This study provides evidence that antitakeover amendments affect managerial behavior and provide ... more This study provides evidence that antitakeover amendments affect managerial behavior and provide long-term implications for the firm. Our study links the change in R&D expenditure after amendment adoption to board composition and ownership structure. Results are consistent with the hypothesis that the amendments provide an environment that allows managers to focus on long-term objectives. R&D expenditures significantly increased in the
The importance of bidder competition in the corporate takeover process has long been recognized i... more The importance of bidder competition in the corporate takeover process has long been recognized in theoretical models. This paper provides empirical tests of those models. The results indicate that resistance by target management to an initial bid encourages multiple bidders. Competing bidders are less likely to enter in cases where the target is large, but more likely to arise when the initial bidder is highly levered. High initial bids (preemptive bids) are found to discourage entry by additional firms. Surprisingly, targets with high levels of free cash flow tend not to be the recipients of multiple bids.
... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Techno... more ... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Technological University) Ho Pei Yui (Nanyang Technological University) Abstract. ... Publisher Info. Article provided by University of Chicago Press in its journal Journal of Business. ...
... mechanisms to performance Jerilyn W. Colesa,*, Victoria B. McWilliamsb, Nilanjan Senc,d ... T... more ... mechanisms to performance Jerilyn W. Colesa,*, Victoria B. McWilliamsb, Nilanjan Senc,d ... Tel.: +1-602-543-6126; fax: +1-602-543-6221. E-mail addresses: [email protected] (JW Coles), [email protected] (N. Sen), victoria.mcwilliams@ villanova.edu (VB McWilliams). ...
ABSTRACT We examine whether the curvilinear relationship between directors’ equity ownership and ... more ABSTRACT We examine whether the curvilinear relationship between directors’ equity ownership and firm performance exists in a non-Western economy such as Singapore. We find that it does, although the inflection points are much higher than that generally cited for U.S. firms. We then compare this relationship across two kinds of firms that are not common to the U.S. marketplace. We observe for founder-controlled firms that the impact of director ownership is insignificant. We also examine government-linked corporations and in spite of the presence of a government blockholder, find that the pattern of alignment, entrenchment and then alignment remains operative.
This study examines the extent to which agency-based models and asymmetric information theories e... more This study examines the extent to which agency-based models and asymmetric information theories explain dividend smoothing around the world. Tests on a cross-section of more than two thousand firms from twenty-four countries show that managers of firms with low market-to-book ratios and less cash engage in greater dividend smoothing. Further, firms with highly-concentrated ownership structure and strong corporate governance smooth dividends less. In addition, managers of firms in industries facing high levels of competition smooth dividends more. We also determine that the extent of legal protections provided to shareholders and the culture of the country in which the firm is incorporated, as well as tax regime, have additional explanatory power for dividend smoothing. Our results are most consistent with the simultaneous presence of agency and information asymmetry effects in the decision to smooth dividends. asymmetry between an investor and the firm or tax treatment of dividends influences dividend smoothing. Firms facing greater informational asymmetry and less investor cognizance will need to smooth more to allow investors to assess the firm's earnings ability and value .
This study examines aggregate patterns of dividends and earnings for the two largest equity marke... more This study examines aggregate patterns of dividends and earnings for the two largest equity markets outside of the U.S. over 1990–2001. Although aggregate U.K. and Japanese dividends exhibit modest increases, neither the magnitude nor the trend is comparable to the U.S. experience. Further, we note important differences in the level of aggregate dividends between keiretsu, independent and hybrid firms. This suggests the importance of corporate organizational form in understanding Japanese dividend behavior over time. We find evidence of dividend concentration in the U.K., but not in Japan. Fewer firms are paying more dividends, but not everywhere. We find evidence of earnings concentration in the U.K., but such consolidation in Japan is limited to independent firms. Our analysis offers mixed results for the relation between a firm's earnings and its ability to pay dividends. Few U.K. firms with negative earnings pay dividends while 73% of comparable Japanese firms do. The U.K. economy rather than the Japanese, increasingly resembles a two-tier system with a small set of very high earners providing a disproportional percentage of aggregate dividends. Finally, our evidence suggests that the general stability of Japanese and U.K. payout practices is inconsistent with a reduced propensity to pay dividends.
Our study examines the nature of industrial and global diversification for a sample of more than ... more Our study examines the nature of industrial and global diversification for a sample of more than 12 000 firms across 35 emerging and developed countries during the period 1991-2006. Consistent with previous studies, we find that industrial diversification, either alone or combined with ...
