Download or read book Agency costs mispricing and ownership structure written by Sergey Chernenko and published by . This book was released on 2010 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Standard theories of corporate ownership assume that because markets are efficient, insiders ultimately bear agency costs and therefore have a strong incentive to minimize conflicts of interest with outside investors. We show that if equity is overvalued, however, mispricing offsets agency costs and can induce a controlling shareholder to list equity. Higher valuations support listings associated with greater agency costs. We test the predictions that follow from this idea on a sample of publicly listed corporate subsidiaries in Japan. When there is greater scope for expropriation by the parent firm, minority shareholders fare poorly after listing. Parent firms often repurchase subsidiaries at large discounts to valuations at the time of listing and experience positive abnormal returns when repurchases are announced.

Download or read book Agency Costs and the Underlying Causes of Mispricing written by Christos Pantzalis and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the link between agency costs and equity mispricing. We find that mispricing is positively related with agency costs caused by divergent objectives between agents and owners in the presence of information asymmetry where managers discriminately have better/more information than owners. Our investigation extends previous studies arguing that information asymmetry is simply a key determinant of mispricing. We show that, for a given level of information asymmetry, conflicts of interest can substantially exacerbate mispricing. Furthermore, we find that stock option grants, originally intended to resolve conflicts of interest, actually exaggerate this problem, and thus lead to greater mispricing.

Download or read book Agency Costs and Ownership Structure written by James S. Ang and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide measures of absolute and relative equity agency costs for corporations under different ownership and management structures. Our base case is Jensen and Meckling's (1976) zero agency-cost firm, where the manager is the firm's sole shareholder. We utilize a sample of 1,708 small corporations from the FRB/NSSBF database and find that agency costs (i) are significantly higher when an outsider rather than an insider manages the firm; (ii) are inversely related to the manager's ownership share; (iii) increase with the number of nonmanager shareholders, and (iv) to a lesser extent, are lower with greater monitoring by banks.

Download or read book An Empirical Investigation of Agency Costs and Ownership Structure in Unlisted Small Businesses written by Nirosha Hewa Wellalage and published by . This book was released on 2018 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study uses panel data to investigate agency costs, both principal-agent (PA) and principal-principal (PP), in 240 small businesses not listed on the New Zealand Stock Exchange. Results show that both forms of agency cost vary according to industry, the life of the business and size. The results indicate that the degree of owner involvement in the business influencesfirm PA and PP agency costs. Moreover, this study finds nonlinear relationship between agency costs and ownership structure align with convergence of interest hypothesis and managerialentrenchment hypothesis. It is noted that the distortion between equity returns and debt returns gives rise to a preference for quasiequity and distorts the productive base and effective pricing ofrisk. The analysis indicates there is considerable variability in the burden of agency cost and that this raises the potential for regulatory and policy reforms that may enhance the productivity and growth in the sector.

Download or read book Ownership Structure Agency Costs and Departure from Value Maximation written by Said T. Ebeid and published by . This book was released on 1980 with total page 422 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Agency Costs and Ownership Structure in New Zealand Unlisted Small Businesses written by Nirosha Hewa Wellalage and published by . This book was released on 2018 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses a small business based investigation of principal-agent and principal-principal dimensions of agency cost. Panel data for 11 years to 2008, covering a sample of small businesses not listed on a stock exchange, are examined using multivariate statistical techniques. The sample of businesses includes sole proprietorships, partnerships and private companies and differs from previous studies in terms of selection bias and breadth of coverage. Several variables, including financial and operating structure, size, industry, performance and ownership concentration are found to be related to the level of agency costs. Aspects of agency cost have been researched for small and large listed companies but unlisted small businesses, many of which are unincorporated trading as sole proprietorships and partnerships, have not previously been the subject of robust empirical research. This paper makes a number of contributions to the agency cost debate, using a New Zealand data set for unlisted small businesses.

Download or read book Capital Market Imperfections and Corporate Finance written by Sergey Chernenko and published by . This book was released on 2010 with total page 258 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third essay, joint with C. Fritz Foley and Robin Greenwood, studies the interaction between stock market mispricing, agency costs, and ownership structure. Standard theories of corporate ownership assume that because markets are efficient, insiders ultimately bear agency costs. We show that if equity is overvalued, however, mispricing offsets agency costs and can induce a controlling shareholder to list equity. Higher valuations support listings with greater agency costs. We test these ideas on a sample of publicly listed subsidiaries in Japan. We show that when there is greater scope for expropriation by the parent firm, minority shareholders fare poorly after listing. Parent firms often repurchase subsidiaries at large discounts to valuations at the time of listing and experience positive announcement returns.

Download or read book The Agency Costs of Equity written by Oded Sarig and published by . This book was released on 1983 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Behavioral Corporate Finance written by Hersh Shefrin and published by College Ie Overruns. This book was released on 2017-04-16 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Agency Costs Really Matter A Non Linear Approach to Panel Data written by Fitriya Fauzi and published by . This book was released on 2018 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the relationship between agency cost, ownership structure and corporate governance mechanisms. Though previous studies of agency problems, corporate governance mechanisms or ownership variables suffer from endogeneity, with respect to the corporate governance it is unclear as to which variables are endogenous and which are exogenous. This study, using the Durbin-Wu-Hausman test for endogeneity, confirms noendogeneity issues should be addressed. Furthermore, addressing the issue of non-linearity, this study confirms that the relationship between agency costs, ownership structures and corporate governance mechanisms are non-linear. Using a balanced panel of 79 New Zealand-listed firms, this study employs a non-linear panel data method using Tobit. Apart from block-holders' ownership, leverage, dividend, non-executive directors and audit committees, managerial ownership, the number of the board size, nomination and remuneration of the committee have significant impact in reducing the agency costs in the context of New Zealand-listed firms. Overall, it can be concluded that corporate governance mechanisms and ownership structures are vital in mitigating agency costs in the New Zealand context.

