REINCORPORATION: MOTIVES AND SHAREHOLDER WEALTH

This study provides evidence on the wealth effects of reincorporation and the association of these wealth effects with motives to change the state of incorporation. There are no wealth effects observed on the announcement of the change for shareholders of corporations that change as part of a set of measures to defend against a pending or possible hostile takeover. However, for corporations that reincorporate without stated antitakeover intentions, a positive reaction is observed at the announcement of the change. These results indicate that the defensive posture assumed by reincorporating may offset other positive effects of the change in corporate charters.     

DIVESTITURE TO UNIT MANAGERS AND SHAREHOLDER WEALTH

The impact on shareholder wealth from selling units to management is examined. The two-day announcement period average abnormal return for parent firms divesting units to managers of those units is positive (0.80 percent) and significant. On average, the impact on shareholder wealth of parent firms divesting assets to managers of the unit is similar to the shareholder wealth effect for divestiture to third parties.     

SHAREHOLDER WEALTH EFFECTS OF MANAGEMENT CHANGES

This paper analyzes the direction and magnitude of changes in stock prices resulting from the announcement of various types of changes in senior corporate management over a twelve-year period. We find support for the view that instability resulting from executive succession adversely affects organizational performance. Furthermore, our results imply a clear preference by the market for a change in composition of the previous management team over its further entrenchment and a perception by the market that senior corporate executives and the board of directors may not be solely motivated by considerations of shareholder wealth maximization.     

THE SHAREHOLDER WEALTH EFFECTS OF MONOPOLIES AND MERGERS COMMISSION DECISIONS

This paper presents an analysis of the policy of the UK's Monopolies and Mergers Commission using stock market data. Stock price reactions to regula-tory intervention by the Monopolies and Mergers Commission might be expected to reflect two sorts of factors. Firstly, the impact of the intervention on the possibility of bidders extracting monopoly profits from consumers. Secondly, the possibility that the subsequent investigation of the bid by the Monopolies and Mergers Commission will raise the cost of a bid, which may not necessarily be in the shareholder's interests, and so cause such bids to be abandoned. Studying a sample of some 53 bids, investigated by the Commission in the period 1976–90, little evidence was found that the Commission halts bids that are likely to result in monopoly profits to the bidder but there was some weak evidence that non-shareholder wealth maximising bids are abandoned as a result of the Monopolies and Mergers Commission intervention.     

THE IMPACT OF SALE-LEASEBACKS TRANSACTIONS ON BONDHOLDER AND SHAREHOLDER WEALTH

Prior research has shown that a sale and leaseback transaction (SLBT) results in positive average abnormal returns to the lessee's common stockholders. Researchers have conjectured that this could be due to SLBT tax benefits or due to a wealth transfer from bondholders (since after the SLBT it is possible that fewer assets remain as collateral). This study shows that bondholders do not lose in SLBT's and confirms previous results showing that stockholders gain from sale leaseback transactions. The results are consistent with the position that bondholders write provisions to protect their rights to the underlying assets, resulting in no wealth transfer from bondholders to stockholders when the firm sells off assets and leases them back.     

THE ADOPTION OF NEW-ISSUE DIVIDEND REINVESTMENT PLANS AND SHAREHOLDER WEALTH

This study examines security price reactions to the adoption of new-issue dividend reinvestment plans. The sample is broken down into three subsamples: nonutilities, utilities adopting plans prior to May 1981, and utilities adopting plans after July 1981. For the nonutility corporations, no significant market reaction is observed. The utilities adopting prior to the change in the tax law experience a negative reaction the day following registration for the plan. Corporations adopting after July 1981, whose dividends receive preferential tax treatment, experience abnormal returns significantly greater than those of the utilities without preferential tax treatment.     

THE SHAREHOLDER WEALTH EFFECTS OF CORPORATE GREENMAIL

In this study, the abnormal return dynamics of firms undertaking premium targeted block share repurchases are examined empirically. The positive returns accruing to nonparticipating shareholders for the period encompassing the buy-in and repurchase announcements are attributable to the expectation of subsequent acquisition activity. Firms that are not acquired realize, on average, a zero abnormal return. The probability of subsequent acquisition is not related to the targeted repurchase. Managers who engage in targeted block share repurchases frequently are expelled from corporate ranks. Firms that are acquired exhibit abnormal returns only similar to those of other merger and tender offer targets.     

THE SHAREHOLDER WEALTH EFFECTS OF CALPERS' FOCUS LIST

Shareholder activism can help to protect shareholder value by promoting sound corporate governance practices. As an active institutional investor, CalPERS takes its role in the corporate governance process very seriously. In addition to many other initiatives, CalPERS publishes each year a list of six to twelve public companies with poor corporate governance principles and poor financial performance—its well-known "Focus List"—in the hope that the managements of these companies will be motivated to improve their performance and increase shareholder value for CalPERS and their other equity owners.
In an attempt to assess the effectiveness of CalPERS' governance program, the authors examine the market impact of the Focus List and find that companies on the list experience positive excess stock returns of about 12% over the three months following release of the list. Moreover, this wealth effect is even greater for companies with a large, widely dispersed shareholder base, as might be expected given the relative inability of such shareholders to act collectively.     

THE EFFECT OF TRADED OPTION INTRODUCTION ON SHAREHOLDER WEALTH

Several authors suggest that the opening of a market in traded options constitutes a “feasibility-expanding” change. In this paper evidence on changes in the price of underlying stocks at the time of option listing is examined to determine whether option listing constitutes such a change. Evidence supports the hypothesis that call option listing is feasibility expanding, that put option listing is not feasibility expanding, and that call listings closer to the initiation of organized option trading have a larger impact relative to later listings.     

DEBT REFUNDING AND SHAREHOLDER WEALTH: THE PRICE EFFECTS OF DEBT-FOR-DEBT EXCHANGE OFFER ANNOUNCEMENTS

This study examines the impact of debt refunding on common stock prices for a sample of 48 exchange offers announced from 1970 through 1981. Exchange offer announcements do not have a significant impact on average common stock returns but appear to produce idiosyncratic share price effects. Refunding-induced price effects were unrelated to several exchange offer characteristics including tax shield increases, exchange offer premia, and transaction costs of refunding. Common stock excess returns were negatively related to reductions in debt service payments and relaxation of dividend payment constraints. Thus, the evidence is consistent with theories predicting that certain debt refundings generate negative information-signaling price effects.