Essays on Ownership Structure, Corporate Governance and Corporate Finance PDF Download

Author: Kurt A. Desender
Publisher:
ISBN:
Category :
Languages : en
Pages : 137

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Author: Johan Molin
Publisher: Stockholm School of Economics Efi Economic Research Institut
ISBN:
Category : Business & Economics
Languages : en
Pages : 182

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Author: Jérôme Philippe Alain Taillard
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 210

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Abstract: In my dissertation, I first contribute to the capital structure literature by estimating the potential impact of financial distress on a firm's real business operations. Secondly, I contribute to the ownership structure literature, and more broadly to the field of corporate governance, by revisiting the relationship between managerial ownership and firm performance. In my first essay, I analyze a comprehensive sample of defendant firms that found themselves exposed to an unexpected wave of asbestos litigation in the wake of two U.S. Supreme Court decisions. Since these legal liabilities are unrelated to current operations, firms that are in financial distress due to their legal woes provide a natural experiment to study the impact of financial distress on a firm's operational performance. When analyzing firms suffering from this exogenous shock to their finances, I find little evidence of negative spillover effects ("indirect" costs) of financial distress. That is, the competitive position of the distressed firms is not adversely impacted by their weakened financial situation. Furthermore, I find empirical support for a significant disciplinary effect of financial distress as these firms actively restructure and refocus on core operations. In my second and third essays, I focus on the relationship between managerial ownership and firm performance using a large panel dataset of U.S. firms over the period 1988-2004. In the second essay, I reconcile some of the extant literature by showing that the relationship is sensitive to the firm size characteristics of the sample being used. In particular, I recover the classic hump-shaped relationship when focusing only on the largest firms (e.g. Fortune 500 firms), while the relationship turns negative when the sample is comprised of smaller firms. The negative relationship among smaller firms is consistent with entrenchment arguments given that managerial ownership is on average much higher for small firms. Second, I find that for lower levels of managerial ownership, the negative relationship is driven by older firms that have on average less liquid stocks. This finding is consistent with firms that do not perform well enough to create a liquid market for their stock, and hence have to keep high levels of insider ownership in order to avoid a negative price impact that would result from a reduction of their stake. Lastly, these results could also be suggestive of endogeneity concerns. I investigate this issue further in my third essay. Principal-agent models predict that managerial ownership and firm performance are endogenously determined by exogenous changes in a firm's contracting environment. Changes in the contracting environment are, however, only partially observed, and the standard statistical techniques used to address endogeneity may be ineffective in this corporate setting. In my third essay, together with my coauthor Phil Davies, we develop a novel econometric approach to control for the influence of time-varying unobserved variables related to a firm's contracting environment. Using the same large panel dataset of U.S. firms over the period 1988-2004, we find no evidence of a systematic relation between managerial ownership and performance.

Author: Klaus J. Hopt
Publisher: Walter de Gruyter GmbH & Co KG
ISBN: 3110905043
Category : Law
Languages : en
Pages : 372

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Corporate governance has become an important issue in all industrial economies. This text has grown out of a conference entitled Comparative Corporate Governance, An International Conference, United States - Japan - Western Europe which considered the subject.

Author: Yinghong Chen
Publisher:
ISBN:
Category : Corporate governance
Languages : en
Pages : 204

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Author: Donald H. Chew
Publisher: Columbia University Press
ISBN: 0231519974
Category : Business & Economics
Languages : en
Pages : 393

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Effective corporate governance, or the set of controls and incentives that drive top management, originates both outside and inside the firm and assures investors who hope to commit their capital. Essential when buying stocks in one's own country, effective corporate governance is even more important abroad, where information can be less reliable and investor influence (or protection) more limited. In this collection of articles from the Journal of Applied Corporate Finance, more than thirty leading scholars and practitioners discuss the possibilities and limitations of global corporate finance and governance systems, whether in Europe and North America or in the emerging markets of Israel, India, Korea, and South Africa. Essays discuss the political roots of American corporate finance; the structural and financial variations between international corporations; control premiums and the effectiveness of corporate governance systems; debt, folklore, and cross-country differences in financial structures; the driving forces behind the East Asian Financial Crisis of 1997; corporate ownership and control in India, Germany, France, and the United Kingdom; financial and economic lessons of Italy's privatization program; changes in Korean corporate governance; sovereign wealth funds; and the new organization of Canadian business trusts. A special roundtable discussion addresses shareholder activism in the U.K.

Author: Donald H. Chew
Publisher: Columbia University Press
ISBN: 0231519982
Category : Business & Economics
Languages : en
Pages : 385

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Corporate governance constitutes the internal and external institutions, markets, policies, and processes designed to help companies maximize their efficiency and value. In this collection of classic and current articles from the Journal of Applied Corporate Finance, thought leaders such as Michael Jensen and Robert Monks discuss the corporate mission of value maximization and the accomplishments and limitations of the U.S. governance system in achieving that end. Essays address the elements driving corporate value: the board of directors, compensation for CEOs and other employees, incentives and organizational structure, external ownership and control, role of markets, and financial reporting. They evaluate best practice methods, challenges in designing equity plans, transferable stock options, the controversy over executive compensation, the values of decentralization, identifying and attracting the "right" investors, the evolution of shareholder activism, creating value through mergers and acquisitions, and the benefits of just saying no to Wall Street's "earnings game." Grounded in solid research and practice, U.S. Corporate Governance is a crucial companion for navigating the world of modern finance.

