnormal return
Abstract: Recent empirical research has shown that, from deal to deal, serial acquirers' cumulative abnormal returns (CAR) are declining. This has been most often attributed to CEOs hubris. We question this interpretation. Our theoretical analysis shows that (i) a declining CAR from deal to deal is not sufficient to reveal the presence of hubris, (ii) if CEOs are learning, economically motivated and rational, a declining CAR from deal to deal should be observed, (iii) predictions can be derived about the impact of learning and hubris on the time between successive deals and, finally, (iv) predictions about the CAR and about the time between successive deal trends lead to testable empirical hypotheses.
Notes: doi: DOI: 10.1016/j.jcorpfin.2009.01.006
URL: http://www.sciencedirect.com/science/article/B6VFK-4VJBTN9-1/2/2b14388d326471b6ccf5b97a02bc68cd
Reference Type: Journal Article
Record Number: 29115
Author: M. J. Alderson and B. L. Betker
Year: 2006
Title: The specification and power of tests to detect abnormal changes in corporate investment
Journal: Journal of Corporate Finance
Volume: 12
Issue: 4
Pages: 738-760
Short Title: The specification and power of tests to detect abnormal changes in corporate investment
ISSN: 0929-1199
Keywords: Capital expenditures
Corporate investment
Event studies
Abstract: We evaluate methods used to measure abnormal changes in capital expenditures. We examine both statistical tests and models of expected capital expenditures. We find that commonly used research designs yield test statistics that are misspecified, even in random samples. In cases where sample firms share a common characteristic such as extremely low or high investment, size, leverage, return on assets or market-to-book ratio, it is very important to match sample firms to a control group that shares this pre-event characteristic. We also find that using control groups, rather than a single control firm, yields more powerful test statistics.
Notes: doi: DOI: 10.1016/j.jcorpfin.2005.07.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4GY8718-1/2/4e05b21bc03d225079b3d1d3650c924f
Reference Type: Journal Article
Record Number: 28971
Author: M. J. Alderson and B. L. Betker
Year: 2009
Title: Were internal capital markets affected by the [`]perfect' pension storm?
Journal: Journal of Corporate Finance
Volume: 15
Issue: 2
Pages: 257-271
Short Title: Were internal capital markets affected by the [`]perfect' pension storm?
ISSN: 0929-1199
Keywords: Internal capital markets
Investment policy
Pension contributions
Abstract: We examine capital expenditures in multi-segment firms before and after the "perfect storm" that affected pension plans between 2000 and 2002, when bond yields and stock prices both fell precipitously. Our sample of firms went from having overfunded to underfunded pension plans as a result of the storm. We examine the segment-level relation between investment, Tobin's q, and cash flow both before and after the event. We find mixed evidence on the change in the relation between investment and q, which may be a result of measurement error in q. We find stronger evidence for the conclusion that after the pension storm, firms with underfunded pension plans directed more investment towards segments that produce higher cash flow.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.12.002
URL: http://www.sciencedirect.com/science/article/B6VFK-4V70R8C-1/2/20965859a5f513fa539fe8bb35d0a15b
Reference Type: Journal Article
Record Number: 29325
Author: C. R. Alexander and M. A. Cohen
Year: 1999
Title: Why do corporations become criminals? Ownership, hidden actions, and crime as an agency cost
Journal: Journal of Corporate Finance
Volume: 5
Issue: 1
Pages: 1-34
Short Title: Why do corporations become criminals? Ownership, hidden actions, and crime as an agency cost
ISSN: 0929-1199
Keywords: Corporation
Criminal
Ownership
Hidden action
Crime
Agency cost
Abstract: We examine the relationship between ownership structure and corporate crime. Our approach draws upon two lines of research: (1) the theory of the firm which poses ownership as a critical incentive mechanism and (2) the economic theory of corporate crime, which emphasizes the role played by top management in affecting crime in the corporation. We find that crime occurs less frequently among firms in which management has a larger ownership stake. Our results imply that penalizing [`]corporations' (shareholders) deters crime, and that corporate crime tends not to benefit shareholders, ex ante. Rather than being something shareholders have encouraged, corporate crime appears to reflect an agency cost limited but not optimally eliminated through the costly efforts of top management. The evidence is consistent with the notion that ownership structure plays an important role in aligning the hidden actions of top management with the shareholder interest.
Notes: doi: DOI: 10.1016/S0929-1199(98)00015-7
URL: http://www.sciencedirect.com/science/article/B6VFK-3VTSD54-1/2/6b72bc9c2a31a6669eb3b2b4a8662e0a
Reference Type: Journal Article
Record Number: 29202
Author: G. J. Alexander, E. Ors, M. A. Peterson and P. J. Seguin
Year: 2004
Title: Margin regulation and market quality: a microstructure analysis
Journal: Journal of Corporate Finance
Volume: 10
Issue: 4
Pages: 549-574
Short Title: Margin regulation and market quality: a microstructure analysis
ISSN: 0929-1199
Keywords: Margin regulation
Market quality
Microstructure analysis
Abstract: We find that trading volume increases and market liquidity remains unchanged, while the adverse selection and order-processing cost components of the spread increase and decrease, respectively, after margin levels decline when stocks become margin-eligible. This evidence indicates that the information content of trades has increased, thereby improving market quality. However, no changes were detected after the 1997 regulatory reforms. These results have implications across a broad swath of corporate finance dimensions, including the (1) cost of capital, (2) public vs. private financing decision, (3) form of managerial compensation, (4) type of ownership structure, and (5) degree of shareholder monitoring.
Notes: doi: DOI: 10.1016/S0929-1199(02)00048-2
URL: http://www.sciencedirect.com/science/article/B6VFK-478J2GV-2/2/a267252201138b7b20618b66e754c591
Reference Type: Journal Article
Record Number: 29213
Author: H. Alexandre and G. Charreaux
Year: 2004
Title: Efficiency of French privatizations: a dynamic vision
Journal: Journal of Corporate Finance
Volume: 10
Issue: 3
Pages: 467-494
Short Title: Efficiency of French privatizations: a dynamic vision
ISSN: 0929-1199
Keywords: Privatization
Static efficiency
Dynamic efficiency
Corporate governance
Abstract: We interpret privatization in light of corporate governance theory. After replicating some traditional tests, we test our new model on a sample of privatized French firms. We cannot confirm for French privatizations the positive effect on overall static and dynamic efficiency of the firm traditionally attributed to privatizations. In addition, we find that whatever positive value accrues from privatization is affected by the contextual, organizational, governance, and strategic variables that influence the privatization process.
