Common Stock Returns in Corporate Takeover Bids: The Case of Brokerage House Acquisitions

This paper examines the common stock returns of three groups of bidders that purchased brokerage houses. Only in the cases of horizontal mergers, one brokerage house purchasing another, are there abnormal returns associated with the purchase. Neither bank holding company bidders nor non-financial bidders gain significantly when purchasing a brokerage house. Bank holding company bidders face considerable regulatory delays, and these economic disturbances may eliminate their gains. Bank holding company expansion into these non-bank activities does not appear, at the time of announcement, to either hurt or benefit them; hence, this expansion does not appear to further the loss exposure of the Federal Deposit Insurance Corporation.     

Dividend Imputation and Shareholder Wealth: The Case of New Zealand

On April 1, 1988, New Zealand stopped the double taxation of dividends by implementing a full dividend imputation program. Because many believed that the tax advantage of debt had led to more highly leveraged firms subject to greater financial risk than was socially optimal, it was hoped the removal of incentives to finance with debt would result in a more efficient allocation of capital. The empirical results suggest that the shareholder wealth gain from dividend imputation was more than offset in firms with large debt levels. Moreover, an examination of debt ratios indicates debt levels declined in the post–imputation period.     

Resolving Information Asymmetry Through Contractual Risk Sharing: The Case of Private Firm Acquisitions

When private firms are acquired, buyers commonly rely on seller financing and earnouts. Using a novel database of private acquisitions, I find that seller financing and earnouts become more common as information asymmetry increases between the acquirer and the target. Financial statement audits of the targets attenuate these results, which suggests that audits decrease information asymmetry in firm acquisitions. Seller-financed acquisitions also close faster and at higher prices, reducing the private firm discount. These findings suggest that these contract structures are an important channel through which privately held firms mitigate adverse selection that arises from information asymmetry.     

The Effect of Corporate Multinationalism on Shareholders' Wealth: Evidence from International Acquisitions

This study presents direct evidence on the effect of international acquisitions on stock prices of U.S. bidding firms. Shareholders of MNCs not operating in the target firm's country experience significant positive abnormal returns at the announcement of international acquisitions. Shareholders of U.S. firms expanding internationally for the first time experience insignificant positive abnormal returns, while shareholders of MNCs operating already in the target firm's country experience insignificant negative abnormal returns. The abnormal returns are larger when firms expand into new industry and geographic markets—especially those less developed than the U.S. economy. The evidence is consistent with the theory of corporate multinationalism, predicting an increase in the firm's market value from the expansion of its existing multinational network.     

Bondholder Wealth Effects in Mergers and Acquisitions: New Evidence from the 1980s and 1990s

We examine the wealth effects of mergers and acquisitions on target and acquiring firm bondholders in the 1980s and 1990s. Consistent with a coinsurance effect, below investment grade target bonds earn significantly positive announcement period returns. By contrast, acquiring firm bonds earn negative announcement period returns. Additionally, target bonds have significantly larger returns when the target's rating is below the acquirer's, when the combination is anticipated to decrease target risk or leverage, and when the target's maturity is shorter than the acquirer's. Finally, we find that target and acquirer announcement period bond returns are significantly larger in the 1990s.     

Volatility Implied by Option Prices: The Case of Takeover Bids

We model the effect of an impending share price jump on the implied standard deviation (ISD) of a company's options, testing the model by investigating its predictive ability for ISDs of companies subject to a takeover bid. Our model fits the observed ISDs well for all but certain deep in-the-money options. However, the model demonstrates that a discontinuity in the relationship between moneyness and the ISD both explains the combination of high and zero ISDs exhibited by these options, and impairs the predictive power of the model at these levels of moneyness.     

The Information Content of Defence Documents in UK Hostile Takeover Bids

This study examines the defence documents of 79 hostile take-over bids of publicly quoted companies in the UK during the period 1988–1990 using logit regression and discriminant analysis to determine if any of the 41 identified characteristics of the defence document and seven continuous control variables lead to a higher or lower probability of a successful defence. The study finds that managers in target companies are unable to introduce new information in their defence documents that materially affects the outcome of a bid. This suggests that managers may advise shareholders to reject a bid for other reasons, such as to drive up the offer price.     

Waves and Determinants in Mergers and Acquisitions: The Case of Latin America

This article contributes to the current literature on mergers and acquisitions (M&As) by identifying the existence of waves and the determinants of M&A activity in the economies of Argentina, Brazil, Chile, Colombia, Mexico, and Peru. From a sample of 2,391 M&A announcements reported by Thomson One on these countries, applying the methodology proposed by Harford (2005), evidence of M&A waves is found for the periods 1995–2002 and 2003–2010, as reported for other regions in various international studies. After controlling for economic and business environment variables, as well as for profitability and book-to-market variables at the industry level, we find evidence that supports neoclassical theory as a main explanation for M&A activity but not for the misvaluation effect.     

Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs

We explore how compensation policies following mergers affect a CEO's incentives to pursue a merger. We find that even in mergers where bidding shareholders are worse off, bidding CEOs are better off three quarters of the time. Following a merger, a CEO's pay and overall wealth become insensitive to negative stock performance, but a CEO's wealth rises in step with positive stock performance. Corporate governance matters; bidding firms with stronger boards retain the sensitivity of their CEOs' compensation to poor performance following the merger. In comparison, we find that CEOs are not rewarded for undertaking major capital expenditures.     

