Corporate Finance and Organizations eJournal最新文献

{"title":"Delaware's Takeover Law: The Uncertain Search for Hidden Value","authors":"Reinier H. Kraakman, Bernard Black","doi":"10.2139/ssrn.279376","DOIUrl":"https://doi.org/10.2139/ssrn.279376","url":null,"abstract":"It is easy sport to criticize the Delaware takeover cases as inconsistent with the empirical evidence, each other, and a sensible allocation of power between managers and shareholders. We in fact believe all of these things. Here, however, we offer a more sympathetic account of the core Delaware takeover cases. We argue that they reflect an often unstated \"hidden value\" model, in which a firm's true value is visible to corporate directors but not to shareholders or potential acquirers. We explore the assumptions needed to make the hidden value model internally consistent, and contrast those assumptions to those that underlie to a \"visible value\" model in which shareholders and potential acquirers are well informed about firm value or can be made so through disclosure by the target's board. (One outcome of carefully stating the hidden value model's assumptions is to expose the model's problems.) We also address and reject a \"control premium\" theory, sometimes invoked by the Delaware courts, in which control is a corporate asset that the law protects by imposing Revlon duties on the target's board. Assuming that the Delaware courts continue to embrace hidden value, we argue that takeover decisions should, at a minimum, be governed by a bilateral decision-making structure, in which a target board's initial decision to approve an acquisition, block a takeover bid, or choose one bidder over another must be approved or rejected by shareholders. Under this approach, target boards could adopt modest deal protections and say \"no\" to a takeover bid by adopting a poison pill, but could not say \"never\" by using a staggered board to block a bid after the bidder wins a proxy contest. The courts must also strictly limit efforts by target boards to stuff the ballot box or otherwise alter shareholder vote outcomes.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"22 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-02-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126399278","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Management Retention Following Poor Performance: Board Failure or Management Entrenchment","authors":"Carolyn Carroll, John M. Griffith","doi":"10.2139/ssrn.303832","DOIUrl":"https://doi.org/10.2139/ssrn.303832","url":null,"abstract":"Acting in shareholders' best interests, the board of directors should remove top management when a firm performs poorly. However, empirical evidence indicates that sometimes boards replace top management and sometimes they do not. When top management is not replaced following poor performance, does this represent a failure of boards of directors and the market or is management so entrenched that it is not cost effective to remove management? That is, if the benefits of replacing management exceed the costs and yet the board does not replace top management then the board has failed in its fiduciary responsibility to act in shareholders' best interests. On the other hand, if the cost of replacing management exceeds the benefits, then boards are behaving in shareholders' best interests by not replacing management. Management is so entrenched that it is not cost effective to remove them. In this study, we examine a group of firms that performs poorly but boards do not replace management. Our measure of poor performance is white knights who lost money when acquiring a target firm and have q-ratios less than one. For these firms, proxies for the costs of replacing management are compared to proxies for the benefits of retaining management. We find that the market works, that the retention of a poorly performing CEO does not represent a failure of the boards, but rather the costs of replacing a poorly performing manager are greater than the benefits. Poorly performing management is so entrenched that it is not cost effective to replace them. We also find that if the share price falls too drastically, the probability of replacing management increases. A proxy battle indicating serious opposition to management also increase the probability of replacement even if the proxy battle is unsuccessful. Boards also tend to replace managers with no prior bidding experience who lose big when acquiring a target company. It is also less costly to replace managers who are close to retirement age. And the more control a CEO has over the company as evidenced by holding two job titles, the less likely the board is to replace him/her.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129515061","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Mutual Funds Activism (?) in Corporate Governance","authors":"M. Miccoli","doi":"10.2139/ssrn.302382","DOIUrl":"https://doi.org/10.2139/ssrn.302382","url":null,"abstract":"American mutual funds industry has been characterised, in the last 20 years, by a wide growth, which led mutual funds to become, as a whole, the biggest American institutional investors. Notwithstanding their dimensions, mutual funds can not be considered \"active\" institutional investors: they rarely conduct proxy fights or bring class action against management. There are many reasons to explain mutual funds' passivity in corporate governance, some depending on mutual funds' federal regulations, other depending on the characteristics of American mutual funds' industry. Is this paper I will describe the principal developments of mutual funds' industry, and 1 try to examine the principal reasons of mutual funds' passivity.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114856682","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"New Estimates of the Equity Risk Premium and Why Business Economists Need Them","authors":"Douglas J. Lamdin","doi":"10.2139/ssrn.296857","DOIUrl":"https://doi.org/10.2139/ssrn.296857","url":null,"abstract":"The equity risk premium (ERP) is used to estimate a firm's cost of equity and overall cost of capital. It therefore is relevant to, for example, capital budgeting analyses and calculation of economic value added. Unfortunately, current estimates of the ERP range widely. Some claim it has fallen to as low as around 2%, while others place it at 3 to 4 times this amount. Using a model that extracts the required return on equity from a valuation model based on dividends and repurchases of shares the ERP is estimated. This approach leads to estimates of the ERP of 3% to 6%.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2002-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132616052","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Underinvestment and Overinvestment Hypotheses: An Analysis Using Panel Data","authors":"Arthur Morgado, Julio Pindado","doi":"10.2139/ssrn.294871","DOIUrl":"https://doi.org/10.2139/ssrn.294871","url":null,"abstract":"We study the relationship between firm value and investment to test the underinvestment and overinvestment hypotheses. The results obtained, using panel data methodology as the estimation method, indicate that the abovementioned relation is quadratic, which implies that there exists an optimal level of investment. As a consequence, firms that invest less than the optimal level suffer from an underinvestment problem, while those investing more than the optimum suffer from overinvestment. The quadratic relation is maintained when firms are classified depending on their investment opportunities, the optimum being in accordance with the quality of investment opportunities.