Notes: doi: DOI: 10.1016/S0929-1199(02)00044-5
URL: http://www.sciencedirect.com/science/article/B6VFK-46Y5H4M-1/2/72d16098e70a9220b2e3e9f2a9219fa5
Reference Type: Journal Article
Record Number: 29341
Author: A. Alford, P. Healy and N. K. Hwa
Year: 1998
Title: The performance of international joint ventures: A study of the merchant banking industry in Singapore
Journal: Journal of Corporate Finance
Volume: 4
Issue: 1
Pages: 31-52
Short Title: The performance of international joint ventures: A study of the merchant banking industry in Singapore
ISSN: 0929-1199
Keywords: Joint venture
Investment banking industry
Singapore
Abstract: We examine operating performance and ownership of joint venture and wholly-owned merchant banks operating in Singapore from the formation of the industry to its maturity. For our sample, joint ventures dominated wholly-owned banks as an organizational form only within the first six years of the industry's life, when there were opportunities for organizational learning and risk sharing by venture partners. Thereafter, new banks were typically wholly-owned subsidiaries and 71% of surviving joint ventures switched to wholly-owned status. Despite their higher mortality rates, we find no evidence of lower performance for joint ventures.
Notes: doi: DOI: 10.1016/S0929-1199(97)00008-4
URL: http://www.sciencedirect.com/science/article/B6VFK-3SX87D0-2/2/57a23c4a5602c108e371be91e093956e
Reference Type: Journal Article
Record Number: 29332
Author: A. W. Alford and J. D. Jones
Year: 1998
Title: Financial reporting and information asymmetry: an empirical analysis of the SEC's information-supplying exemption for foreign companies
Journal: Journal of Corporate Finance
Volume: 4
Issue: 4
Pages: 373-398
Short Title: Financial reporting and information asymmetry: an empirical analysis of the SEC's information-supplying exemption for foreign companies
ISSN: 0929-1199
Keywords: Information asymmetry
SEC registration
Financial reporting
Abstract: This paper examines empirically the effects of domicile and SEC registration and reporting requirements on information asymmetry. We compare the adverse-selection component of the relative bid-ask spread (our measure of information asymmetry) for three samples of Nasdaq NMS companies that trade in different home markets and are subject to different standards of disclosure: registered U.S. companies, registered non-Canadian foreign companies, and unregistered non-Canadian foreign companies covered by the information-supplying exemption of the Securities and Exchange Act of 1934. We find that the adverse-selection component is not significantly larger for the two foreign samples, and it is not reliably different for the registered and unregistered foreign samples. Therefore, we are unable to document that less stringent SEC registration and reporting requirements for foreign companies are associated with greater information asymmetry among investors for non-U.S. securities traded on Nasdaq.
Notes: doi: DOI: 10.1016/S0929-1199(98)00010-8
URL: http://www.sciencedirect.com/science/article/B6VFK-3V5VTYC-4/2/a53d11e2bc8e37aca9dc8db2dc350be0
Reference Type: Journal Article
Record Number: 28962
Author: H. Almeida, M. Campello and M. S. Weisbach
Title: Corporate financial and investment policies when future financing is not frictionless
Journal: Journal of Corporate Finance
Volume: In Press, Corrected Proof
Short Title: Corporate financial and investment policies when future financing is not frictionless
ISSN: 0929-1199
Keywords: Financing constraints
Risk shifting
Liquidity
Capital structure
Hedging
Abstract: We study a model in which future financing constraints lead firms to have a preference for investments with shorter payback periods, investments with less risk, and investments that utilize more pledgeable assets. The model also shows how investment distortions towards more liquid, safer assets vary with the marginal cost of external financing and with firm internal cash flows. Our theory helps reconcile and interpret a number of patterns reported in the empirical literature, in areas such as risk-taking behavior, capital structure choices, hedging strategies, and cash management policies. For example, contrary to Jensen and Meckling [Jensen, M., Meckling, W., 1976. Theory of the Firm: managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 305-360], we show that firms may reduce rather than increase risk when leverage increases exogenously. Furthermore, firms in economies with less developed financial markets will not only take different quantities of investment, but will also take different kinds of investment (safer, short-term projects that are potentially less profitable). We also point out to several predictions that have not been empirically examined. For example, our model predicts that investment safety and liquidity are complementary: constrained firms are specially likely to decrease the risk of their most liquid investments.
Notes: doi: DOI: 10.1016/j.jcorpfin.2009.04.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4W6XYH0-1/2/d07df6ac8a8b1a1d34330e06e3b5f2d0
Reference Type: Journal Article
Record Number: 29191
Author: Z. A. Altintig and A. W. Butler
Year: 2005
Title: Are they still called late? The effect of notice period on calls of convertible bonds
Journal: Journal of Corporate Finance
Volume: 11
Issue: 1-2
Pages: 337-350
Short Title: Are they still called late? The effect of notice period on calls of convertible bonds
ISSN: 0929-1199
Keywords: Call policy
Convertible bonds
Abstract: When calling its convertible bonds, a company must typically give bondholders a notice period of about 30 days to decide whether to convert the bonds. This notice period affects the optimal call policy for convertible bonds. After accounting for the notice period, convertible bonds in our sample would have been optimally called when the stock was at about an 11% premium (median) relative to the conversion price. We show that after properly accounting for the call notice period and other factors, the median excess call premium is less than 4%--substantially less than the 26-44% call premium previous researchers have documented.
Notes: doi: DOI: 10.1016/j.jcorpfin.2003.08.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4B8BXWS-1/2/f60946ccde99c10873120a8f762ffc2d
Reference Type: Journal Article
Record Number: 28997
Author: H. An and K. C. Chan
Year: 2008
Title: Credit ratings and IPO pricing
Journal: Journal of Corporate Finance
Volume: 14
Issue: 5
Pages: 584-595
Short Title: Credit ratings and IPO pricing
ISSN: 0929-1199
Keywords: IPO underpricing
Price revision
Credit rating
Information asymmetry
Selection bias
Abstract: We examine the effects of credit ratings on IPO pricing. The evidence from U.S. common share IPOs during 1986-2004 shows that when firms go public, those with credit ratings are underpriced significantly less than firms without credit ratings. Credit rating levels, however, do not have a significant effect on IPO underpricing. The existence of credit rating reduces uncertainty about firm value. It is the value certainty that matters, not the value per se. Credit ratings also reduce the degree of price revision during the bookbuilding process and the aftermarket volatility in the post-IPO period. The evidence suggests that credit ratings convey useful information in reducing value uncertainty of the issuing firms as well as information asymmetry in the IPO markets.
