Blockholder Heterogeneity, Monitoring and Firm Performance

Size: px
Start display at page:

Download "Blockholder Heterogeneity, Monitoring and Firm Performance"

Transcription

1 Blockholder Heterogeneity, Monitoring and Firm Performance Christopher Clifford University of Kentucky Laura Lindsey Arizona State University December 2008

2 Blockholders as Monitors Separation of Ownership and control in public firms may lead to agency conflict between the firm s managers and owners Berle and s (1932), Jensen and Meckling (1976) Shareholders may monitor firm management to reduce this agency conflict, but there is a free-rider problem Grossman and Hart (1980) Large blockholders may be able to mitigate the free-rider problem Shleifer and Vishny (1986) Conflicting Evidence in Literature on Efficacy of Blockholders as Monitors December

3 Empirical Evidence on Monitoring Most evidence indicates that shareholder activism can prompt small changes in target firms governance structures, but has negligible impacts on share values and earnings. (Karpoff, 2001) Corporate Raiders Holderness and Sheehan (1985); Bethel, Liebeskind, and Opler (1998) Corporations Mikkelson and Ruback (1985); Allen and Phillips (2000) Pension Funds and Shareholder Groups Karpoff, Malatesta, and Walkling (1996); Wahal (1996); Del Guercio and Hawkins (1999); Opler and Sokobin (1995); Strickland, Wiles, and Zenner (1996); Barber (2006) Mutual Funds Parrino, Sias, and Starks (2003); Davis and Kim (2006) Hedge Funds Brav, Jiang, Partnoy, and Thomas (2008); Klein and Zur (2008); Clifford (2008) But blockholder organizations may themselves incur agency costs December

4 Our Approach Examine differences in operating (& stock price) performance for firms with different types of outside blockholders Include a variety of blockholder types Group by compensation associated with organizational form Active (13-D) and Passive Filings (13-G) Control for selection with econometric techniques to identify causal effects What we find: An outside blockholder has no effect on performance, but activist and high-incentive blockholders improve firm performance! December

5 Data S&P 1500 from 1996 to 2005 Hand-collected blockholdings from proxy statements following Dlugosz, et al. (2005) A blockholder is an investor who holds more than 5% of the company s equity Excluded insider blocks Categorized each blockholder by organizational form (e.g., other industrial corporation, mutual fund, hedge fund) Collected filing information on active (13D) versus passive holding (13G) Other sources: CRSP, Compustat, Execucomp, IRRC, IBES December

6 Distribution of Blockholder Types Organizational Form Number of Firm- Years 13-D / Active Filers 13-D / Active Filers (%) No Outside Block 1, Outside Block 9,166 1, % Corporation % Financial Institutions 3, % Mutual Fund / Inv. Advisor 7, % Pension % Professional Investor % Venture Capital % Private Equity % Hedge Fund % Low Incentive 12, % High Incentive 2, % High Incentive = Professional Investor, Venture Capital, Private Equity, Hedge Funds, (Corporations) December

7 Distribution of Blockholder Freq. Number of Blocks All Outside Blocks 15.5% 22.6% 25.6% 18.2% 11.0% 7.1% Active Blocks 85.4% 12.8% 1.5% 0.2% 0.1% 0.0% High Incentive Blocks 81.7% 14.7% 2.7% 0.7% 0.2% 0.0% High Incentive = Professional Investor, Venture Capital, Private Equity, Hedge Funds, (Corporations) December

8 Open Questions Does the presence of an outside blockholder, activist blockholder, or high-incentive blockholder matter for firm performance? Controlling for firm characteristics Controlling for endogeneity (self-selection) of blockholder presence How do these effects relate to other monitoring mechanisms? Firm Governance: Entrenchment and Anti-takeover Indices Market Following: Analyst Coverage December

9 Empirical Details Blockholders may select firms likely to outperform Empirical technique of Instrumental Variables controls for endogeneity of blockholder presence IV approach requires something correlated with the presence of 5% Blockholder (and Active or High Incentive Blockholders) but uncorrelated with performance residual Measures from 13-F filings: Institutional ownership, Average institution s ownership share Stock Liquidity Measures: Turnover, Bid-ask Spread Basic Specification: ROA t+1 -ROA t-1 = f(block t,, Active or High Incentive t, X t ) Block t = f(instruments, X t ) Active or High Incentive Block t = f(instruments, X t ) Errors: White (1981, clustered by firm) December

10 Variables of Interest and Controls Blockholder Variables Indicator for Outside 5% Blockholder Indicator for Active Blockholder (13-D filer) Indicator for High Incentive Blockholder Performance measures Change in industry-adjusted (FF30 median) ROA Long run abnormal stock returns (size and book to market adjusted) Company characteristics Firm Size (MV of Assets) Exec options characteristics R&D expenditures/ Assets Year Indicators Age (years public) (Lagged ROA) Book Leverage/ Assets Governance Indices Officer&Director Ownership Analyst Coverage December

11 Effects on Operating Performance ROA improves with the presence of High-Incentive Blocks and Activist Blocks... (controls) HAS OUTSIDE BLOCK HAS HIGH INCENTIVE BLOCK HAS ACTIVE BLOCK ROA ROA HAS OUTSIDE BLOCK N/A N/A N/A *** (-2.80) -81 (-0.29) HIGHINCENTIVE N/A N/A N/A *** N/A (5.06) N/A N/A N/A N/A *** (4.65) *** *** N/A N/A (1.61) (5.42) (4.40) *** ** N/A N/A (10.34) (0.55) (-2.12) *** N/A N/A (-3.18) (-0.45) (-0.36) (1.30) * (1.86) (1.10) N/A N/A Number of observations Hansen J Prob > Chi-sq Kleibergen-Paap rk LM Prob > Chi-sq F (20,1274), (18, 1274) Prob > F December