Journal of Business Finance & Accounting - J BUS FINAN ACCOUNT, 2009
Abstract: This study investigates patterns in dividend payment across nine common law and sixtee... more Abstract: This study investigates patterns in dividend payment across nine common law and sixteen civil law countries over 1994-2007. We begin by examining whether the recent decline in the number of dividend payers is solely a US phenomenon or part of a more global trend. We find that at the beginning of our sample period, 72% of our sample firms pay dividends, but by 2007, this percentage decreases to 55%, with the decline more acute in common law countries. Our analysis further shows that the growing incidence of non-dividend paying firms can be explained by an increase in the percentage of firms that have never paid dividends. We find that common law firms are less likely to initiate new dividend programs than those in civil law nations, although they tend to have more abundant growth opportunities. We further establish that this global decline in the propensity to pay dividends is more pronounced in firms incorporated in common law jurisdictions. Finally, we find that both the percentage increase in aggregate dividends and the dividend payout ratio is higher in civil law countries.
... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Techno... more ... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Technological University) Ho Pei Yui (Nanyang Technological University) Abstract. ... Publisher Info. Article provided by University of Chicago Press in its journal Journal of Business. ...
The phenomenon of low-balling reported in the financial press involves downward biased projection... more The phenomenon of low-balling reported in the financial press involves downward biased projections of earnings by managers or analysts, thereby artificially lowering market expectations and creating a positive earnings surprise when actual earnings are announced. This study reports that the stock market does respond to such surprises relative to analysts' reported forecasts. Further, the proportion of insider buy-transactions in the period prior to the earnings forecast is significantly higher for the sample with high positive earnings surprise than for the control sample with zero forecast errors. The study cannot distinguish whether managers or analysts are the source of the low-balling and therefore makes no statement on the legality of such insider trades.
This paper examines the reaction of Japanese and American firms to the initial public announcemen... more This paper examines the reaction of Japanese and American firms to the initial public announcement of international mergers, acquisitions, and joint ventures between Japanese and American firms. We study a sample of 111 initial announcements of these events during the period 1980-1991. In addition, of the Japanese firms included in our sample, 60 were members of a Keiretsu. We find that on average both the Japanese and American firms showed a significant positive reaction to the initial public announcement of the event. We also find the reaction of American firms to focused events to be much larger than to non-focused events, 6.2% on the announcement day vs. 1.3%. In contrast, we find that while the overall reaction of Japanese firms to the announcement was positive, the reaction of Japanese firms to focused events was negative and insignificant while the reaction to non-focused events was significant and positive. Upon further examination it is found that non-focus combinations were only significant and positive for Keiretsu firms. The interpretation of these results is that the relationship between Keiretsus and the Japanese firms serves to repress investment in negative net present value projects and subsidization of poorly performing business units, while offsetting the increased cost of information that occurs as a firm diversifies. Moreover, as diversification opens up a larger universe of possible projects and mergers, unfocused mergers and acquisitions may be of more value, ) Corresponding author. A.J. Keown . 0927-538Xr01r$ -see front matter q 2001 Elsevier Science B.V. All rights reserved.
Journal of Multinational Financial Management, 2006
This study examines aggregate patterns of dividends and earnings for the two largest equity marke... more This study examines aggregate patterns of dividends and earnings for the two largest equity markets outside of the U.S. over 1990–2001. Although aggregate U.K. and Japanese dividends exhibit modest increases, neither the magnitude nor the trend is comparable to the U.S. experience. Further, we note important differences in the level of aggregate dividends between keiretsu, independent and hybrid firms. This
Journal of International Financial Markets, Institutions and Money, 2002
We examine the valuation impact of corporate diversification strategies through an analysis of a ... more We examine the valuation impact of corporate diversification strategies through an analysis of a set of international joint ventures which contain both focus-decreasing and focus-increasing investments. Consistent with previous findings reported for US firms, we find that focus-increasing joint ventures create value for shareholders. However, we do not find that corporate diversification uniformly reduces shareholder value, either at the announcement of the project or in the long-run. Diversifying joint ventures negatively impact shareholder wealth only when the investing firms have poor growth opportunities and a weak cashflow position. After controlling for the q and cashflow effects, we find no significant difference in the market reaction to focus-increasing and -decreasing joint ventures. Such a result implies that the impact of diversification on shareholder wealth is not absolute, but rather is conditional upon the financial resources and growth opportunities available to the firm.