Notes: (Hunter)
doi: DOI: 10.1016/j.jcorpfin.2008.09.010
URL: http://www.sciencedirect.com/science/article/B6VFK-4TKX0GR-1/2/3762aa022c63585e862c942059c25ba2
Reference Type: Journal Article
Record Number: 29207
Author: C. W. Anderson and T. L. Campbell
Year: 2004
Title: Corporate governance of Japanese banks
Journal: Journal of Corporate Finance
Volume: 10
Issue: 3
Pages: 327-354
Short Title: Corporate governance of Japanese banks
ISSN: 0929-1199
Keywords: Japanese banks
Banking crisis
Managerial turnover
Corporate governance
Abstract: We investigate external and internal corporate governance activity observed at Japanese banks over 1985-1996. External governance appears to be inactive, and even after the onset of the banking crisis of the 1990s there are few mergers, failures, and other changes in ownership and control. Prior to the banking crisis we do not find a relation between bank performance and executive turnover. In contrast, non-routine turnover of bank presidents is inversely related to both stock returns and profitability in the 1990s. Consequently, internal governance activity is observable following the onset of the Japanese banking crisis, a period otherwise characterized by inactive external governance and regulatory forbearance.
Notes: doi: DOI: 10.1016/S0929-1199(03)00029-4
URL: http://www.sciencedirect.com/science/article/B6VFK-48FCJSX-1/2/0474829d990970244e98c19bc8119722
Reference Type: Journal Article
Record Number: 29218
Author: G. Andrade and E. Stafford
Year: 2004
Title: Investigating the economic role of mergers
Journal: Journal of Corporate Finance
Volume: 10
Issue: 1
Pages: 1-36
Short Title: Investigating the economic role of mergers
ISSN: 0929-1199
Keywords: Mergers
Acquisitions
Restructuring
Corporate governance
Abstract: We investigate the economic role of mergers by performing a comparative study of mergers and internal corporate investment at the industry and firm levels. We find strong evidence that merger activity clusters through time by industry, whereas internal investment does not. Mergers play both an "expansionary" and "contractionary" role in industry restructuring. During the 1970s and 1980s, excess capacity drove industry consolidation through mergers, while peak capacity utilization triggered industry expansion through non-merger investments. In the 1990s, this phenomenon is reversed, as industries with strong growth prospects, high profitability, and near capacity experience the most intense merger activity.
Notes: doi: DOI: 10.1016/S0929-1199(02)00023-8
URL: http://www.sciencedirect.com/science/article/B6VFK-462BR0W-2/2/f21ab0d8505730ce71d9990181e4891c
Reference Type: Journal Article
Record Number: 29018
Author: C. Andres
Year: 2008
Title: Large shareholders and firm performance--An empirical examination of founding-family ownership
Journal: Journal of Corporate Finance
Volume: 14
Issue: 4
Pages: 431-445
Short Title: Large shareholders and firm performance--An empirical examination of founding-family ownership
ISSN: 0929-1199
Keywords: Family firms
Ownership structure
Blockholders
Agency theory
Abstract: Using panel data on 275 German exchange-listed companies I examine the relationship between founding-family ownership and firm performance. By separating the family effect from general blockholder effects, the paper shows that family firms are not only more profitable than widely-held firms but also outperform companies with other types of blockholders. However, the performance of family businesses is only better in firms in which the founding-family is still active either on the executive or the supervisory board. These findings suggest that family ownership is related to superior firm performance only under certain conditions. If families are just large shareholders without board representation, the performance of their companies is not distinguishable from other firms. In addition, the results indicate that other blockholders either affect firm performance adversely or have no detectable influence on performance measures.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.05.003
URL: http://www.sciencedirect.com/science/article/B6VFK-4SK62TN-1/2/2552d9661223f53c342ef213b15daa51
Reference Type: Journal Article
Record Number: 29032
Author: C. Andres and E. Theissen
Year: 2008
Title: Setting a fox to keep the geese -- Does the comply-or-explain principle work?
Journal: Journal of Corporate Finance
Volume: 14
Issue: 3
Pages: 289-301
Short Title: Setting a fox to keep the geese -- Does the comply-or-explain principle work?
ISSN: 0929-1199
Keywords: Executive compensation
Corporate governance
Self regulation
Abstract: The German Corporate Governance Code works according to the comply-or-explain principle. One of its recommendations was to publish the remuneration of the members of the executive board on an individual basis. We examine the characteristics of the firms that complied with the code requirement. Our results indicate that firms that paid higher average remunerations to their management board members were less likely to comply, whereas firms with higher Tobin's Q were more likely to comply. We also document a non-monotonic relation between ownership concentration and the probability of compliance that is consistent with standard corporate governance arguments. Due to the fact that the number of firms complying with the disclosure requirement was low, a new law was passed that mandates disclosure unless the shareholders' meeting (with a 75% majority) decides otherwise. We find that this "loophole" in the new legislation is exploited by smaller firms, firms with comparatively high levels of executive remuneration, and firms with concentrated ownership. We discuss the implications of our results for the effectiveness of the comply-or-explain regulation.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.03.008
URL: http://www.sciencedirect.com/science/article/B6VFK-4S6P1YH-5/2/3505839062e6308b04ed7aa2bcafbd70
Reference Type: Journal Article
Record Number: 29206
Author: J. S. Ang and E. Kraizberg
Year: 2004
Title: An analysis of a strategy for management to separate and reward supportive shareholders
Journal: Journal of Corporate Finance
Volume: 10
Issue: 4
Pages: 639-658
Short Title: An analysis of a strategy for management to separate and reward supportive shareholders
ISSN: 0929-1199
Keywords: Heterogeneous expectations
Sidebets games
Agents to choose principal
Wealth transfer
Sorting shareholders
Abstract: Managers prefer investors who share similar expectations of their firms' prospects. Instead of taking the distribution of investor types as given, we investigate the question of how the managers may be able to effect a change in the pattern of ownership in a world where outside shareholders hold heterogeneous expectations. Under the requirements that the mechanism is costless to the firm and involves no initial cash transfer among the shareholders, the solution is a menu of securities in the form of sidebets among the shareholders. Ex post, the mechanism allows the high-valuation investors to own a greater proportion of the firm and be rewarded with a greater share of the firm's wealth gains.