12 Effects on Long-Run Returns Also true for long-run abnormal returns LR ABNORMAL RETURNS (OLS) LR ABNORMAL RETURNS (OLS) LR ABNORMAL RETURNS (IV-GMM) LR ABNORMAL RETURNS (IV-GMM) HAS OUTSIDE BLOCK *** (3.92) *** (3.92) *** (-2.57) (-0.25) HIGHINCENTIVE N/A *** N/A (1.57) (5.25) N/A (1.29) N/A *** (4.37)... (controls) Number of observations Hansen J Prob > Chi-sq Kleibergen-Paap rk LM Prob > Chi-sq F (18,1335), (18, 1269) Prob > F December

13 Cumulative Abnormal Returns around filing dates Filing Type N CAR (-1,0) CAR (-1,+1) CAR (-1,30) CAR (-2,2) CAR (-5,5) CAR (-10,10) Active (13D) %*** 1.55%*** 3.62%*** 2.46%*** 3.72%*** 6.09%*** Passive (13G) Š no batches % 0.14% 0.19% 0.30% 0.26% -0.08% High Incentive Š no batches %*** 1.52%*** 4.41%*** 2.12%*** 3.50%*** 4.72%*** Low Incentive Š no batches % % -0.42% 0.19% -0.05% 0.39% after filing dates Filing Type N CAR (+1,2) CAR (+1,5) CAR (+1,30) CAR (+1,90) CAR (+1,125) CAR (+1,250) Active (13D) %* 1.67%** 2.23% 4.82% 7.33%** 18.70%*** Passive (13G) Š no batches % 0.18% 0.12% 1.10% 0.36% -1.64% High Incentive Š no batches %** 1.87%*** 3.17%*** 5.31%** 5.33%** 14.25%*** Low Incentive Š no batches % -0.05% -0.41% 0.51% 0.14% -2.71% December

14 How? As in hedge fund results, no evidence that performance comes through cash flow disciplining measures Unlike hedge fund results, no clear reduction in assets Ź Std. N Diff. Error. p-val N Diff. Ź CASH Passive Low Std. Error. p-val Active High PAYOUT Passive Low Active High LEVERAGE Passive Low Active High ASSETS Passive Low Active 1, High INVESTMENT Passive Low Active High December

15 Monitoring and Governance Do activist and high incentive blockholder effects relate to corporate governance in the firm? Can effective blockholder monitors substitute for good corporate governance? Add governance index to performance equation (as endogenous variable) Anti-takeover, Entrenchment, GIM Interact governance index with active and high-incentive blockholder measures Interaction term treated as exogenous December

16 Governance Index Interactions Efficacy of Activist (and High Incentive Blocks) are increasing in quality of governance ROA (ENTRENCH) HAS OUTSIDE BLOCK -60 (-0.16) HIGHINCENTIVE *** (2.83) ROA (ENTRENCH) ROA (EXTERNAL) ROA (EXTERNAL) (0.25) * (-1.73) (-1.32) N/A *** N/A (2.85) N/A ** N/A *** (2.44) (2.80) (-0.90) (-0.12) (-0.21) (0.68) ** ** *** *** (-2.54) (-2.25) (-2.62) (-2.61)... (controls) Number of observations Hansen J Prob > Chi-sq Kleibergen-Paap rk LM Prob > Chi-sq F (20,1144) Prob > F December

17 Monitoring and Market Attention Do activist and high incentive blockholder effects relate to other market monitoring mechanisms? Can effective blockholder monitors substitute for market monitoring? Add analyst coverage index to performance equation (as endogenous variable) Construct terciles of low to high analyst coverage Interact analyst coverage with active and high-incentive blockholder measures Interaction term treated as exogenous December

18 Analyst Coverage Interactions Efficacy of Activist (and High Incentive Blocks) are decreasing in market following ROA ROA HAS OUTSIDE BLOCK (-1.15) (-1.26) HIGHINCENTIVE ** N/A (2.36) N/A *** (3.07) (1.28) (1.09) ** (-2.31) *** (-3.02)... (controls) Number of observations Hansen J Prob > Chi-sq Kleibergen-Paap rk LM Prob > Chi-sq F (20,1268) Prob > F December

19 Note on Incentives Organizational forms differ by features other than use of carry Liquidity requirements Use of leverage Results not similar segmenting blockholder types based on clientele liquidity demands Results are similar segmenting blockholder types based on use of leverage, but also hold for low-leverage, high-carry blocks Work in progress Examining intra-organizational compensation characteristics (e.g., use of performance fees among mutual funds and investment advisors) Positive relation between the likelihood of pursuing activism and performance-based compensation December

20 Conclusions Open question as to what types of shareholders are effective as monitors and when they are most effective We find, intuitively, that incentives matter: there is a relation between incentive compensation and (a) efficacy as blockholder monitor and (b) likelihood to pursue activist strategies Intentions (filing choice) also accurately reveals type Not purely a hedge fund effect All regression results are robust to the exclusion of hedge funds from activist and high incentive blocks Activist Strategies are credible Performance improvements greater in well-governed firms (Activism complements good governance) Performance improvements greater in undiscovered firms (Activism may substitute for a market following) December

Hedge Fund Ownership, Board Composition and Dividend Policy in the Telecommunications Industry

Hedge Fund Ownership, Board Composition and Dividend Policy in the Telecommunications Industry Hedge Fund Ownership, Board Composition and Dividend Policy in the Telecommunications Industry Eric Haye 1 1 Anisfield School of Business, Ramapo College of New Jersey, Mawah, New Jersey, USA Correspondence:

More information

Conflicts of Interest and Monitoring Costs of Institutional Investors: Evidence from Executive Compensation

Conflicts of Interest and Monitoring Costs of Institutional Investors: Evidence from Executive Compensation Conflicts of Interest and Monitoring Costs of Institutional Investors: Evidence from Executive Compensation by Andres Almazan * University of Texas Department of Finance Austin, TX 78712-1179 (512) 471-5856

More information

Hostile Corporate Governance and Stock Liquidity

Hostile Corporate Governance and Stock Liquidity Hostile Corporate Governance and Stock Liquidity Vyacheslav (Slava) Fos University of Illinois at Urbana-Champaign EFMA 2014 Panel Session on Hedge Fund Activism Vyacheslav (Slava) Fos, UIUC Hostile Corporate

More information

Privately Negotiated Repurchases and Monitoring by Block Shareholders

Privately Negotiated Repurchases and Monitoring by Block Shareholders Privately Negotiated Repurchases and Monitoring by Block Shareholders Murali Jagannathan College of Management Binghamton University Binghamton, NY 607.777.4639 Muralij@binghamton.edu Clifford Stephens

More information

Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani. November 2015 ABSTRACT

Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani. November 2015 ABSTRACT Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani November 2015 ABSTRACT Activist hedge funds play a critical role in the market for corporate control. Activists foster acquisition

More information

Shareholder Activism in Europe

Shareholder Activism in Europe Shareholder Activism in Europe Jeremy Grant London Business School with Marco Becht ECARES, Université Libre de Bruxelles and ECGI Julian Franks London Business School and ECGI Federal Reserve Bank of

More information

Corporate Governance and Diversification*

Corporate Governance and Diversification* Corporate Governance and Diversification* Kimberly C. Gleason Dept of Finance Florida Atlantic University kgleason@fau.edu Inho Kim Dept of Finance University of Cincinnati Inho73@gmail.com Yong H. Kim

More information

Hedge Fund Activism and Corporate M&A Decisions #

Hedge Fund Activism and Corporate M&A Decisions # Hedge Fund Activism and Corporate M&A Decisions # Jennifer Wu a and Kee H. Chung b,* a Department of Business and Management, Wheaton College, Norton, MA 02766 b School of Management, State University

More information

What matters for Investor Activism: An Investigation of Activists Incentives vs. Activist Types

What matters for Investor Activism: An Investigation of Activists Incentives vs. Activist Types What matters for Investor Activism: An Investigation of Activists Incentives vs. Activist Types Ulf von Lilienfeld-Toal Luxembourg School of Finance, University of Luxembourg Jan Schnitzler Stockholm School

More information

Activism Mergers. Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani* October 2015 ABSTRACT

Activism Mergers. Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani* October 2015 ABSTRACT Activism Mergers Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani* October 2015 ABSTRACT Activist hedge funds play a central role in the market for corporate control. An activist campaign makes

More information

Acquiring Intangible Assets

Acquiring Intangible Assets Acquiring Intangible Assets Intangible assets are important for corporations and their owners. The book value of intangible assets as a percentage of total assets for all COMPUSTAT firms grew from 6% in

More information

Bachelor Thesis Hedge Fund Activism Value Creation or Destruction for the Target Firm?

Bachelor Thesis Hedge Fund Activism Value Creation or Destruction for the Target Firm? Bachelor Thesis Hedge Fund Activism Value Creation or Destruction for the Target Firm? ANR: s893416 Name: M.W.S. Jansen Supervisor: J. Guo Study program: Business Administration Specialisation: Finance

More information

Selection or Influence? Institutional Investors and Corporate Acquisitions

Selection or Influence? Institutional Investors and Corporate Acquisitions Selection or Influence? Institutional Investors and Corporate Acquisitions Lily Qiu This draft: October 2006 ABSTRACT This paper shows that the presence of large public pension fund shareholders particularly

More information

Ownership structure and corporate performance: empirical evidence of China s listed property companies

Ownership structure and corporate performance: empirical evidence of China s listed property companies Ownership structure and corporate performance: empirical evidence of China s listed property companies Qiulin Ke Nottingham Trent University, School of Architecture, Design and the Built Environment, Burton

More information

Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As

Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As Sources of Financing in Different Forms of Corporate Liquidity and the Performance of M&As Zhenxu Tong * University of Exeter Jian Liu ** University of Exeter This draft: August 2016 Abstract We examine

More information

Investor Dissatisfaction and Hedge Fund Activism

Investor Dissatisfaction and Hedge Fund Activism Investor Dissatisfaction and Hedge Fund Activism September 15, 2017 Abstract This paper utilizes a rich literature on institutional investors governance roles and develops simple measures of institutional

More information

Behind the Scenes: The Corporate Governance Preferences of Institutional Investors

Behind the Scenes: The Corporate Governance Preferences of Institutional Investors Behind the Scenes: The Corporate Governance Preferences of Institutional Investors Joseph McCahery Zacharias Sautner Laura Starks Rome June 26, 2014 Motivation Shareholder Activism An increasing phenomena

More information

CORPORATE GOVERNANCE AND PRODUCT MARKET COMPETITION

CORPORATE GOVERNANCE AND PRODUCT MARKET COMPETITION CORPORATE GOVERNANCE AND PRODUCT MARKET COMPETITION Sterling Huang and Urs Peyer* INSEAD First: 30 August 2010 Current: 5 July 2012 Abstract The objective of this study is to contribute to a better understanding

More information

Do Long-Term Investors Improve Corporate Decision Making?

Do Long-Term Investors Improve Corporate Decision Making? Do Long-Term Investors Improve Corporate Decision Making? Jarrad Harford (University of Washington) Ambrus Kecskés (York University) Sattar Mansi (Virginia Tech) Are long-term investors desirable for firms?

