Two Essays On Corporate Activities And The Market For Corporate Control

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Two Essays On Corporate Activities And The Market For Corporate Control

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Author : Zheng Liu
language : en
Publisher:
Release Date : 2017-01-26

Two Essays On Corporate Activities And The Market For Corporate Control written by Zheng Liu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017-01-26 with categories.

This dissertation, "Two Essays on Corporate Activities and the Market for Corporate Control" by Zheng, Liu, 刘峥, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This dissertation addresses concerns regarding corporate activities in relation to agency costs and studies the effect of the market for corporate control. In the first essay, we use the mid-1990s Delaware takeover regime shift as an exogenous shock to examine how the removal of takeover threats affects managerial decisions on corporate financing and investment and how it affects firm value. Based on a differences-in-differences-in-differences (DDD) approach, we find that managers reduce debt financing and increase capital investment when they are protected against hostile takeovers, which is consistent with managerial agency models of capital structure and the free cash flow hypothesis proposed by Jensen (1986). We demonstrate that engaging in these entrenched behaviors consequently destroys firm value. Moreover, our evidence indicates that the effect of the takeover regime shift is more pronounced in firms with fewer institutional holdings or lower managerial ownership, supporting the argument of Jensen (1993) that effective internal control systems can alleviate the negative outcomes of a weakened market for corporate control. The substitution effect of internal controls is more substantial than that of the external product market competition. Finally, we determine that empire building, rather than quiet life, is the main consequence of a weakened market for corporate control. In the second essay, we directly examine the causal relationship between managerial entrenchment and diversification. We demonstrate that more entrenched managers adopt higher levels of diversification than do less entrenched managers. We verify the result by using two-stage least squares (2SLS) regression and treating entrenchment as endogenous. In addition, based on an exogenous change in takeover legislation in Delaware in the mid-1990s, we adopt the differences-in-differences-in-differences (DDD) approach and demonstrate that managers increase diversification activities when they are protected against hostile takeovers. Given that diversification destroys value, these results are consistent with the agency costs explanation of diversification. We then explore the motivations that drive managers to diversify. We document that entrenched managers diversify to gain private benefits and to reduce firm risk. Finally, we demonstrate that CEO equity-based incentives increase when takeover-protected firms diversify, suggesting that firms proactively respond to counterbalance the increased costs associated with discretional diversification, which is consistent with theories of optimal contract. DOI: 10.5353/th_b5153698 Subjects: Capital investments Corporate governance Corporations - Finance

Two Essays On Corporate Activities And The Market For Corporate Control

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Author : 刘峥
language : en
Publisher:
Release Date : 2013

Two Essays On Corporate Activities And The Market For Corporate Control written by 刘峥 and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Capital investments categories.

The Market For Corporate Control The Theory And The Empirical Evidence

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Author : Marius Beckermann
language : en
Publisher: GRIN Verlag
Release Date : 2014-12-30

The Market For Corporate Control The Theory And The Empirical Evidence written by Marius Beckermann and has been published by GRIN Verlag this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-12-30 with Business & Economics categories.

Seminar paper from the year 2012 in the subject Business economics - Investment and Finance, grade: 1,3, Otto Beisheim School of Management Vallendar (Chair for Corporate Finance), course: Seminar on Recent Developments in Corporate Governance, language: English, abstract: The market for corporate control, often referred to as the takeover market, is subject to scientific research since many years. This paper starts with Manne‘s (1965) initial essay on the topic, introduce the theory of the market for corporate control. Therefore, it will begin with a definition of the terms “corporate control” and “the market for corporate control”. Following this, it will explain the possibilities of taking over the control of a corporation. Subsequently, it will argue why the market for corporate control is of great importance. Afterwards, a synopsis on the current empirical evidence of its efficiency follows. Finally, the author takes a look on the welfare effects of the market for corporate control, before concluding on its applicability and having a look on solutions to correct the imperfections of the model.

Essays On The Market For Corporate Control

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Author : Hyunjung Kim
language : en
Publisher:
Release Date : 2011

Essays On The Market For Corporate Control written by Hyunjung Kim and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.

This dissertation examines the relative importance of the information effect on corporate takeover in total takeover gains. It develops the measure of information effect based on the residual income valuation model with I/B/E/S analysts' abnormal earnings forecast revisions. Empirical results show that the information effect and the synergy are estimated to be around 4 percent and 22 percent respectively in the 1,372 US samples during 1980- 2006. Furthermore, almost all of the synergy gains disappear as the deal is expected to be failed while the measured information effect remains afterwards. The evidence suggests that the information effect is more evident in the disciplinary (failed & high Tobin's-q for bidders) or acquisitional (small capitalization & high book-to-market ratio for targets) takeovers while the synergy is greater in the successful tender-offer. Overall, the corporate takeover bid generates information gains up to 15 percent of total takeover gains. It also develops a theoretical model on the market for corporate control using the assumption that there exists management slack which does not contribute to shareholder wealth. This model provides explanations to several questions about corporate takeovers, which include the following: Why do managers prefer takeovers to other investment alternatives? When are they likely to occur? What are the sources of takeover gains? Do takeovers create value? Why are stock offers more common? Who gains from such transactions both in the long and short runs? Why do they occur in massive waves? Why is diversification often attractive to bidder managers? How does corporate governance play its role during this process? And why do managers often resist takeovers? The agency model this paper develops is compatible with existing theories on takeovers including neoclassical, inefficient stock market, and the free cash flow approach. Furthermore, it is consistent with most of the empirical evidence available.

Two Essays On Corporate Governance

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Author : Isabella Otero Lazzari
language : en
Publisher:
Release Date : 2005

Two Essays On Corporate Governance written by Isabella Otero Lazzari and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with categories.

The Market For Corporate Control

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Author : Richard S. Ruback
language : en
Publisher:
Release Date : 2006

The Market For Corporate Control written by Richard S. Ruback and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with categories.

This paper reviews much of the scientific literature on the market for corporate control. The evidence indicates that corporate takeovers generate positive gains, that target firm shareholders benefit, and that bidding firm shareholders do not lose. The gains created by corporate takeovers do not appear to come from the creation of market power. With the exception of actions that exclude potential bidders, it is difficult to find managerial actions related to corporate control that harm shareholders. Finally, we argue the market for corporate control is best viewed as an arena in which managerial teams compete for the rights to manage corporate resources.

Essays In Corporate Governance

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Author : Syed Walid Reza
language : en
Publisher:
Release Date : 2013

Essays In Corporate Governance written by Syed Walid Reza and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with Chief executive officers categories.

Two Essays On Corporate Policy And Corporate Governance

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Author : Taemin Cha
language : en
Publisher:
Release Date : 2014

Two Essays On Corporate Policy And Corporate Governance written by Taemin Cha and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.

Three Essays On The Market For Corporate Control

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Author : Jennifer Ariadne Hawkins Van Heeckeren
language : en
Publisher:
Release Date : 1993

Three Essays On The Market For Corporate Control written by Jennifer Ariadne Hawkins Van Heeckeren and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1993 with Consolidation and merger of corporations categories.

Essays On The Economics Of Corporate Control

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Author : Fabrizio Hernandez
language : en
Publisher:
Release Date : 1997

Essays On The Economics Of Corporate Control written by Fabrizio Hernandez and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 1997 with Business enterprises categories.