Notes: doi: DOI: 10.1016/S0929-1199(03)00028-2
URL: http://www.sciencedirect.com/science/article/B6VFK-486GG1R-1/2/65d7a128c69f39ad7dc8340e66794461
Reference Type: Journal Article
Record Number: 29070
Author: M. P. Arena and S. P. Ferris
Year: 2007
Title: When managers bypass shareholder approval of board appointments: Evidence from the private security market
Journal: Journal of Corporate Finance
Volume: 13
Issue: 4
Pages: 485-510
Short Title: When managers bypass shareholder approval of board appointments: Evidence from the private security market
ISSN: 0929-1199
Keywords: Shareholder voting rights
Board of directors
Private placement
Abstract: This paper investigates the influence of managerial entrenchment on private placements by examining the firm's decision to appoint representatives of the private investors to the board without shareholder approval. By analyzing a sample of U.S. firms that appoint directors in combination with private offerings between 1995 and 2000, we find that firms with greater managerial entrenchment are more likely to bypass shareholder approval. Firms that bypass shareholders are less likely to appoint independent directors or to elect one of these directors as chairman. We also show that the market reacts more positively to the private offering announcement when the firm submits its board candidates for shareholder approval. Further, firms that bypass approval underperform compared to firms that obtain it. Overall our findings suggest that managers avoid shareholder approval to perpetuate entrenchment.
Notes: doi: DOI: 10.1016/j.jcorpfin.2007.04.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4NRCRRS-1/2/3672e6f0393dbe4d5312e794a1984249
Reference Type: Journal Article
Record Number: 29285
Author: N. Arthur
Year: 2001
Title: Board composition as the outcome of an internal bargaining process: empirical evidence
Journal: Journal of Corporate Finance
Volume: 7
Issue: 3
Pages: 307-340
Short Title: Board composition as the outcome of an internal bargaining process: empirical evidence
ISSN: 0929-1199
Keywords: Board composition
Board leadership
Bargaining
Abstract: The traditional financial economics view of the determinants of board composition is based on outside shareholders' demand for external monitoring of management. In comparison, Hermalin and Weisbach (American Economic Review, 88 (1998) 96) model board composition as the outcome of a bargaining process between the CEO and the rest of the board. The model predicts, inter alia, that the bargaining power of the CEO relative to the rest of the board of directors will determine the level of independence of the board and the extent of board monitoring. This study tests Hermalin and Weisbach's model using a random sample of companies that are subject to limited regulatory constraints in relation to board composition and a common set of corporations regulations that may indirectly affect board composition. There is strong evidence that representation by outside directors varies inversely with CEO bargaining power, which is proxied by CEO tenure and inside shareholdings. An extension of the argument of Hermalin and Weisbach to board leadership is also tested. The results indicate that the appointment of the chairman of the board is also the outcome of a bargaining process between the CEO and the rest of the board with more powerful CEOs likely to hold the position of Chairman of the board. Together, these results suggest that more "powerful" CEOs are relatively entrenched and face fewer constraints and less monitoring than other CEOs. This evidence has potential relevance to current debates in relation to the need to control the number or proportion of outside directors.
Notes: doi: DOI: 10.1016/S0929-1199(01)00024-4
URL: http://www.sciencedirect.com/science/article/B6VFK-4435022-5/2/665d9f05e00f08dd67d43af279fa6b5c
Reference Type: Journal Article
Record Number: 29006
Author: N. Attig, O. Guedhami and D. Mishra
Year: 2008
Title: Multiple large shareholders, control contests, and implied cost of equity
Journal: Journal of Corporate Finance
Volume: 14
Issue: 5
Pages: 721-737
Short Title: Multiple large shareholders, control contests, and implied cost of equity
ISSN: 0929-1199
Keywords: Corporate governance
Multiple large shareholders
Cost of equity
Abstract: In this paper, we examine whether the presence of multiple large shareholders alleviates a firm's agency costs and information asymmetry manifested in the cost of equity financing. Using data for 1165 corporations from 8 East Asian and 13 Western European countries, we find evidence that the implied cost of equity decreases with the presence, number, and voting size of large shareholders beyond the controlling owner. We also find that the identity of the second largest shareholder is important in determining the risk of corporate expropriation in family-controlled firms. Our regional analysis reveals that, mainly in East Asian firms, multiple large shareholders structures exert an internal governance role in curbing private benefits and reducing information asymmetry, perhaps to sidestep deficiencies in the external institutional environment.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.08.008
URL: http://www.sciencedirect.com/science/article/B6VFK-4TC9223-1/2/d74da5e6e40af1ad9c1dd55541faa5df
Reference Type: Journal Article
Record Number: 28956
Author: D. M. Autore, D. E. Bray and D. R. Peterson
Year: 2009
Title: Intended use of proceeds and the long-run performance of seasoned equity issuers
Journal: Journal of Corporate Finance
Volume: 15
Issue: 3
Pages: 358-367
Short Title: Intended use of proceeds and the long-run performance of seasoned equity issuers
ISSN: 0929-1199
Keywords: Seasoned equity offer
Use of proceeds
Long-run performance
Investment financing
Market timing
Abstract: We investigate the relation between seasoned equity issuers' stated intended use of proceeds and their subsequent long-run stock and operating performance. Stated intended uses of proceeds are: investment, recapitalization, and general corporate purposes. We find that issuers stating recapitalization or general corporate purposes experience abnormally poor performance in the subsequent three years, but issuers stating investment display little or no subsequent underperformance. These results suggest that issuers with specific plans to use the proceeds for investment purposes are credibly signaling profitable investment opportunities, whereas issuers without specific investment plans are more likely to be opportunistic market timers. Consistent with a timing motive, the secondary component of the offering is significantly larger when the issuer is not specific about investment plans.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.12.003
URL: http://www.sciencedirect.com/science/article/B6VFK-4VC0YDG-2/2/5cad306fb453f089615171c601f8cd42
Reference Type: Journal Article
Record Number: 29045
Author: D. M. Autore, R. Kumar and D. K. Shome
Year: 2008
Title: The revival of shelf-registered corporate equity offerings
Journal: Journal of Corporate Finance
Volume: 14
Issue: 1
Pages: 32-50
Short Title: The revival of shelf-registered corporate equity offerings
ISSN: 0929-1199
Keywords: Shelf registration
Seasoned equity offerings
Underwriter certification
Abstract: We report that traditional seasoned equity offerings (SEOs) are no longer firms' preferred choice for raising seasoned public equity. Traditional offerings have recently been surpassed by shelf-registered offerings in terms of both annual frequency and total capital raised. This represents a dramatic shift from the 1980s, during which the overwhelming majority of firms favored traditional over shelf-registered offerings. We find that the growth in shelf use is related to firms increasingly valuing and using the option feature of shelf registration to defer offerings. Moreover, the evidence indicates that the way firms now use shelf offerings resolves the shelf under-certification problem and results in no larger market penalties and significantly lower underwriter fees relative to non-shelf offerings. Finally, firms often use universal shelf filings and choose between debt and equity offerings based on the prevailing relative market conditions.