Corporate Control and the Choice of Investment Financing: The Case of Corporate Acquisitions

We test the proposition that corporate control considerations motivate the means of investment financing—cash (and debt) or stock. Corporate insiders who value control will prefer financing investments by cash or debt rather than by issuing new stock which dilutes their holdings and increases the risk of losing control. Our empirical results support this hypothesis: in corporate acquisitions, the larger the managerial ownership fraction of the acquiring firm the more likely the use of cash financing. Also, the previously observed negative bidders' abnormal returns associated with stock financing are mainly in acquisitions made by firms with low managerial ownership.     

Cost Information in the New Public-Sector Environment: Cost Accounting Change in a State-Owned Hospital

This paper reports on a case study of the utilisation and users of cost information in a state-owned teaching and research hospital in Australia. The findings indicate that the current utilisation of the cost information resides primarily at higher executive and managerial levels of the organisation. Organisational change, particularly pressure for improved productivity and competitiveness driven by public-sector reforms in Australia, is significantly filtering down throughout the subject hospital. Various productive and unproductive ways that cost information is used, and impediments to the use of costing information in the hospital setting, are identified.     

非正规金融与正规金融协同性的实证分析:温州案例

许多实证研究表明,非正规金融与正规金融具有相互影响、相互补充、相互协作的关系.本文把这种关系定义为协同性.本文通过对民间金融发达的温州市的个案研究,证明了非正规金融与正规金融具有显著的协同性关系.这种关系不仅体现在对中小企业资金来源的供给结构上,还表现在利率变化与融资规模上.在此基础上,对这种协同性关系进行了理论归纳,最后是结论:要给非正规金融必要的制度空间;完善这种协同性关键是要发挥民间金融市场化的机制,避免政府直接干预;还须考虑金融生态环境因素的影响.     

A Re-Examination of the Wealth Expropriation Hypothesis: The Case of Captive Finance Subsidiaries

This paper re-examines Kim, McConnell, and Greenwood's (1977) study of captive finance subsidiaries. We suggest that, as long as firms are concerned with reputation, shareholders will find it costly to engage in deliberate wealth expropriation and thus have no incentives to do so. Using a sample of fourteen firms with publicly traded debt, we compute and test the statistical significance of abnormal returns to shareholders, bondholders, and the firm when captives are incorporated. We find that shareholders gain 14.9 percent, bondholders lose 2.3 percent, and firm value increases a significant 10.4 percent. Our results are inconsistent with wealth expropriation and lend support to the importance of reputation to firms.     

Coping with Technological Change: The Case of Retail

Functional obsolescence in real estate occurs because of technological change. A theoretical model suggests that the early years of building life are characterized by functional obsolescence that is undiminished by reinvestment (cures in appraisal terminology). Later, observable functional obsolescence is eliminated by cures. A national, proprietary data set consisting of department store sales is utilized to test these propositions. The test is structured within a hedonic model in which the effect of age represents functional obsolescence and technological change, while other variables control for physical condition and location quality. The empirical results do not permit the rejection of the hypotheses developed from the theory. The measured rate of techological change in retail real estate is 1.7 percent per annum.     

制度安排与会计信息质量——红光实业的案例分析

本文对会计信息失真、特别是违法造假的会计信息失真现象 ,以四川红光实业公司的案例为分析对象 ,从我国现有制度安排的角度进行分析。分析认为 ,现有的制度安排本身排斥高质量的会计信息 ,并诱发会计信息违法性失真。本文分析的政策性意义在于 :会计信息失真的治理 ,不仅仅是一部《会计法》或相应的会计技术规范所能解决的 ,相关的法律制度安排等才是解决会计信息失真的治本之举     

European Rule-making in Accounting: The Seventh Directive as a Case Study

This paper analyses EC rule-making, using the Seventh Directive as a case study. Three stages of a Directive's life are identified, with different key players taking the lead. The paper analyses the evolution of the Seventh Directive up to its adoption in 1983, looking at 19 key features. The adopted Directive is close to previous UK consolidation practices, but investigation shows that, from its origins in the late 1960s to the published drafts of the late 1970s, it showed clear German parentage. The coalition of forces leading to the major changes from German to UK practices is examined.     

Stock and Bond Return Comovement as a Different Way to Assess Information Content: The Case of Debt Covenant Violation Disclosures

We propose a supplementary way to assess the information content of a financial statement disclosure based on the comovement of asset returns in different markets in response to information that has price implications for both. The influence of a signal that strongly influences at least two asset markets measures a dimension of information content less clearly reflected in single‐market responses. We apply our method to debt covenant violation (DCV) disclosures. These are the outcome of a debt renegotiation when the covenant promises in a debt agreement to manage the agency costs of debt are broken. We find that stock and bond return comovement is highest one day before DCV disclosure and differs depending on whether the debt covenant is waived or not waived. We find that stock and bond return comovement in the days following a DCV disclosure decreases more for non‐waiver disclosures than for waiver disclosures. This supports the theory that a non‐waiver outcome shifts control rights and bargaining power to the creditors. Consistent with this theory, single‐market tests show that bonds with a non‐waiver disclosure versus a waiver disclosure earn positive excess returns following a DCV disclosure whereas the reverse is true for stocks.     

Change and Decision-Making in the NHS: The Case of the Care Programme Approach

Using the Care Programme Approach (CPA) as an example, this article examines the difficulties of implementing change within the National Health Service (NHS). A framework is suggested which aims to clarify the nature of change by distinguishing where, when and how decisions are made. It is argued that structural change in the NHS and the related emergence of new institutions, systems, relationships and operational principles, have generated new uncertainties and ambiguities. A fuller appreciation of how the decision-making process operates is necessary to an understanding of how different policy objectives are pursued.