More information

The Market for Shareholder Voting Rights Around Mergers and Acquisitions: Evidence from Institutional Daily Trading and Voting

The Market for Shareholder Voting Rights Around Mergers and Acquisitions: Evidence from Institutional Daily Trading and Voting The Market for Shareholder Voting Rights Around Mergers and Acquisitions: Evidence from Institutional Daily Trading and Voting Jennifer E. Bethel* Babson College Babson Park, MA 02457 (781) 239-5797 Fax

More information

The Long-Run Performance of Sponsored and Conventional Spin-offs. April Klein. Stern School of Business. New York University. and.

The Long-Run Performance of Sponsored and Conventional Spin-offs. April Klein. Stern School of Business. New York University. and. The Long-Run Performance of Sponsored and Conventional Spin-offs by April Klein Stern School of Business New York University and James Rosenfeld Goizueta Business School Emory University Address Correspondence

More information

Firm Diversification and the Value of Corporate Cash Holdings

Firm Diversification and the Value of Corporate Cash Holdings Firm Diversification and the Value of Corporate Cash Holdings Zhenxu Tong University of Exeter* Paper Number: 08/03 First Draft: June 2007 This Draft: February 2008 Abstract This paper studies how firm

More information

Corporate Governance, Analyst Following, and Firm Behavior 1

Corporate Governance, Analyst Following, and Firm Behavior 1 Corporate Governance, Analyst Following, and Firm Behavior 1 Diana Knyazeva, University of Rochester Draft: January 2007 Abstract Since Jensen and Meckling (1976), the finance literature has studied the

More information

Corporate Governance and Firm Performance. Sanjai Bhagat. Brian J. Bolton. Leeds School of Business University of Colorado Boulder.

Corporate Governance and Firm Performance. Sanjai Bhagat. Brian J. Bolton. Leeds School of Business University of Colorado Boulder. Corporate Governance and Firm Performance Sanjai Bhagat Brian J. Bolton Leeds School of Business University of Colorado Boulder November 2005 PRELIMINARY AND INCOMPLETE PLEASE DO NOT QUOTE WITHOUT PERMISSION

More information

Liquidity and Shareholder Activism

Liquidity and Shareholder Activism Working Paper No. 1/2009 Liquidity and Shareholder Activism July 2009 Øyvind Norli, Charlotte Ostergaard and Ibolya Schindele Øyvind Norli, Charlotte Ostergaard and Ibolya Schindele 2009. All rights reserved.

More information

SHAREHOLDER ACTIVISM RESEARCH SPOTLIGHT David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business

SHAREHOLDER ACTIVISM RESEARCH SPOTLIGHT David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business SHAREHOLDER ACTIVISM RESEARCH SPOTLIGHT David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business KEY CONCEPTS Activist shareholders purchase shares

More information

Agency costs and corporate control devices in the Turkish manufacturing industry

Agency costs and corporate control devices in the Turkish manufacturing industry The current issue and full text archive of this journal is available at http://www.emerald-library.com Journal of Economic Studies 27,6 566 Agency costs and corporate control devices in the Turkish manufacturing

More information

Myopic Investor Myth Debunked: The Long-term Efficacy of Shareholder Advocacy

Myopic Investor Myth Debunked: The Long-term Efficacy of Shareholder Advocacy Myopic Investor Myth Debunked: The Long-term Efficacy of Shareholder Advocacy in the Boardroom Shane Goodwin Oklahoma State University shane.goodwin@okstate.edu Walter Slipetz Oklahoma State University

More information

Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance.

Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance. Ownership Concentration of Family and Non-Family Firms and the Relationship to Performance. Guillermo Acuña, Jean P. Sepulveda, and Marcos Vergara December 2014 Working Paper 03 Ownership Concentration

More information

Dividend policy, dividend initiations, and governance. Micah S. Officer *

Dividend policy, dividend initiations, and governance. Micah S. Officer * Dividend policy, dividend initiations, and governance Micah S. Officer * Marshall School of Business Department of Finance and Business Economics University of Southern California Los Angeles, CA 90089

More information

Tobin's Q and the Gains from Takeovers

Tobin's Q and the Gains from Takeovers THE JOURNAL OF FINANCE VOL. LXVI, NO. 1 MARCH 1991 Tobin's Q and the Gains from Takeovers HENRI SERVAES* ABSTRACT This paper analyzes the relation between takeover gains and the q ratios of targets and

More information

What Causes Passive Hedge Funds to Become Activists?

What Causes Passive Hedge Funds to Become Activists? What Causes Passive Hedge Funds to Become Activists? Marco Elia September 1, 2017 JOB MARKET PAPER Abstract About 20% of the total activist hedge funds positions are initiated as passive holdings, that

More information

What Causes Passive Hedge Funds to Become Activists?

What Causes Passive Hedge Funds to Become Activists? What Causes Passive Hedge Funds to Become Activists? Marco Elia * March 14, 2017 Abstract About 20% of the total activist hedge funds positions are initiated as passive holdings, that is without the intention

More information

Private placements and managerial entrenchment

Private placements and managerial entrenchment Journal of Corporate Finance 13 (2007) 461 484 www.elsevier.com/locate/jcorpfin Private placements and managerial entrenchment Michael J. Barclay a,, Clifford G. Holderness b, Dennis P. Sheehan c a University

More information

Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors. APRIL KLEIN and EMANUEL ZUR* ABSTRACT

Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors. APRIL KLEIN and EMANUEL ZUR* ABSTRACT Entrepreneurial Shareholder Activism: Hedge Funds and Other Private Investors APRIL KLEIN and EMANUEL ZUR* ABSTRACT We examine recent confrontational activism campaigns by hedge funds and other private

More information

Governance Mechanisms and Equity Prices 1

Governance Mechanisms and Equity Prices 1 Governance Mechanisms and Equity Prices 1 K. J. Martijn Cremers 2 International Center for Finance Yale School of Management & Vinay B Nair 3 Stern School of Business New York University First draft: Feb.