Notes: doi: DOI: 10.1016/j.jcorpfin.2007.12.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4RFJ4HG-1/2/43bf9b081495a879ec62e9ff1d6961a2
Reference Type: Journal Article
Record Number: 29358
Author: A. Banerjee and J. E. Owers
Year: 1996
Title: The impact of the nature and sequence of multiple bids in corporate control contests
Journal: Journal of Corporate Finance
Volume: 3
Issue: 1
Pages: 23-43
Short Title: The impact of the nature and sequence of multiple bids in corporate control contests
ISSN: 0929-1199
Keywords: Corporate control
Auctions
White knights
Multiple bidders
Wealth effects
Abstract: This paper examines multiple-bidder corporate control contests involving white knights, who are late-entry collaborative bidders. We employ auction theory to structure the analysis and examine the valuation consequences for bidding firms. An immediate white knight response to a hostile bid is met with a strong, negative market reaction. When the white knight and hostile bidder get into a [`]bidding war' with follow-up bids by each, the white knight (but not the hostile bidder) loses each time it bids. However, if the white knight bid follows two consecutive, hostile bids and the contest ends, there are minimal losses to the white knight, which are statistically indistinguishable from the mildly positive reaction to the preceding hostile bids.
Notes: doi: DOI: 10.1016/S0929-1199(96)00007-7
URL: http://www.sciencedirect.com/science/article/B6VFK-3SWT51X-2/2/594e545ad6106c7ee135d914f34a5193
Reference Type: Journal Article
Record Number: 29338
Author: M. M. Bange and W. F. M. De Bondt
Year: 1998
Title: R&D budgets and corporate earnings targets
Journal: Journal of Corporate Finance
Volume: 4
Issue: 2
Pages: 153-184
Short Title: R&D budgets and corporate earnings targets
ISSN: 0929-1199
Keywords: Investing policy
R&D budgets
Earnings management
Abstract: Unlike other investments in the U.S., research and development budgets are not depreciated but expensed. Thus, pre-tax reported earnings fluctuate dollar-for-dollar with changes in R&D budgets. Because executives know more about the firm than outsiders, they may adjust R&D budgets in order to manage accounting earnings and stock prices. Discretionary changes in R&D may also reflect managerial incentives, taxes, and free cash flow. We study a panel of 100 U.S. companies with large R&D budgets for the decade between 1977 and 1986. On average, R&D budget adjustments reduce the anticipated gap between analysts' earnings forecasts and reported income. In the cross-section of firms, more gap closure is associated with high trading volume and high business risk. Less earnings management occurs if the CEO and institutional investors own an important fraction of the shares.
Notes: doi: DOI: 10.1016/S0929-1199(98)00006-6
URL: http://www.sciencedirect.com/science/article/B6VFK-3V72TS4-6/2/07c0f27c331daee5faedc7d2068882bf
Reference Type: Journal Article
Record Number: 29020
Author: M. L. Banyi, E. A. Dyl and K. M. Kahle
Year: 2008
Title: Errors in estimating share repurchases
Journal: Journal of Corporate Finance
Volume: 14
Issue: 4
Pages: 460-474
Short Title: Errors in estimating share repurchases
ISSN: 0929-1199
Keywords: Stock repurchases
Share repurchases
Payout policy
Abstract: We examine the accuracy of various estimates of firms' repurchases of common stock used in earlier studies, and find high error rates in the most commonly used estimators. We also find that the procedure used to estimate open market share repurchases can significantly impact results. The Compustat-based measure, which is the most accurate, deviates from the actual number of shares repurchased by more than 30% in about 16% of the cases. We conclude that many studies should be revisited now that the SEC mandates disclosure of precise information about share repurchases in Forms 10-Q and 10-K.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.06.004
URL: http://www.sciencedirect.com/science/article/B6VFK-4SWWT2Y-1/2/15163e46e50d55d512d96db6a3c3ef59
Reference Type: Journal Article
Record Number: 29376
Author: B. M. Barber, D. Palmer and J. Wallace
Year: 1995
Title: Determinants of conglomerate and predatory acquisitions: evidence from the 1960s
Journal: Journal of Corporate Finance
Volume: 1
Issue: 3-4
Pages: 283-318
Short Title: Determinants of conglomerate and predatory acquisitions: evidence from the 1960s
ISSN: 0929-1199
Keywords: Mergers
Acquisitions
Corporate control
Corporate board
Abstract: We estimate continuous-time event-history models of the acquisition of conglomerate vs. non-conglomerate and predatory vs. friendly acquisitions among the 1962 Fortune 500 between January, 1963, and December, 1968. Our analysis of predatory acquisitions reveals that there were strong disciplinary motivations for these acquisitions in the 1960s. Q ratios were, by a large margin, the most important determinant of predatory acquisition likelihood. Surprisingly, however, corporate boards appear to have provided little alternative to predatory acquisition as a monitoring mechanism during this period. Friendly acquisitions, on the other hand, were concentrated among firms with low price-earnings ratios and high return on equity, suggestive of the earnings manipulation story often associated with conglomerate acquisitions. Our analysis of conglomerate acquisitions reveals that there were strong disciplinary motivations for conglomerate acquisitions during this period. Conglomerate targets had low Q ratios and were as likely as non-conglomerate targets to be acquired in a predatory fashion. We find no evidence that conglomerate acquisitions were motivated by a desire to improve earnings-per-share numbers, as some have maintained. In addition, regardless of type or tenor, we find managerial ownership, firm size, and industrial organization motivations for acquisition are consistently important determinants of acquisition likelihood.
