Excess control and the risk of corporate expropriation: Canadian evidence

Corporate governance in Canada was examined by looking at the ultimate ownership structure of a large sample of publicly traded firms. Results suggest that small investors in Canada are vulnerable to corporate expropriation in large firms. Despite the similarities in institutional indexes, Canada displays different patterns of ownership structure than sister Anglo‐Saxon countries (the U.S. and the U.K). More importantly, results suggest that excess control drives expropriation over and above the typical Jensen type of agency problems that are attributable to regular separation of ownership and control. Equally important, firms headquartered in Quebec appear to be undervalued vis‐à‐vis firms headquartered in the rest of Canada. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Canadian takeover announcements and the job security of top managers

This study measures the turnover rate of top managers (Chief Executive Officers or Presidents) in acquisition targets following the public announcements of takeovers in Canada. Turnover rates following the announcements of completed and unsuccessful takeover attempts did not differ from each other but were higher than the norm for CEOs from a control group of nontarget firms. The turnover rate was particularly high for widely‐held firms and negatively correlated with the preannouncement performance of the targets. Overall, results suggest that a major objective of takeovers in Canada is to reduce management failings, inefficiency, and agency costs. Copyright © 2007 ASAC. Published by John Wiley & Sons, Ltd.     

Governance and the decision to issue a profit warning

The theoretical concept of agency costs developed by Jensen and Meckling (1976) and Jensen (2005) are used to study the relationship between the quality of a firm's governance and its decision to issue a profit warning (PW) when it is overvalued. Based on a sample of Canadian companies between 2000 and 2004, results were only partially supportive of the hypotheses. The characteristics of the board seem to play only a secondary role in the decision to issue a profit warning when the firm is overvalued. On the other hand, as expected, governance mechanisms that factor in market values to align the interests of managers and directors with those of shareholders are negatively related to the profit warning decision. Copyright © 2008 ASAC. Published by John Wiley & Sons, Ltd.     

Compensation of owner managers in Canadian family‐owned businesses: expropriation of minority shareholders

The aim of this paper is to test the hypothesis of owner managers expropriating minority shareholders by receiving excessive compensation. Using a sample of Canadian family firms, we found that when there is divergence between voting rights and cash flow rights, owner CEOs receive higher compensation than non‐owners. The higher the divergence between voting rights and cash flow rights, the higher the excess compensation. Further analysis shows that only poorly governed firms are affected by the expropriation problem. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

Consequences of the halloween nightmare: analysis of investorsõ response to an overnight tax legislation change in the canadian income trust sector

On October 31, 2006, the Canadian federal government announced increased taxation of income trusts, beginning in 2011. Using discounted cash flow analysis, we investigated timing of the market adjustment. Energy, utility, and business trust prices dropped by predicted amounts, indicating a rational market response. Following the announcement, however, affected sectors reacted differently: Energy and utility trusts were more likely to merge within their sectors while business trusts became private equity targets. The income trust case is a classic example of a natural event, and our results underscore the efficiency of Canadian capital markets. Copyright © 2010 ASAC. Published by John Wiley & Sons, Ltd.     

Private Benefits of Managerial Control,Government Ownership,and Acquirer Returns: Evidence from the Chinese State‐Controlled Listed Companies

This article examines how government ownership affects the relationship between private benefits of managerial control, measured as excessive overhead expenses, and profitability of acquirers. A total of 246 merger and acquisition (M&A) events from Chinese state‐controlled listed companies (CSCLCs) between 2001 and 2006 constitutes the analytical sample. Under a low level of government shareholding, private benefits of managerial control positively correlated with acquirer announcement returns. However, there was no relationship between private benefits of managerial control and acquirer announcement returns under a high level of government shareholding. The implications of these findings for scholarship and practice are discussed. Copyright © 2011 ASAC. Published by John Wiley & Sons, Ltd.