Author: Hoang N. Pham
Publisher: Routledge
ISBN: 1000540278
Category : Business & Economics
Languages : en
Pages : 190

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The relationship between ownership structure and firm performance has been studied extensively in corporate finance and corporate governance literature. Nevertheless, the mediation (path) analysis to examine the issue can be adopted as a new approach to explain why and how ownership structure is related to firm performance and vice versa. This approach calls for full recognition of the roles of agency costs and corporate risk-taking as essential mediating variables in the bi-directional and mediated relationship between ownership structure and firm performance. Based on the agency theory, corporate risk management theory and accounting for the dynamic endogeneity in the ownership–performance relationship, this book develops two-mediator mediation models, including recursive and non-recursive mediation models, to investigate the ownership structure–firm performance relationship. It is demonstrated that agency costs and corporate risk-taking are the ‘missing links’ in the ownership structure–firm performance relationship. Hence, this book brings into attention the mediation and dynamic approach to this issue and enhances the knowledge of the mechanisms for improving firm’s financial performance. This book will be of interest to corporate finance, management and economics researchers and policy makers. Post-graduate research students in corporate governance and corporate finance will also find this book beneficial to the application of econometrics into multi-dimensional and complex issues of the firm, including ownership structure, agency problems, corporate risk management and financial performance.

Author: Yiwei Li
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Ling Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 141

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Corporate governance of financial and non-financial firms is critical in modern corporations with diffuse stock ownership, which deals with the agency conflicts between managers and shareholders. Corporate governance has a profound impact on various corporate policy, and firm value in the end. This study examines the importance of corporate governance and its influences on various corporate policy and firm value and risks for both financial and non-financial firms. Chapter 1 investigates the association between the firm's liquidity level and liquidity mix on the one hand and CEO entrenchment on the other. CEO entrenchment may distort the firms' liquidity policy because managers and shareholders may have conflicting preferences between cash and lines of credit. Using lines of credit data from 1996 to 2008, we find five main results. First, entrenched CEOs hold more liquidity as measured by the sum of cash and lines of credit. Second, entrenched managers have a preference for cash over lines of credit because while cash gives them flexibility, lines of credit are accompanied with bank restrictions and monitoring. Third, entrenched CEOs also use more lines of credit because of the extra liquidity it provides, despite the associated bank monitoring. Fourth, entrenched CEOs in smaller and opaque firms tend to hold more liquidity. Five, entrenched CEO's preference for cash versus lines of credit is stronger for large and transparent firms, compared to small and opaque firms. These findings imply that firms should better align the interests of the entrenched managers with those of the shareholders in order to limit the excessive liquidity holding of firms when CEOs are entrenched and to thereby increase firms' profitability. Chapter 2 examines the relationship between bank holding company (BHC) performance, risk and "busy" board of directors, an overlooked dimension of corporate governance in the banking literature. Busy directors are defined as directors with three or more directorships. The sample covers the 2001-2010 period. We employ a simultaneous equation framework and estimate the models employing the three stage least square (3SLS) technique in order to account for endogeneity. Several interesting results are obtained. First, BHC performance, as measured by return on assets (ROA), Tobin's Q and earnings before interest and taxes (EBIT) over total assets is positively associated with busy directors. Second, BHC total risk (standard deviation of stock returns), market risk (market beta), idiosyncratic risk (standard errors of the CAPM model) credit risk (percentage of non-performing assets over total assets) and default risk (HigherZ-Score) are inversely related to it. Third, busy directors are not more likely to become problem directors, in the sense of failing the meeting-attendance-criterion (75% attendance). Fourth, the benefits of having busy directors in terms of performance improvement strengthened but the benefits of risk reduction declined during the recent financial crisis These findings partially alleviate concerns that when directors become too busy with multiple directorships, they shirk their responsibilities. Major implications for investors, regulators, and firm managers are drawn. Chapter 3 investigates the effect of CEO entrenchment on the loan syndication structure. Over the past decade, syndicated loans have played an increasingly important role in corporate financing. Unlike a traditional bank loan with only a single creditor, a syndicated loan involves a group of lenders: a lead arranger and a number of participant lenders. The syndication process, therefore, generates an additional dimension of agency problem between the lead arranger and the participant lenders, besides the traditional agency cost of debt between the borrowing firm and the lender (Diamond, 1984; Holmstrom and Tirole, 1997). Several results are obtained about syndicated loans made to firms with more entrenched CEOs. First, in these loans the number of participant lenders and their share in the loan are smaller; the lead arranger retains a larger loan share. Second, these loans are more closely held resulting in a higher Herfindahl index of loan concentration. Third, foreign lenders are less involved in these loans. Specifically, the number of foreign lenders and the percentage of loans held by foreign lenders are both smaller. Our findings shed light on the two types of agency problems associated with the syndicated loans, and have great implication for the firms' shareholders, creditors and regulators.