Notes: doi: DOI: 10.1016/0929-1199(94)00007-H
URL: http://www.sciencedirect.com/science/article/B6VFK-3XY2J7C-1/2/ae07dee93be42888e3dcb202a4b481a3
Reference Type: Journal Article
Record Number: 29069
Author: M. J. Barclay, C. G. Holderness and D. P. Sheehan
Year: 2007
Title: Private placements and managerial entrenchment
Journal: Journal of Corporate Finance
Volume: 13
Issue: 4
Pages: 461-484
Short Title: Private placements and managerial entrenchment
ISSN: 0929-1199
Keywords: Private placement
Managerial entrenchment
Abstract: We re-examine old evidence and provide new evidence on private placements of large-percentage blocks of stock. Our goal is to judge whether the prevailing hypotheses of monitoring and certification explain most private placements. Examining new evidence on events following the private placements and using a much larger sample than previous studies, our findings suggests that private placements are often made to passive investors, thereby helping management solidify their control of the firm. Although monitoring and certification may motivate some private placements, the evidence with respect to placement discounts, stock-price reactions, the post-placement activities of the purchasers, and a comparison with arm's-length trades of large blocks of stock favors managerial entrenchment as the explanation for many private placements.
Notes: doi: DOI: 10.1016/j.jcorpfin.2007.04.009
URL: http://www.sciencedirect.com/science/article/B6VFK-4NVCFTV-2/2/4b378a74437a46a934213ae4d46525c2
Reference Type: Journal Article
Record Number: 29244
Author: M. J. Barclay, L. M. Marx and C. W. Smith
Year: 2003
Title: The joint determination of leverage and maturity
Journal: Journal of Corporate Finance
Volume: 9
Issue: 2
Pages: 149-167
Short Title: The joint determination of leverage and maturity
ISSN: 0929-1199
Keywords: Capital structure
Leverage
Debt maturity
Strategic complements
Abstract: We examine theories of leverage and debt maturity, focusing on the impact of firms' investment opportunity sets and regulatory environments in determining these policies. Using results on strategic complementarities, we identify sufficient conditions for the theory to have testable implications for reduced-form and structural-equation regression coefficients. Obtaining testable implications for structural equations requires less from the theory but more from the data than the reduced-form specification because it requires an instrumental-variables approach. We examine this trade-off between theory and statistical methods and provide tests using two decades of data for over 5000 industrial firms.
Notes: doi: DOI: 10.1016/S0929-1199(02)00003-2
URL: http://www.sciencedirect.com/science/article/B6VFK-451NR8T-1/2/b67199ebbd5f552a96963773a44a93ab
Reference Type: Journal Article
Record Number: 29182
Author: E. Barth, T. Gulbrandsen and P. Schønea
Year: 2005
Title: Family ownership and productivity: the role of owner-management
Journal: Journal of Corporate Finance
Volume: 11
Issue: 1-2
Pages: 107-127
Short Title: Family ownership and productivity: the role of owner-management
ISSN: 0929-1199
Keywords: Ownership structure
Management
Productivity
Abstract: This article analyses the relationship between family ownership and productivity, with special focus on the role of owner-management. The results show that family-owned firms are less productive than non-family-owned firms. This productivity gap is, however, explained by differences in management regime. Family-owned firms managed by a person hired outside the owner family are equally productive as non-family-owned firms, while family-owned firms managed by a person from the owner family are significantly less productive. This finding is sustained after controlling for endogeneity of management regime.
Notes: doi: DOI: 10.1016/j.jcorpfin.2004.02.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4C5PXWM-1/2/7a5fb9e42e3dcf7156a5d195e26b427f
Reference Type: Journal Article
Record Number: 29063
Author: S. M. Bartram
Year: 2007
Title: Corporate cash flow and stock price exposures to foreign exchange rate risk
Journal: Journal of Corporate Finance
Volume: 13
Issue: 5
Pages: 981-994
Short Title: Corporate cash flow and stock price exposures to foreign exchange rate risk
ISSN: 0929-1199
Keywords: Corporate finance
Risk management
Exposure
Foreign exchange rates
Hedging
Abstract: This paper estimates the foreign exchange rate exposure of 6917 U.S. nonfinancial firms on the basis of stock prices and corporate cash flows. The results show that several firms are significantly exposed to at least one of the foreign exchange rates Canadian Dollar, Japanese Yen and Euro, and significant exposures are more frequent at longer horizons. The percentage of firms for which stock price and earnings exposures are significantly different is relatively low, though it increases with time horizon. Overall, the impact of exchange rate risk on stock prices and cash flows is similar and determined by a related set of economic factors.
Notes: doi: DOI: 10.1016/j.jcorpfin.2007.05.002
URL: http://www.sciencedirect.com/science/article/B6VFK-4NTB94R-1/2/ee76dc0fccc5358a2a7236397396d9cf
Reference Type: Journal Article
Record Number: 29284
Author: A. Bascha and U. Walz
Year: 2001
Title: Convertible securities and optimal exit decisions in venture capital finance
Journal: Journal of Corporate Finance
Volume: 7
Issue: 3
Pages: 285-306
Short Title: Convertible securities and optimal exit decisions in venture capital finance
ISSN: 0929-1199
Keywords: Venture capital
Convertible securities
Exit decisions
Abstract: We study the interaction between exit decisions and contract design in venture capital finance. One of the main characteristics of venture capital funds is that they need to divest their holdings in the portfolio firms after a limited period of time. However, venture capitalists and entrepreneurs often have diverging interests with respect to different exit solutions (e.g., IPOs or trade sales). We show that with convertible securities, the ex-ante agreed optimal exit policy can be implemented. Thereby, we give an explanation for the widespread use of convertible securities in venture capital finance.