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121206731","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Acquisition Strategies as Option Games","authors":"Han T. J. Smit","doi":"10.2139/ssrn.291496","DOIUrl":"https://doi.org/10.2139/ssrn.291496","url":null,"abstract":"In 1996, HAL Investments, a European private equity investor, agreed to buy Pearle Benelux, a leading optical chain in Belgium and the Netherlands. HAL subsequently made further acquisitions in Belgium and the Netherlands and also in Germany, Austria, and Italy, all within the same industry. These transactions were part of an acquisition strategy known as \"buy-and-build,\" in which an equity investor initially undertakes a \"platform\" acquisition in an industry and then leverages core competencies or efficiencies onto follow-on acquisitions in a broad-ended geographical base. The goal of such a strategy is targeted industry consolidation. This paper develops a framework for assessing the value generated by both the option-like and competitive characteristics of an acquisition strategy.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116269483","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Hard Times or Great Expectations?: Dividend Omissions and Dividend Cuts by UK Firms","authors":"A. Benito, G. Young","doi":"10.2139/ssrn.293187","DOIUrl":"https://doi.org/10.2139/ssrn.293187","url":null,"abstract":"The payment of dividends is one of the key unresolved puzzles of company financial behaviour. This paper uncovers a more recent dividend puzzle; that of an increasing proportion of quoted UK companies omitting cash dividends. Also motivated by a desire to understand corporate balance sheet adjustment, models for the incidence of dividend omissions and cuts are estimated as functions of financial characteristics including cash flow, leverage, investment opportunities, investment and company size. These financial variables can account for most of the increase in omissions since 1995. There is relatively little evidence to link this to the major tax reform of 1997 that abolished tax refunds on dividend income payable to tax-exempt institutions. Significant persistence effects indicate that companies are slow to adjust their balance sheets through dividends.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"64 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131288930","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Do Shareholders Benefit from the Adoption of Incentive Pay For Directors?","authors":"Mason S. Gerety, Chun Keung Hoi, Ashok Robin","doi":"10.2139/ssrn.291054","DOIUrl":"https://doi.org/10.2139/ssrn.291054","url":null,"abstract":"We assess the stock market reaction to proposals of incentive plans for directors in a sample of 289 firms. The reaction is both economically and statistically insignificant. This result suggests that shareholders do not necessarily benefit from the adoption of such plans. Across firms, we find that the market reaction depends on whether the CEO is involved in director selection; stock markets react negatively to plans proposed by firms without nomination committees. These findings highlight the important link between corporate governance and the effectiveness of director incentive plans.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"144 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-11-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123475293","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"Institutional Shareholders' Split Personality on Corporate Governance: Active in Proxies, Passive in Ipos","authors":"M. Klausner","doi":"10.2139/ssrn.292083","DOIUrl":"https://doi.org/10.2139/ssrn.292083","url":null,"abstract":"For well over a decade, institutional shareholders have fought proxy battles with corporate management over matters of corporate governance. They have opposed takeover defenses and advocated such structures as independent boards and board committees, confidential voting, and the separation of the CEO and chairman positions. At the same time, however, hundreds of companies whose shares those same institutions own, through venture capital and other private equity funds, have gone public with charters containing the same takeover defenses that institutions oppose when the institutions are in the proxy battle mode - and without the governance provisions that they advocate. This article reports data on the apparently inconsistent behavior of institutional investors and asks the question: Why do institutional investors actively advocate their view of good governance in the proxy context but passively accept what they consider bad governance among the companies in which they invest through private equity funds? The article concludes with some potential (but ultimately unsatisfying) explanations.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"1983 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125457455","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}

{"title":"The Valuation of European Financial Firms","authors":"J. Danbolt, Bill Rees","doi":"10.2139/ssrn.289218","DOIUrl":"https://doi.org/10.2139/ssrn.289218","url":null,"abstract":"We extend the recent literature concerning accounting based valuation models to investigate financial firms from six European countries with substantial financial sectors: France, Germany, Italy, Netherlands, Switzerland and the UK. Not only are these crucial industries worthy of study in their own right, but unusual accounting practices, and inter‐country differences in those accounting practices, provide valuable insights into the accounting‐value relationship. Our sample consists of 7,714 financial firm/years observations from 1,140 companies drawn from 1989–2000. Sub‐samples include 1,309 firm/years for banks, 650 for insurance companies, 1,705 for real estate firms, and 3,239 for investment companies. In most countries we find that the valuation models work as well or better in explaining cross‐sectional variations in the market‐to‐book ratio for financial firms as they do for industrial and commercial firms in the same countries, although Switzerland is an exception to this generalization. As expected, the results are sensitive to industrial differences, accounting regulation and accounting practices. In particular, marking assets to market value reduces the relevance of earnings figures and increases that of equity.","PeriodicalId":272257,"journal":{"name":"Corporate Finance and Organizations eJournal","volume":"05 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2001-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127242778","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}