Download or read book Do Shareholder Coalitions Affect Agency Costs Evidence from Italian Listed Companies written by Fabrizio Rossi and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relationship between agency costs and ownership structure for a sample of listed Italian companies to determine the impact of shareholder coalitions on agency costs. Using a balanced panel dataset of 1,956 firm-year observations for the period 2002-2013, the results provide evidence that ownership concentration and debt play a limited role in monitoring agency costs, whereas the type of shareholder plays an important role in either mitigating or exacerbating agency costs. Family-controlled firms and coalitions among non-controlling shareholders seem helpful in reducing agency costs. The results suggest that coalitions among non-controlling shareholders both in family and non-family firms reduce agency costs. The findings also indicate that multiple blockholders play a key role as mediators. The paper provides a new perspective on assessing the role of agency costs in a bank-based, civil law country. The results enable one to better understand the impact of blockholders on agency costs and their interactions within family-controlled firms. The results also provide support for both the entrenchment effect and the alignment-of-interests hypothesis.

Download or read book Agency Costs of Stakeholders and Corporate Finance written by Bing Yu and published by . This book was released on 2009 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt: Agency cost is a major factor that constrains corporate finance decision making. Current corporate governance theory focuses primarily on agency costs of managers and existing literature studies extensively on this aspect. This dissertation studies agency costs from a unique point of view: it addresses the agency costs of creditors and employees. It tests the relationship between creditor rights as well as employee rights and corporations' financing and dividend payment decisions across countries. Based on a sample of 182, 182 firm-year observations from 21,663 unique firms over 52 countries, this study uses the year- and industry-fixed effects Tobit model to test the impacts of creditor rights and labor rights on debt ratio in different countries. The empirical results reveal a positive relationship between employee rights and firms' use of debt and a negative relationship between creditor rights and firm debt ratio. Such relationships hold valid when tests are implemented by using pooled country sample, country mean of residuals, and different country-group sub-samples. The results imply that in countries where employee rights are high, shareholders will use more debt obligation to reduce possibility of exploitation by employees whereas in countries where creditor rights are high, it is harder for shareholders to get a favorable debt contract and they will reduce the use of debt capital. Running fixed effects Logit and Tobit models, this study also documents that labor rights are negatively related to firms' decision to pay dividends and dividend payment amounts. This relationship is reinforced to be more salient in civil law countries where shareholder rights are weak. The empirical results are robust by controlling for sample selection bias, test model specification, and a series of country-level control variables. The explaining power of the major creditor rights and labor rights variables keeps significant statistically, implying that the empirical results remain valid after taking country-specific economic characteristics into account across countries. This is the first study that examines agency costs of employees in corporate finance context explicitly. It takes all stakeholders into account when studying agency problems and sheds light on the interaction relationship among shareholders, creditors, and employees across countries. The empirical results of this study provide a new perspective to interpret international variations in financial leverage and dividend policy in the world.

Download or read book The Agency Cost of Alternative Debt Instruments Classic Reprint written by Antonio Mello and published by Forgotten Books. This book was released on 2018-02-25 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Agency Cost of Alternative Debt Instruments It is now commonly recognized that a firm's capital structure can affect its value through the incentives that are created for the equity holders in favor of one or another investment and operating policy. A place has therefore been created for a positive theory of capital structure. Missing, however, from the literature on agency costs in finance have been models that enable us to measure the effects of capital structure on the value of the firm's assets. In this paper we show how contingent claims models can be used to measure and compare the agency costs of different forms of debt-fixed rate and indexed. The model can be used to determine the optimal indexing structure and the optimal parameters of the debt contract. The case of index linked debt that we study in this paper is a commodity bond. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.

Download or read book Agency Costs of Overvalued Equity written by Michael C. Jensen and published by . This book was released on 2009 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt: I define and analyze the ...

Download or read book Agency Costs Risk Management and Capital Structure written by Hayne E. Leland and published by . This book was released on 1998 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Measuring the Agency Costs of Dispersed Ownership written by Ruth Gesser and published by . This book was released on 2011 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical investigations of the agency costs of dispersed ownership yield mixed results. A possible explanation for the lack of conclusive evidence is inaccurate measurement of the extent of the problem. We suggest that the extent of the problem be measured as theory suggests: by the wealth managers commit to their firms. We examine the relative performance of the different measures of the agency problem of dispersed ownership in the context of changes in payout policy affected by repurchase initiations. We find that the suggested measure - managerial equity wealth - performs better than the other measures: the proposed measure of the problem explains better than any other measure the market reaction to repurchase initiations. Our results are robust to several modifications of the main test.

Download or read book Agency Costs Asset Specificity and the Capital Structure of the Firm written by Jon Vilasuso and published by . This book was released on 2001 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a dynamic model that incorporates the insights of both the agency cost and asset specificity literature aboutcorporate finance. In general, we find that neither can be ignored, and that the optimal capital structure minimizes agency cost and asset specificity considerations. A key finding is that the conditions most favorable for reducing transaction costs due to asset specificity are the same as those for reducing the agency costs of debt. Empirically, we find that agency costs and asset specificity are significant determinants of a firm's capital structure in the transportation equipment and the printing and publishing industries.