Notes: doi: DOI: 10.1016/S0929-1199(01)00023-2
URL: http://www.sciencedirect.com/science/article/B6VFK-4435022-4/2/4f0fb0279af0501337a15be9f433cc92
Reference Type: Journal Article
Record Number: 28995
Author: S. Bauguess and M. Stegemoller
Year: 2008
Title: Protective governance choices and the value of acquisition activity
Journal: Journal of Corporate Finance
Volume: 14
Issue: 5
Pages: 550-566
Short Title: Protective governance choices and the value of acquisition activity
ISSN: 0929-1199
Keywords: Acquisitions
Governance
Family
Ownership
Shareholder Rights
Abstract: Protective governance structure is often viewed as costly to minority shareholders who bear the costs of opportunism by entrenched managers. A less common view is that protective governance encourages value-enhancing initiative, allowing risk-averse managers to pursue projects they would otherwise forgo. To assess these views we examine the acquisition decisions of S&P 500 firms between 1994 and 2005 and document two entrenching dimensions of governance: founding family presence and larger boards with more inside directors. We find that family firms destroy value when they acquire, consistent with an agency cost explanation for acquisitions. In contrast, firms with large boards and more insiders are more likely to acquire and to create value when they do acquire. These results are consistent with benefits to managerial initiative when managers are insulated from discipline. Finally, we find no systematic evidence that shareholder right limiting provisions either facilitate managerial entrenchment or lead to wealth losses through acquisition activity.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.09.011
URL: http://www.sciencedirect.com/science/article/B6VFK-4TKX0GR-2/2/84b0a284a5b736e2508a0cf39200d50e
Reference Type: Journal Article
Record Number: 28982
Author: S. W. Bauguess, S. B. Moeller, F. P. Schlingemann and C. J. Zutter
Year: 2009
Title: Ownership structure and target returns
Journal: Journal of Corporate Finance
Volume: 15
Issue: 1
Pages: 48-65
Short Title: Ownership structure and target returns
ISSN: 0929-1199
Keywords: Target returns
Ownership
Acquisitions
Firm value
Abstract: Contrary to past literature, ownership defined as "all officers and directors" of the target firm has no association with target returns. Rather, we find that inside (managerial) ownership has a positive relation with target returns, whereas active-outside (non-managing director) ownership has a negative relation with target returns. Using accounting-based versus market-based performance measures, we find that the relation between inside ownership and target returns is best explained by takeover anticipation. Using bidder and synergy returns we find that the relation between outside ownership and target returns is best explained by outsiders' willingness to share gains with the bidder. While the relations are more pronounced for non-tender deals, they also hold for tender offers when active-outside ownership is corporate rather than institutional.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.09.002
URL: http://www.sciencedirect.com/science/article/B6VFK-4TFW981-1/2/56d51d5fd2884b1d4a9998db7a07b8b9
Reference Type: Journal Article
Record Number: 29306
Author: D. A. Becher
Year: 2000
Title: The valuation effects of bank mergers
Journal: Journal of Corporate Finance
Volume: 6
Issue: 2
Pages: 189-214
Short Title: The valuation effects of bank mergers
ISSN: 0929-1199
Keywords: Mergers and acquisitions
Banking
Valuation effects
Abstract: This paper examines the valuation effects of a sample of 558 bank mergers from 1980-1997. The overall results indicate that bank mergers create wealth. On average over a 36-day (-30, +5) event window, targets gain over 22%, bidders break even, and combined firms gain 3%. The results further indicate that mergers in the 1990s, which have not been extensively studied in prior work, have positive effects. In the 1990s over the 36-day window: target gain significantly, bidder returns are positive and statistically larger than the mid-1980s, and combined firm returns are significantly positive. These results are consistent with the notion that bank mergers occur for synergistic reasons and are not the result of empire building. However, bidder returns are sensitive to the event window implemented. Examining returns over an 11-day (-5, +5) window, target returns remain significantly positive, while bidder returns are statistically negative, and combined firm returns are statistically positive. Results over both windows indicate that overall wealth effects from bank mergers are positive over time, particularly in the 1990s.
Notes: doi: DOI: 10.1016/S0929-1199(00)00013-4
URL: http://www.sciencedirect.com/science/article/B6VFK-40V4F2V-5/2/b763940dec3307dc7581c99ab56ba274
Reference Type: Journal Article
Record Number: 28985
Author: D. A. Becher
Year: 2009
Title: Bidder returns and merger anticipation: Evidence from banking deregulation
Journal: Journal of Corporate Finance
Volume: 15
Issue: 1
Pages: 85-98
Short Title: Bidder returns and merger anticipation: Evidence from banking deregulation
ISSN: 0929-1199
Keywords: Merger returns
Anticipation
Deregulation
Banking
Abstract: This paper examines the anticipated components of bidder returns by focusing on the banking industry around the passage of interstate deregulation (Riegle Neal Act of 1994). Overall, firms that became bidders after Riegle Neal have large significant positive returns during its passage. Moreover, these positive wealth effects are significantly larger than the effects at the merger announcement. These results suggest that bidder returns are anticipated and focusing only on narrow event windows underestimates gains to bidders. Finally, the positive bidder returns appear to provide evidence against both the entrenchment and hubris hypotheses. Additional tests provide evidence to suggest that mergers are motivated by synergy rather than disciplinary motives.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.08.005
URL: http://www.sciencedirect.com/science/article/B6VFK-4T8SKYT-3/2/46097c93a6371ece420ffc033b8f157b
Reference Type: Journal Article
Record Number: 29029
Author: M. Becht, C. Mayer and H. F. Wagner
Year: 2008
Title: Where do firms incorporate? Deregulation and the cost of entry
Journal: Journal of Corporate Finance
Volume: 14
Issue: 3
Pages: 241-256
Short Title: Where do firms incorporate? Deregulation and the cost of entry
ISSN: 0929-1199
Keywords: Incorporation
Mobility
Costs of regulation
Regulatory competition
Abstract: We study how deregulation of corporate law affects the decision of entrepreneurs of where to incorporate. Recent rulings by the European Court of Justice (ECJ) have enabled entrepreneurs to select their country of incorporation independently of their real seat. We analyze foreign incorporations in the U.K., where incorporations of limited liability companies can be arranged at low cost. Using data for over 2 million companies from around the world incorporating in the U.K., we find a large increase in cross-country incorporations from E.U. Member States following the ECJ rulings. In line with regulatory cost theories, incorporations are primarily driven by minimum capital requirements and setup costs in home countries. We record widespread use of special incorporation agents to facilitate legal mobility across countries.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.04.002
URL: http://www.sciencedirect.com/science/article/B6VFK-4S9P5NB-2/2/91477e9b72f0ec3d14a242676935a17b
Reference Type: Journal Article
Record Number: 29316
Author: N. Beiner and R. Gibson
Year: 1999
Title: A theoretical analysis of the liquidity risk premium embedded in the prices of voting and non-voting stocks
Journal: Journal of Corporate Finance
Volume: 5
Issue: 3
Pages: 209-225
Short Title: A theoretical analysis of the liquidity risk premium embedded in the prices of voting and non-voting stocks
ISSN: 0929-1199
Keywords: Dual class shares
Corporate control
Liquidity
Abstract: Liquidity risk and corporate control considerations affect shareholders' willingness to invest in stocks and should thus be reflected in their prices. This paper derives the premium required by liquidity risk-averse agents who invest, respectively in non-voting and voting shares. It is shown that the liquidity risk premium depends upon the investor's risk aversion, the variance of his future consumption flow and the liquidation probability of each share type. Furthermore, liquidity risk premia depend upon the firm's capital structure decisions, the distribution and private valuation of voting rights by its shareholders.