Studies by LaPorta et al. (2000, 2002) show that the strong protection of investor rights encoura... more Studies by LaPorta et al. (2000, 2002) show that the strong protection of investor rights encourage the development of capital markets and are associated with higher levels of firm valuation as measured by Tobin's Q. Related research finds that well-developed capital markets produce higher rates of economic growth and allocate capital more efficiently. These studies fail, however, to explain how the investor protection environment produces higher firm values or facilitates the more efficient allocation of investment capital. Using a sample of 158 ADRs representing 26 different countries, this study provides such a linkage by examining the effect of investor protection levels on share liquidity and the firm's cost of capital. We find that lower levels of investor protection reduce share liquidity while simultaneously resulting in a higher cost of equity capital. The combination of less liquidity with a higher cost of capital suggests an explanation for the lower values observed for firms incorporated in countries with fewer investor protections.
This study investigates patterns in dividend payment across nine common law and sixteen civil law... more This study investigates patterns in dividend payment across nine common law and sixteen civil law countries over 1994-2007. We begin by examining whether the recent decline in the number of dividend payers is solely a US phenomenon or part of a more global trend. We find that at the beginning of our sample period, 72% of our sample firms pay dividends, but by 2007, this percentage decreases to 55%, with the decline more acute in common law countries. Our analysis further shows that the growing incidence of non-dividend paying firms can be explained by an increase in the percentage of firms that have never paid dividends. We find that common law firms are less likely to initiate new dividend programs than those in civil law nations, although they tend to have more abundant growth opportunities. We further establish that this global decline in the propensity to pay dividends is more pronounced in firms incorporated in common law jurisdictions. Finally, we find that both the percentage increase in aggregate dividends and the dividend payout ratio is higher in civil law countries.
Over the past three decades researchers have found a dramatic drop in the returns generated by ac... more Over the past three decades researchers have found a dramatic drop in the returns generated by acquiring firms in domestic acquisitions, dropping to a level insignificantly different from zero during the 1980s. In this paper we find this not to be the case for Japanese firms that acquire domestic U,S. firms. Moreover, contrary to what has been found for domestic acquisitions, a positive relationship was found between free cash flow and the returns accrued by the Japanese acquiring firm. This result may be a result of the institutional participation in the management of Japanese firms playing a role in eliminating agency problems for them.
This study provides evidence that antitakeover amendments affect managerial behavior and provide ... more This study provides evidence that antitakeover amendments affect managerial behavior and provide long-term implications for the firm. Our study links the change in R&D expenditure after amendment adoption to board composition and ownership structure. Results are consistent with the hypothesis that the amendments provide an environment that allows managers to focus on long-term objectives. R&D expenditures significantly increased in the
The importance of bidder competition in the corporate takeover process has long been recognized i... more The importance of bidder competition in the corporate takeover process has long been recognized in theoretical models. This paper provides empirical tests of those models. The results indicate that resistance by target management to an initial bid encourages multiple bidders. Competing bidders are less likely to enter in cases where the target is large, but more likely to arise when the initial bidder is highly levered. High initial bids (preemptive bids) are found to discourage entry by additional firms. Surprisingly, targets with high levels of free cash flow tend not to be the recipients of multiple bids.
... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Techno... more ... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Technological University) Ho Pei Yui (Nanyang Technological University) Abstract. ... Publisher Info. Article provided by University of Chicago Press in its journal Journal of Business. ...
... mechanisms to performance Jerilyn W. Colesa,*, Victoria B. McWilliamsb, Nilanjan Senc,d ... T... more ... mechanisms to performance Jerilyn W. Colesa,*, Victoria B. McWilliamsb, Nilanjan Senc,d ... Tel.: +1-602-543-6126; fax: +1-602-543-6221. E-mail addresses: [email protected] (JW Coles), [email protected] (N. Sen), victoria.mcwilliams@ villanova.edu (VB McWilliams). ...
ABSTRACT We examine whether the curvilinear relationship between directors’ equity ownership and ... more ABSTRACT We examine whether the curvilinear relationship between directors’ equity ownership and firm performance exists in a non-Western economy such as Singapore. We find that it does, although the inflection points are much higher than that generally cited for U.S. firms. We then compare this relationship across two kinds of firms that are not common to the U.S. marketplace. We observe for founder-controlled firms that the impact of director ownership is insignificant. We also examine government-linked corporations and in spite of the presence of a government blockholder, find that the pattern of alignment, entrenchment and then alignment remains operative.