More information

INVESTORS & ACTIVISM. David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business

INVESTORS & ACTIVISM. David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business INVESTORS & ACTIVISM David F. Larcker and Brian Tayan Corporate Governance Research Initiative Stanford Graduate School of Business THE ROLE OF SHAREHOLDERS The shareholder-centric view holds that the

More information

Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani. October 31, 2016 ABSTRACT

Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani. October 31, 2016 ABSTRACT Activism Mergers * Nicole M. Boyson, Nickolay Gantchev, and Anil Shivdasani October 31, 2016 ABSTRACT Shareholder value creation from hedge fund activism occurs primarily by influencing takeover outcomes

More information

Hedge Fund Activism, Corporate Governance, and Firm Performance

Hedge Fund Activism, Corporate Governance, and Firm Performance Hedge Fund Activism, Corporate Governance, and Firm Performance ALON BRAV, WEI JIANG, FRANK PARTNOY, and RANDALL THOMAS * ABSTRACT Using a large hand-collected data set from 2001 to 2006, we find that

More information

Large Shareholder Turnover and CEO Compensation

Large Shareholder Turnover and CEO Compensation Large Shareholder Turnover and CEO Compensation Kyonghee Kim University of Pittsburgh, Pittsburgh PA February 2005 Abstract The corporate governance literature generally assumes that shareholders incentives

More information

Managerial Incentives and Corporate Leverage: Evidence from United Kingdom

Managerial Incentives and Corporate Leverage: Evidence from United Kingdom Managerial Incentives and Corporate Leverage: Evidence from United Kingdom Chrisostomos Florackis* and Aydin Ozkan ** *University of Liverpool, The Management School, Liverpool, L69 7ZH, Tel. +44 (0)1517953807,

More information

Essays on labor power and agency problem :values of cash holdings and capital expenditures, and accounting earnings informativeness

Essays on labor power and agency problem :values of cash holdings and capital expenditures, and accounting earnings informativeness Hong Kong Baptist University HKBU Institutional Repository Open Access Theses and Dissertations Electronic Theses and Dissertations 8-14-2015 Essays on labor power and agency problem :values of cash holdings

More information

Corporate Governance and the Value of Cash Holdings *

Corporate Governance and the Value of Cash Holdings * Corporate Governance and the Value of Cash Holdings * Amy Dittmar University of Michigan Jan Mahrt-Smith (Attending Author) University of Toronto First version: October 2004 This version: May 2005 Correspondence

More information

The Effect of Institutional Ownership on Firm Performance: Evidence from Jordanian Listed Firms

The Effect of Institutional Ownership on Firm Performance: Evidence from Jordanian Listed Firms International Journal of Economics and Finance; Vol. 7, No. 12; 2015 ISSN 1916-971X E-ISSN 1916-9728 Published by Canadian Center of Science and Education The Effect of Institutional Ownership on Firm

More information

Marketability, Control, and the Pricing of Block Shares

Marketability, Control, and the Pricing of Block Shares Marketability, Control, and the Pricing of Block Shares Zhangkai Huang * and Xingzhong Xu Guanghua School of Management Peking University Abstract Unlike in other countries, negotiated block shares have

More information

GOVERNANCE PROVISIONS AND MANAGERIAL ENTRENCHMENT: EVIDENCE FROM FORCED CEO TURNOVER OF ACQUIRING FIRMS

GOVERNANCE PROVISIONS AND MANAGERIAL ENTRENCHMENT: EVIDENCE FROM FORCED CEO TURNOVER OF ACQUIRING FIRMS GOVERNANCE PROVISIONS AND MANAGERIAL ENTRENCHMENT: EVIDENCE FROM FORCED CEO TURNOVER OF ACQUIRING FIRMS Tatyana Sokolyk Department of Economics and Finance University of Wyoming phone: (307) 766-4244 fax:

More information

Institutional Shareholders and Activist Investors

Institutional Shareholders and Activist Investors Institutional Shareholders and Activist Investors Professor David F. Larcker Center for Leadership Development & Research Stanford Graduate School of Business The Role of Shareholders The shareholder-centric

More information

Alon Brav *, Wei Jiang and Hyunseob Kim

Alon Brav *, Wei Jiang and Hyunseob Kim CHAPTER 7 HEDGE FUND ACTIVISM Alon Brav *, Wei Jiang and Hyunseob Kim Introduction During the past decade, hedge fund activism has emerged as a new type of corporate governance mechanism, capable of bringing

More information

What Causes Passive Hedge Funds to Become Activists?

What Causes Passive Hedge Funds to Become Activists? What Causes Passive Hedge Funds to Become Activists? Marco Elia November 28, 2018 Abstract About 20% of the total activist hedge funds positions are initiated as passive holdings, that is without the intention

More information

Cash holdings, corporate governance, and acquirer returns

Cash holdings, corporate governance, and acquirer returns Ahn and Chung Financial Innovation (2015) 1:13 DOI 10.1186/s40854-015-0013-6 RESEARCH Open Access Cash holdings, corporate governance, and acquirer returns Seoungpil Ahn 1* and Jaiho Chung 2 * Correspondence:

More information

Financial Flexibility and Corporate Cash Policy

Financial Flexibility and Corporate Cash Policy Financial Flexibility and Corporate Cash Policy Tao Chen, Jarrad Harford and Chen Lin * October 2013 Abstract: Using variations in local real estate prices as exogenous shocks to corporate financing capacity,

More information

Financial Flexibility and Corporate Cash Policy

Financial Flexibility and Corporate Cash Policy Financial Flexibility and Corporate Cash Policy Tao Chen, Jarrad Harford and Chen Lin * July 2013 Abstract: Using variations in local real estate prices as exogenous shocks to corporate financing capacity,

More information

Master in Finance. The effect of ownership structure on firm performance: Are mutual funds actually monitoring?