Notes: doi: DOI: 10.1016/S0929-1199(99)00006-1
URL: http://www.sciencedirect.com/science/article/B6VFK-3XH3HHM-1/2/1bbc3b5a186546a4788cc080b51bed9b
Reference Type: Journal Article
Record Number: 28999
Author: L. M. Benveniste, H. Fu, P. J. Seguin and X. Yu
Year: 2008
Title: On the anticipation of IPO underpricing: Evidence from equity carve-outs
Journal: Journal of Corporate Finance
Volume: 14
Issue: 5
Pages: 614-629
Short Title: On the anticipation of IPO underpricing: Evidence from equity carve-outs
ISSN: 0929-1199
Keywords: G14
G30
Initial public offerings
Underpricing
Equity carve-outs
Market efficiency
Abstract: We investigate IPO market efficiency using a sample of equity carve-outs offered during the period of 1985-2005. Unlike IPOs examined in previous studies where trading during the pre-IPO book-building period does not exist and trading on the IPO date is rationed, in equity carve-outs, investors can trade in the non-rationed market for shares of the parent, which holds a significant fraction of the subsidiary. We find that the subsidiary's initial day return is significantly related to its parent's return over the book-building period, but unrelated to its parent's contemporaneous return. Neither the pre-IPO price revision of the subsidiary nor the return to the parent on the initial trading day can be predicted. While the portion of the subsidiary's initial return unpredictable from information available during the book-building period is significantly related to its parent's contemporaneous return, the predictable component of the initial return is not. We interpret these results as evidence consistent with market efficiency.
Notes: doi: DOI: 10.1016/j.jcorpfin.2008.08.007
URL: http://www.sciencedirect.com/science/article/B6VFK-4TBXGC1-1/2/9dccd976ed523706211d7e088c6fd013
Reference Type: Journal Article
Record Number: 29073
Author: G. Bernile, D. Cumming and E. Lyandres
Year: 2007
Title: The size of venture capital and private equity fund portfolios
Journal: Journal of Corporate Finance
Volume: 13
Issue: 4
Pages: 564-590
Short Title: The size of venture capital and private equity fund portfolios
ISSN: 0929-1199
Keywords: G24
Venture capital
Private equity
Fund portfolio
Abstract: We propose a model that examines the optimal size of venture capital and private equity fund portfolios. The relationship between a VC and entrepreneurs is characterized by double-sided moral hazard, which causes the VC to trade off larger portfolios against lower values of portfolio companies. We analyze the structural relations between the VC's optimal portfolio structure and entrepreneurs' and VC's productivities, their disutilities of effort, the value of a successful project, and the required initial investment in a venture. We also test the model's predictions using a small proprietary dataset collected through a survey targeted to VC and private equity funds worldwide.
Notes: doi: DOI: 10.1016/j.jcorpfin.2007.04.004
URL: http://www.sciencedirect.com/science/article/B6VFK-4NVCFTV-3/2/ff7bc6ebabde4e51ec54ad135c4b45d5
Reference Type: Journal Article
Record Number: 29118
Author: T. K. Berry, J. M. Bizjak, M. L. Lemmon and L. Naveen
Year: 2006
Title: Organizational complexity and CEO labor markets: Evidence from diversified firms
Journal: Journal of Corporate Finance
Volume: 12
Issue: 4
Pages: 797-817
Short Title: Organizational complexity and CEO labor markets: Evidence from diversified firms
ISSN: 0929-1199
Keywords: Managerial labor market
CEO turnover
Diversification
Corporate governance
Abstract: We examine whether CEO turnover and succession patterns vary with firm complexity. Specifically, we compare CEO turnover in diversified versus focused firms. We find that CEO turnover in diversified firms is completely insensitive to both accounting and stock-price performance, but CEO turnover in focused firms is sensitive to firm performance. Diversified firms also experience less forced turnover than focused firms. Following turnover, replacement CEOs in diversified firms are older, more educated, and are paid more when hired. Collectively, our results indicate that the labor market for CEOs is different across diversified and focused firms and that firm complexity and scope affect CEO succession.
Notes: doi: DOI: 10.1016/j.jcorpfin.2005.04.001
URL: http://www.sciencedirect.com/science/article/B6VFK-4GNTFM6-2/2/8e3b2fa5b61ca6aabaace35d7d937a4b
Reference Type: Journal Article
Record Number: 29126
Author: T. K. Berry, L. Paige Fields and M. S. Wilkins
Year: 2006
Title: The interaction among multiple governance mechanisms in young newly public firms
Journal: Journal of Corporate Finance
Volume: 12
Issue: 3
Pages: 449-466
Short Title: The interaction among multiple governance mechanisms in young newly public firms
ISSN: 0929-1199
Keywords: Corporate governance
Initial public offerings
Abstract: We focus on the relations among inside ownership, board composition, unaffiliated block ownership, and compensation structure for a sample of firms following their IPOs. Specifically, we follow firms for up to eleven years after their IPOs and examine the full sample and subsamples of firms that survive, are acquired, or that file for bankruptcy during the sample period. We find that as CEO ownership declines, board independence, board seats held by venture capitalists, and unaffiliated block ownership increase. Our findings suggest that as inside ownership decreases alternative governance mechanisms evolve to help mitigate the resulting increase in agency costs. Interestingly, the associations between