This study examines the extent to which agency-based models and asymmetric information theories e... more This study examines the extent to which agency-based models and asymmetric information theories explain dividend smoothing around the world. Tests on a cross-section of more than two thousand firms from twenty-four countries show that managers of firms with low market-to-book ratios and less cash engage in greater dividend smoothing. Further, firms with highly-concentrated ownership structure and strong corporate governance smooth dividends less. In addition, managers of firms in industries facing high levels of competition smooth dividends more. We also determine that the extent of legal protections provided to shareholders and the culture of the country in which the firm is incorporated, as well as tax regime, have additional explanatory power for dividend smoothing. Our results are most consistent with the simultaneous presence of agency and information asymmetry effects in the decision to smooth dividends. asymmetry between an investor and the firm or tax treatment of dividends influences dividend smoothing. Firms facing greater informational asymmetry and less investor cognizance will need to smooth more to allow investors to assess the firm's earnings ability and value .
This study examines aggregate patterns of dividends and earnings for the two largest equity marke... more This study examines aggregate patterns of dividends and earnings for the two largest equity markets outside of the U.S. over 1990–2001. Although aggregate U.K. and Japanese dividends exhibit modest increases, neither the magnitude nor the trend is comparable to the U.S. experience. Further, we note important differences in the level of aggregate dividends between keiretsu, independent and hybrid firms. This suggests the importance of corporate organizational form in understanding Japanese dividend behavior over time. We find evidence of dividend concentration in the U.K., but not in Japan. Fewer firms are paying more dividends, but not everywhere. We find evidence of earnings concentration in the U.K., but such consolidation in Japan is limited to independent firms. Our analysis offers mixed results for the relation between a firm's earnings and its ability to pay dividends. Few U.K. firms with negative earnings pay dividends while 73% of comparable Japanese firms do. The U.K. economy rather than the Japanese, increasingly resembles a two-tier system with a small set of very high earners providing a disproportional percentage of aggregate dividends. Finally, our evidence suggests that the general stability of Japanese and U.K. payout practices is inconsistent with a reduced propensity to pay dividends.
Our study examines the nature of industrial and global diversification for a sample of more than ... more Our study examines the nature of industrial and global diversification for a sample of more than 12 000 firms across 35 emerging and developed countries during the period 1991-2006. Consistent with previous studies, we find that industrial diversification, either alone or combined with ...
Journal of Business Finance & Accounting - J BUS FINAN ACCOUNT, 2009
Abstract: This study investigates patterns in dividend payment across nine common law and sixtee... more Abstract: This study investigates patterns in dividend payment across nine common law and sixteen civil law countries over 1994-2007. We begin by examining whether the recent decline in the number of dividend payers is solely a US phenomenon or part of a more global trend. We find that at the beginning of our sample period, 72% of our sample firms pay dividends, but by 2007, this percentage decreases to 55%, with the decline more acute in common law countries. Our analysis further shows that the growing incidence of non-dividend paying firms can be explained by an increase in the percentage of firms that have never paid dividends. We find that common law firms are less likely to initiate new dividend programs than those in civil law nations, although they tend to have more abundant growth opportunities. We further establish that this global decline in the propensity to pay dividends is more pronounced in firms incorporated in common law jurisdictions. Finally, we find that both the percentage increase in aggregate dividends and the dividend payout ratio is higher in civil law countries.
... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Techno... more ... Author Info. Stephen P. Ferris (University of MissouriColumbia) Nilanjan Sen (Nanyang Technological University) Ho Pei Yui (Nanyang Technological University) Abstract. ... Publisher Info. Article provided by University of Chicago Press in its journal Journal of Business. ...
The phenomenon of low-balling reported in the financial press involves downward biased projection... more The phenomenon of low-balling reported in the financial press involves downward biased projections of earnings by managers or analysts, thereby artificially lowering market expectations and creating a positive earnings surprise when actual earnings are announced. This study reports that the stock market does respond to such surprises relative to analysts' reported forecasts. Further, the proportion of insider buy-transactions in the period prior to the earnings forecast is significantly higher for the sample with high positive earnings surprise than for the control sample with zero forecast errors. The study cannot distinguish whether managers or analysts are the source of the low-balling and therefore makes no statement on the legality of such insider trades.
