Showing papers in "Journal of Corporate Finance in 2010"

TL;DR: In this article, the authors investigate how corporate governance plays a role in long-run tax management and find that incentive compensation provides long-term incentives to improve performance by establishing a link between higher pay-performance sensitivity and lower taxes.

TL;DR: In this article, the authors examine the determinants of board monitoring activity and its impact on firm value for a broad panel of firms over a six-year period from 1999 to 2005.

TL;DR: Li et al. as discussed by the authors investigated whether good governance structures help constrain management's opportunistic behaviors (in the form of transfer pricing manipulations) in one of the world's most dynamic economies and found that firms with a board that has a higher percentage of independent directors or a lower percentage of "parent" directors (i.e., directors who are representatives of the parent companies of the listed firms), or have different people occupying the chair and CEO positions, or have financial experts on their audit committees, are less likely to engage in transfer pricing manipulation.

TL;DR: In this article, the authors used two dynamic partial adjustment capital structure models to estimate the impact of several macroeconomic factors on the speed of capital structure adjustment toward target leverage, and they found evidence that firms adjust their leverage toward target faster in good macroeconomic states relative to bad states.

TL;DR: The authors found that the likelihood and severity of financial misreporting is positively related to aggregate institutional ownership and this effect can be largely attributed to ownership by institutions with short investment horizons, those with little incentive to engage in costly monitoring of firm activities and precisely those that sell at the announcement of a restatement.

TL;DR: In this paper, the authors examined the labor market consequences of the implementation decision for outside directors and found that directors implementing non-binding, majority-vote (MV) shareholder proposals experience a one-fifth reduction in the likelihood of losing their board seat as well as other directorships.

TL;DR: In this paper, the authors investigate the effect of top managers' myopia on firms' market valuation and devise a measure of expected CEO tenure as a proxy for the length of CEO decision horizon.

TL;DR: In this paper, the authors compared the attractiveness of 27 European countries for institutional investments into the Venture Capital and Private Equity asset class using 42 different parameters, and proposed an aggregation structure that allows for benchmarking on more granulated levels.

TL;DR: Using derivative usage data on over 1746 firms headquartered in the U.S. during the 1991 through 2000 time period, this paper found that firms with greater agency and monitoring problems (i.e., firms that are less transparent, face greater agency costs, have weaker corporate governance, larger information asymmetry problems, and overall poorer monitoring) exhibit a negative association between Tobin's Q and derivative usage.

TL;DR: In this paper, the authors evaluate whether some managers potentially use buyback announcements to mislead investors and find no long-run economic benefit to this behavior, and conclude that only a limited number of managers may have used buybacks in a misleading way as "cheap talk".

TL;DR: In this article, the authors hypothesize that CEO compensation is optimally designed to trade off two types of agency problems: the standard shareholder-management agency problem as well as the risk-shifting problem between shareholders and debtholders.

TL;DR: In this paper, the authors explore the effect of tax reform on the distribution of corporate dividends in Finland and find that Finnish firms altered their dividend policies based on the changed tax incentives of their largest shareholders.

TL;DR: In this paper, the authors investigate the determinants of subordinate board structures, exploring both their benefits and costs, and find that these board structures can offset the negative associations that board size and the proportion of outsiders can have with firm performance.

TL;DR: In this paper, the authors investigate the motives and circumstances surrounding outside directors' decisions to publicly announce their board resignations and conclude that while such public resignations are motivated by the reputational concerns of directors, they can act as a disciplining device for poor board performance.

TL;DR: In this paper, the authors examine the announcement-period acquirer returns and target values for a large sample of cross-border acquisitions by US firms, differentiating between private and public targets and paying particular attention to the legal protection of minority shareholders in the target country.

TL;DR: In this paper, the authors examine the firm's choice between an SEO and a PIPE, an innovation in follow-on equity selling mechanism seen in the late 1990s.

TL;DR: In this article, the authors examined the effect of change-in-control covenants on the wealth effects and probability of takeovers of leveraged buyouts and found that the existence of such covenants reduced the firm's probability of being targeted in an LBO in half.

TL;DR: This paper showed that shareholders' option to renegotiate debt in a period of financial distress exacerbates Myers' (1977) underinvestment problem at the time of the firm's expansion.

TL;DR: In this paper, the authors present an explanation for the anomalous behavior of earnings and returns around the time of a dividend drop, which suggests that a reduction in a firm's established dividend coincides with a decrease in the value of the firm's real options.

TL;DR: In this article, the authors compared corporate dividend policies in Hong Kong and the U.S., two economies where the tax regime and equity ownership structure are significantly different, and they found that the extent of dividend smoothing by Hong Kong firms is significantly less than those in the U., and that the signaling effects of dividend changes on stock returns are stronger in the US compared to those inHong Kong.

TL;DR: In this article, the authors provide evidence on the net realized costs of SOX by examining its impact on operating profitability and find that average cash flows decline by 1.3% of total assets after SOX.

TL;DR: In this paper, the authors used cross-firm variation in corporate governance at the time of the official liberalization of the equity market in Korea to test whether governance can explain the extent to which firms benefit when countries liberalize.

TL;DR: In this article, the authors present empirical evidence that firms inflate earnings around seasoned equity offerings in the presence of large outsider blockholdings, but not in their absence, and conclude that strengthening shareholder power to alleviate the conflict between shareholders and management can also have the unintended consequence of intensifying the conflict among current and future shareholders.

TL;DR: In this article, the authors hypothesize that moral hazard and asymmetric information are dominant motivations for the use of IPO lockup provisions, rather than consider them to be mutually exclusive motivations, and provide empirical support for a set of hypotheses concerning the lockup period.

TL;DR: In this paper, the authors examine how the performance sensitivity of CEO compensation is related to the level and turnover of outside block ownership and find that pay sensitivity to Luck increases with blockholder turnover, whereas pay sensitivity with Skill increases with the blockholding size.

TL;DR: In this paper, the negative relation between firm value and the number of antitakeover provisions a firm has in place was examined, and it was shown that firms with characteristics indicating low power to bargain for favorable terms in a takeover, but also indicating high potential agency costs, have more anti-takeover provisions in place.

TL;DR: In this paper, the authors examine the impact of lead arranger reputation on the design of loan contracts such as spread and fees charged and find that the reputation of top tier arrangers leads to higher spreads, and that top-tier arrangers retain larger fractions of their loans in their syndicates.

TL;DR: The authors examined how owner-managers incentives and firm-specific measures of corporate governance affect restructuring decisions during an economy-wide shock using a large sample of Korean firms that had experienced a severe financial crisis during 1997-1998, and found that the likelihood of restructuring is negatively related to the divergence of cash flow rights and control rights of controlling shareholders.

TL;DR: This paper examined the effect of debt and liquidity on corporate investment in a continuous-time framework and showed that stockholder-bondholder agency conflicts cause investment thresholds to be U-shaped in leverage and decreasing in liquidity, and derived the optimal level of liquid funds that eliminates agency costs by implementing the first best investment policy for a given capital structure.

TL;DR: In this paper, the authors find a benefit to limiting access to the premarket and provide an efficiency rationale for the practice by American bankers of marketing IPOs to a select group of investors.