Master in Finance. The effect of ownership structure on firm performance: Are mutual funds actually monitoring? Master Thesis Finance The effect of ownership structure on firm performance: Are mutual funds actually monitoring? Abstract: In this thesis, the effect of mutual fund ownership on firm performance, as

More information

Hedge fund Activism. Updated tables and figures. Hyunseob Kim Johnson Graduate School of Management Cornell University Ithaca, NY 14853, USA

Hedge fund Activism. Updated tables and figures. Hyunseob Kim Johnson Graduate School of Management Cornell University Ithaca, NY 14853, USA Hedge fund Activism Updated tables and figures Alon Brav Fuqua School of Business Duke University Durham, NC 27708, USA Wei Jiang Columbia Business School New York, NY 10027, USA Hyunseob Kim Johnson Graduate

More information

Corporate Governance, Product Market Competition, and Payout Policy *

Corporate Governance, Product Market Competition, and Payout Policy * Seoul Journal of Business Volume 20, Number 1 (June 2014) Corporate Governance, Product Market Competition, and Payout Policy * HEE SUB BYUN **1) Korea Deposit Insurance Corporation Seoul, Korea JI HYE

More information

Mutual funds as monitors: Evidence from mutual fund voting

Mutual funds as monitors: Evidence from mutual fund voting Mutual funds as monitors: Evidence from mutual fund voting Angela Morgan a,*, Annette Poulsen b, Jack Wolf a, Tina Yang a a College of Business and Behavioral Science, Clemson University, Clemson, SC,

More information

What Drives the Earnings Announcement Premium?

What Drives the Earnings Announcement Premium? What Drives the Earnings Announcement Premium? Hae mi Choi Loyola University Chicago This study investigates what drives the earnings announcement premium. Prior studies have offered various explanations

More information

The Free Cash Flow Effects of Capital Expenditure Announcements. Catherine Shenoy and Nikos Vafeas* Abstract

The Free Cash Flow Effects of Capital Expenditure Announcements. Catherine Shenoy and Nikos Vafeas* Abstract The Free Cash Flow Effects of Capital Expenditure Announcements Catherine Shenoy and Nikos Vafeas* Abstract In this paper we study the market reaction to capital expenditure announcements in the backdrop

More information

Boards of directors, ownership, and regulation

Boards of directors, ownership, and regulation Journal of Banking & Finance 26 (2002) 1973 1996 www.elsevier.com/locate/econbase Boards of directors, ownership, and regulation James R. Booth a, Marcia Millon Cornett b, *, Hassan Tehranian c a College

More information

Firm R&D Strategies Impact of Corporate Governance

Firm R&D Strategies Impact of Corporate Governance Firm R&D Strategies Impact of Corporate Governance Manohar Singh The Pennsylvania State University- Abington Reporting a positive relationship between institutional ownership on one hand and capital expenditures

More information

Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation

Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation University of Massachusetts Boston From the SelectedWorks of Atreya Chakraborty January 1, 2010 Antitakeover amendments and managerial entrenchment: New evidence from investment policy and CEO compensation

More information

External Governance and Ownership Structure

External Governance and Ownership Structure External Governance and Ownership Structure Liang Ding, College of Business Administration, Kent State University, USA Aiwu Zhao, Department of Management and Business, Skidmore College, USA ABSTRACT External

More information

Monitoring with the Media: Social Media as a Corporate Governance Mechanism

Monitoring with the Media: Social Media as a Corporate Governance Mechanism Wesleyan University The Honors College Monitoring with the Media: Social Media as a Corporate Governance Mechanism by Joli Holmes Class of 2017 A thesis (or essay) submitted to the faculty of Wesleyan

More information

Large Shareholders and Corporate Policies *

Large Shareholders and Corporate Policies * Large Shareholders and Corporate Policies * Henrik Cronqvist The Ohio State University Fisher College of Business Department of Finance E-mail: cronqvist_1@cob.osu.edu Rüdiger Fahlenbrach The Ohio State

More information

Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT

Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT Can the Source of Cash Accumulation Alter the Agency Problem of Excess Cash Holdings? Evidence from Mergers and Acquisitions ABSTRACT This study argues that the source of cash accumulation can distinguish

More information

Firm Locations and Takeover Likelihood *

Firm Locations and Takeover Likelihood * Firm Locations and Takeover Likelihood * Ye Cai Leavey School of Business Santa Clara University Santa Clara, CA 95053 ycai@scu.edu (408) 554-5157 Xuan Tian Kelley School of Business Indiana University

More information

The Power of Reputation: Hedge Fund Activists

The Power of Reputation: Hedge Fund Activists The Power of Reputation: Hedge Fund Activists Emanuel Zur Stern School of Business New York University 44 West 4 th Street Suite 10-173 New York, NY 10012 ezur@stern.nyu.edu Job Market Paper December 21,

More information

Stock price synchronicity and the role of analyst: Do analysts generate firm-specific vs. market-wide information?