This paper examines the reaction of Japanese and American firms to the initial public announcemen... more This paper examines the reaction of Japanese and American firms to the initial public announcement of international mergers, acquisitions, and joint ventures between Japanese and American firms. We study a sample of 111 initial announcements of these events during the period 1980-1991. In addition, of the Japanese firms included in our sample, 60 were members of a Keiretsu. We find that on average both the Japanese and American firms showed a significant positive reaction to the initial public announcement of the event. We also find the reaction of American firms to focused events to be much larger than to non-focused events, 6.2% on the announcement day vs. 1.3%. In contrast, we find that while the overall reaction of Japanese firms to the announcement was positive, the reaction of Japanese firms to focused events was negative and insignificant while the reaction to non-focused events was significant and positive. Upon further examination it is found that non-focus combinations were only significant and positive for Keiretsu firms. The interpretation of these results is that the relationship between Keiretsus and the Japanese firms serves to repress investment in negative net present value projects and subsidization of poorly performing business units, while offsetting the increased cost of information that occurs as a firm diversifies. Moreover, as diversification opens up a larger universe of possible projects and mergers, unfocused mergers and acquisitions may be of more value, ) Corresponding author. A.J. Keown . 0927-538Xr01r$ -see front matter q 2001 Elsevier Science B.V. All rights reserved.
Journal of Multinational Financial Management, 2006
This study examines aggregate patterns of dividends and earnings for the two largest equity marke... more This study examines aggregate patterns of dividends and earnings for the two largest equity markets outside of the U.S. over 1990–2001. Although aggregate U.K. and Japanese dividends exhibit modest increases, neither the magnitude nor the trend is comparable to the U.S. experience. Further, we note important differences in the level of aggregate dividends between keiretsu, independent and hybrid firms. This
Journal of International Financial Markets, Institutions and Money, 2002
We examine the valuation impact of corporate diversification strategies through an analysis of a ... more We examine the valuation impact of corporate diversification strategies through an analysis of a set of international joint ventures which contain both focus-decreasing and focus-increasing investments. Consistent with previous findings reported for US firms, we find that focus-increasing joint ventures create value for shareholders. However, we do not find that corporate diversification uniformly reduces shareholder value, either at the announcement of the project or in the long-run. Diversifying joint ventures negatively impact shareholder wealth only when the investing firms have poor growth opportunities and a weak cashflow position. After controlling for the q and cashflow effects, we find no significant difference in the market reaction to focus-increasing and -decreasing joint ventures. Such a result implies that the impact of diversification on shareholder wealth is not absolute, but rather is conditional upon the financial resources and growth opportunities available to the firm.
Studies by LaPorta et al. (2000, 2002) show that the strong protection of investor rights encoura... more Studies by LaPorta et al. (2000, 2002) show that the strong protection of investor rights encourage the development of capital markets and are associated with higher levels of firm valuation as measured by Tobin's Q. Related research finds that well-developed capital markets produce higher rates of economic growth and allocate capital more efficiently. These studies fail, however, to explain how the investor protection environment produces higher firm values or facilitates the more efficient allocation of investment capital. Using a sample of 158 ADRs representing 26 different countries, this study provides such a linkage by examining the effect of investor protection levels on share liquidity and the firm's cost of capital. We find that lower levels of investor protection reduce share liquidity while simultaneously resulting in a higher cost of equity capital. The combination of less liquidity with a higher cost of capital suggests an explanation for the lower values observed for firms incorporated in countries with fewer investor protections.
This study investigates patterns in dividend payment across nine common law and sixteen civil law... more This study investigates patterns in dividend payment across nine common law and sixteen civil law countries over 1994-2007. We begin by examining whether the recent decline in the number of dividend payers is solely a US phenomenon or part of a more global trend. We find that at the beginning of our sample period, 72% of our sample firms pay dividends, but by 2007, this percentage decreases to 55%, with the decline more acute in common law countries. Our analysis further shows that the growing incidence of non-dividend paying firms can be explained by an increase in the percentage of firms that have never paid dividends. We find that common law firms are less likely to initiate new dividend programs than those in civil law nations, although they tend to have more abundant growth opportunities. We further establish that this global decline in the propensity to pay dividends is more pronounced in firms incorporated in common law jurisdictions. Finally, we find that both the percentage increase in aggregate dividends and the dividend payout ratio is higher in civil law countries.
Over the past three decades researchers have found a dramatic drop in the returns generated by ac... more Over the past three decades researchers have found a dramatic drop in the returns generated by acquiring firms in domestic acquisitions, dropping to a level insignificantly different from zero during the 1980s. In this paper we find this not to be the case for Japanese firms that acquire domestic U,S. firms. Moreover, contrary to what has been found for domestic acquisitions, a positive relationship was found between free cash flow and the returns accrued by the Japanese acquiring firm. This result may be a result of the institutional participation in the management of Japanese firms playing a role in eliminating agency problems for them.
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