Stock price synchronicity and the role of analyst: Do analysts generate firm-specific vs. market-wide information? Stock price synchronicity and the role of analyst: Do analysts generate firm-specific vs. market-wide information? Yongsik Kim * Abstract This paper provides empirical evidence that analysts generate firm-specific

More information

Hedge Fund Activism and Internal Capital Markets

Hedge Fund Activism and Internal Capital Markets Hedge Fund Activism and Internal Capital Markets Sehoon Kim Warrington College of Business University of Florida March, 2018 Abstract Hedge fund activism improves the internal capital allocation efficiency

More information

Insider Activism. March Abstract

Insider Activism. March Abstract Insider Activism Mitch Towner Aazam Virani March 2017 Abstract We show that inside shareholders use activist tactics to influence firm policies, which we term insider activism. We contrast insider activism

More information

Board Quality and the Cost and Covenant Terms of Bank Loans

Board Quality and the Cost and Covenant Terms of Bank Loans Board Quality and the Cost and Covenant Terms of Bank Loans By L. Paige Fields, Texas A&M University Mays Business School Department of Finance 351N Wehner Building College Station, Texas 77843-4218 (979)

More information

Board ownership and corporate governance indices

Board ownership and corporate governance indices Board ownership and corporate governance indices Sanjai Bhagat & Brian Bolton University of Colorado at Boulder September 2006 Abstract How is corporate governance measured? What is the relation between

More information

Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies

Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies Stronger Risk Controls, Lower Risk: Evidence from U.S. Bank Holding Companies Andrew Ellul 1 Vijay Yerramilli 2 1 Kelley School of Business, Indiana University 2 C. T. Bauer College of Business, University

More information

Executive Option Repricing, Incentives, and Retention

Executive Option Repricing, Incentives, and Retention THE JOURNAL OF FINANCE VOL. LIX, NO. 3 JUNE 2004 Executive Option Repricing, Incentives, and Retention MARK A. CHEN ABSTRACT While many firms grant executive stock options that can be repriced, other firms

More information

CEO Centrality. NELLCO Legal Scholarship Repository NELLCO. Lucian Bebchuk Harvard Law School. Martijn Cremers. Urs Peyer

CEO Centrality. NELLCO Legal Scholarship Repository NELLCO. Lucian Bebchuk Harvard Law School. Martijn Cremers. Urs Peyer NELLCO NELLCO Legal Scholarship Repository Harvard Law School John M. Olin Center for Law, Economics and Business Discussion Paper Series Harvard Law School 11-6-2007 CEO Centrality Lucian Bebchuk Harvard

More information

Hedge Fund Activism and Internal Capital Markets

Hedge Fund Activism and Internal Capital Markets Hedge Fund Activism and Internal Capital Markets Sehoon Kim Warrington College of Business University of Florida October, 2017 Abstract This paper studies the impact of hedge fund activism on target companies

More information

Lecture 4 Shareholders II and Market for Corporate Control. Prof. Daniel Sungyeon Kim

Lecture 4 Shareholders II and Market for Corporate Control. Prof. Daniel Sungyeon Kim Lecture 4 Shareholders II and Market for Corporate Control Prof. Daniel Sungyeon Kim Hedge Fund Activism Who are Hedge Funds? Why are Hedge Funds different? Activist Hedge Funds Academic research The Market

More information

Voting with their Feet or Activism? Institutional Investors Impact on CEO Turnover

Voting with their Feet or Activism? Institutional Investors Impact on CEO Turnover Current Draft: September 30, 2011 Voting with their Feet or Activism? Institutional Investors Impact on CEO Turnover Jean Helwege Moore College of Business 1705 College Street University of South Carolina

More information

Is Ownership Really Endogenous?

Is Ownership Really Endogenous? Is Ownership Really Endogenous? Klaus Gugler * and Jürgen Weigand ** * (Corresponding author) University of Vienna, Department of Economics, Bruennerstrasse 72, 1210 Vienna, Austria; email: klaus.gugler@univie.ac.at;

More information

Analysts and Hedge Fund Activism

Analysts and Hedge Fund Activism Analysts and Hedge Fund Activism Ryan Flugum John S. Howe July 31, 2017 Abstract Using a sample of hedge fund activist events from the years 2001 to 2014, we assess analysts reaction to hedge fund activism

More information

Financial Flexibility and Corporate Cash Policy

Financial Flexibility and Corporate Cash Policy Financial Flexibility and Corporate Cash Policy Tao Chen, Jarrad Harford and Chen Lin * April 2014 Abstract: Using variations in local real estate prices as exogenous shocks to corporate financing capacity,

More information

RELATIONAL INVESTING AND FIRM PERFORMANCE. Sanjai Bhagat. University of Colorado at Boulder. Bernard Black. Stanford University.

RELATIONAL INVESTING AND FIRM PERFORMANCE. Sanjai Bhagat. University of Colorado at Boulder. Bernard Black. Stanford University. RELATIONAL INVESTING AND FIRM PERFORMANCE Sanjai Bhagat University of Colorado at Boulder Bernard Black Stanford University Margaret Blair Georgetown University Law School July 2001 We thank seminar participants

More information

Active Institutional Shareholders and Costs of Monitoring: Evidence from Executive Compensation

Active Institutional Shareholders and Costs of Monitoring: Evidence from Executive Compensation Active Institutional Shareholders and Costs of Monitoring: Evidence from Executive Compensation Andres Almazan, Jay C. Hartzell, and Laura T. Starks* Although evidence suggests that institutional investors

More information

FAMILY OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE: ARE SHAREHOLDERS REALLY BETTER OFF? Rama Seth IIM Calcutta

FAMILY OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE: ARE SHAREHOLDERS REALLY BETTER OFF? Rama Seth IIM Calcutta FAMILY OWNERSHIP CONCENTRATION AND FIRM PERFORMANCE: ARE SHAREHOLDERS REALLY BETTER OFF? Rama Seth IIM Calcutta INTRODUCTION The share of family firms contribution to global GDP is estimated to be in the

More information

Multiple Blockholdings and Auditor Behavior

Multiple Blockholdings and Auditor Behavior Multiple Blockholdings and Auditor Behavior K.K. Raman 1, Chunlai Ye 2, Lin-Hui Yu 3 ABSTRACT This paper examines whether multiple blockholdings are associated with auditor behavior. Using a sample of

More information

Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion. Harry Feng a Ramesh P. Rao b

Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion. Harry Feng a Ramesh P. Rao b Cash holdings and CEO risk incentive compensation: Effect of CEO risk aversion Harry Feng a Ramesh P. Rao b a Department of Finance, Spears School of Business, Oklahoma State University, Stillwater, OK

More information

Managerial Entrenchment and Debt Maturity: Theory and Evidence

Managerial Entrenchment and Debt Maturity: Theory and Evidence Managerial Entrenchment and Debt Maturity: Theory and Evidence Efraim Benmelech Harvard University and NBER I thank Douglas Baird, George Baker, Patrick Bolton, Lauren Cohen, Doug Diamond, Oliver Hart,

More information

Does Experience Matter for Hedge Fund Managers? Effects of Industry Expertise on Hedge Fund Activism

Does Experience Matter for Hedge Fund Managers? Effects of Industry Expertise on Hedge Fund Activism Does Experience Matter for Hedge Fund Managers? Effects of Industry Expertise on Hedge Fund Activism Ivan E. Brick, Yuzi Chen, Jun-Koo Kang, and Jin-Mo Kim * This Version: August 2018 Preliminary Draft.

More information

Public versus Private Provision of Governance: The Case of Proxy Access

Public versus Private Provision of Governance: The Case of Proxy Access Public versus Private Provision of Governance: The Case of Proxy Access Tara Bhandari Peter Iliev Jonathan Kalodimos March 14, 2016 Abstract We use a unique setting to study the efficiencies and frictions

More information

Activist Hedge Funds and Firm Disclosure

Activist Hedge Funds and Firm Disclosure Activist Hedge Funds and Firm Disclosure Jing Chen School of Management University at Buffalo 239 Jacobs Management Center Buffalo, NY 14260-4000 jchen229@buffalo.edu Michael J. Jung* Leonard N. Stern

More information

Appendix: The Disciplinary Motive for Takeovers A Review of the Empirical Evidence

Appendix: The Disciplinary Motive for Takeovers A Review of the Empirical Evidence Appendix: The Disciplinary Motive for Takeovers A Review of the Empirical Evidence Anup Agrawal Culverhouse College of Business University of Alabama Tuscaloosa, AL 35487-0224 Jeffrey F. Jaffe Department

More information

Empirical Methods for Corporate Finance. Regression Discontinuity Design

Empirical Methods for Corporate Finance. Regression Discontinuity Design Empirical Methods for Corporate Finance Regression Discontinuity Design Basic Idea of RDD Observations (e.g. firms, individuals, ) are treated based on cutoff rules that are known ex ante For instance,

More information

Appendixes Appendix 1 Data of Dependent Variables and Independent Variables Period

Appendixes Appendix 1 Data of Dependent Variables and Independent Variables Period Appendixes Appendix 1 Data of Dependent Variables and Independent Variables Period 1-15 1 ROA INF KURS FG January 1,3,7 9 -,19 February 1,79,5 95 3,1 March 1,3,7 91,95 April 1,79,1 919,71 May 1,99,7 955

More information

Coordination Costs, Institutional Investors, and Firm Value

Coordination Costs, Institutional Investors, and Firm Value Coordination Costs, Institutional Investors, and Firm Value Abstract Coordination costs among institutional investors have a signi cant impact on corporate governance and rm value. We use two measures,

More information

Two essays on Corporate Restructuring

Two essays on Corporate Restructuring University of South Florida Scholar Commons Graduate Theses and Dissertations Graduate School January 2012 Two essays on Corporate Restructuring Dung Anh Pham University of South Florida, dapham@usf.edu

More information

The Effect of Local Holdings on Audit Policy and Outcomes *

The Effect of Local Holdings on Audit Policy and Outcomes * Seoul Journal of Business Volume 17, Number 2 (December 2011) The Effect of Local Holdings on Audit Policy and Outcomes * BOK BAIK **1) Seoul National University Seoul, Korea Abstract This paper examines

More information

The Impact of Ownership Structure on Capital Structure and Firm Value: Evidence from the KSE-100 Index Firms

The Impact of Ownership Structure on Capital Structure and Firm Value: Evidence from the KSE-100 Index Firms The Impact of Ownership Structure on Capital Structure and Firm Value: Evidence from the KSE-100 Index Firms Hamidullah and Attaullah Shah Abstract The crux of this paper is the joint determination of

More information

The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings

The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings The Effect of Financial Constraints, Investment Policy and Product Market Competition on the Value of Cash Holdings Abstract This paper empirically investigates the value shareholders place on excess cash

More information

Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns

Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns Thriving on a Short Leash: Debt Maturity Structure and Acquirer Returns Abstract This research empirically investigates the relation between debt maturity structure and acquirer returns. We find that short-term

More information

Michael Farrell. A Thesis. The John Molson School of Business. Presented in Partial Fulfillment of the Requirements

Michael Farrell. A Thesis. The John Molson School of Business. Presented in Partial Fulfillment of the Requirements Institutional Ownership and Firm Performance: Evidence From Canada Michael Farrell A Thesis in The John Molson School of Business Presented in Partial Fulfillment of the Requirements for the Degree of

More information