Download or read book Empirical Results on Managerial Incentives and Capital Structure written by Nicholas J. Gonedes and published by . This book was released on 1987 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Capital Structure Managerial Incentives and Corporate Governance written by Christian M. Pfeil and published by Peter Lang Gmbh, Internationaler Verlag Der Wissenschaften. This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: What factors determine a firm's financing decision? Informational economics and contract theory have contributed a great deal to answer this question. This book contains three essays that further contribute to this strand of literature with the focus on theories that view capital structure as a disciplining instrument for a self-interested management. Some of the existing theories abstract from other disciplining devices such as ordinary incentive wages to justify debt as a mean to mitigate a moral hazard problem between managers and owners of a firm. Two of the models presented here turn to the question of whether debt can play a role as an incentive device when other incentive mechanisms are available as well. A third model revisits the signaling literature on capital structure in the light of new empirical evidence. All models are embedded into a corporate governance framework that allows to set the conclusions into a broader perspective.
Download or read book Ownership Structure as a Determinant of Capital Structure An Empirical Study of DAX Companies written by Christian Funke and published by GRIN Verlag. This book was released on 2007-07 with total page 109 pages. Available in PDF, EPUB and Kindle. Book excerpt: Diploma Thesis from the year 2003 in the subject Business economics - Investment and Finance, grade: 1,1 (A), European Business School - International University Schlo Reichartshausen Oestrich-Winkel (Endowed-Chairf for Corporate Finance and Capital Markets), language: English, abstract: The idea that the general characteristics of a firm's ownership structure can affect performance has achieved considerable attention and related research brought forward relatively consistent empirical evidence e.g. on the positive impact of managerial ownership on firm performance. However, the evidence on the relation between ownership and capital structure is less consistent and numerous, although there are good reasons to believe that there may be such a relationship. Since the capital structure irrelevance propositions of MODIGLIANI/MILLER economists have devoted considerable time to studying cross-sectional and time-series variations in capital structure. More recent work following the seminal contribution by JENSEN/MECKLING has employed an agency theory perspective in the search for an explanation of capital structure variations. With this managerial perspective capital structure is not only explained by variations in internal and external contextual factors of the firm, but also by the values, goals, preferences and desires of managers. Corporate financing decisions are influenced by managers' incentives and the incentives for managers to act opportunistically can be influenced by the ownership structure of the firm. However, most empirical work analyzing a firm's capital structure in cross-sectional and time-series studies ignores the equity ownership structure as a possible explanatory variable. This can be partly explained by problems associated with the availability of ownership data, when compared to readily available accounting and market data on other relevant variables. Notwithstanding, it entails a problem of model misspecification as omitting a relevant variable
Download or read book Managerial Incentives and Capital Structure written by Larry Lang and published by . This book was released on 1987 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Manager Characteristics and Capital Structure written by Sanjai Bhagat and published by . This book was released on 2011 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: We theoretically and empirically investigate the effects of manager-specific characteristics on capital structure. We develop a dynamic structural model in which a manager affects a firm's earnings through her ability and effort. The manager receives dynamic incentives through explicit contracts with shareholders. We derive the manager's contracts and implement them through financial securities. The firm's resulting capital structure is dynamic, and consists of long-term debt, short-term debt, inside equity, and outside equity. The different components of the firm's capital structure reflect the interactive effects of taxes, bankruptcy costs, as well as agency conflicts between the undiversified manager and well-diversified outside investors. The analysis of the model generates the following novel testable predictions: (i) Long-term debt declines with the manager's ability and with her inside equity ownership in the firm. (ii) Short-term debt declines with the manager's ability and increases with her equity ownership. (iii) Long-term debt increases with the firm's short-term risk and decreases with its long-term risk risk. (iv) Short-term debt declines with short-term risk. With the exception of the predicted relation between short-term debt and manager ownership, we show significant support for the above testable implications in our empirical analysis. Our theoretical and empirical results show that managerial discretion and manager-specific characteristics are important determinants of firms' financial policies.
Download or read book The Effect of Managerial Incentives to Bear Risk on Corporate Capital Structure and R D Investment written by Jouahn Nam and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we use estimates of the sensitivities of managers' portfolios to stock return volatility and stock price to directly test the relationship between managerial incentives to bear risk and two important corporate decisions. We find that as the sensitivity of managers' stock option portfolios to stock return volatility increases firms tend to choose higher debt ratios and make higher levels of Ramp;D investment. These results are even stronger in a sub sample of firms with relatively low outside monitoring. For these firms managerial incentives to bear risk play a particularly pivotal role in determining leverage and Ramp;D investment.
Download or read book Handbook of Empirical Corporate Finance SET written by B. Espen Eckbo and published by North Holland. This book was released on 2008-07-01 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt: This two-volume set summarizes recent research on corporate decision-making. The first volume covers measurement and theoretical subjects as well as sources of capital, including banks, public offerings, and private investors. In the second volume, contributors focus on the ways corporations are structured and the practices through which they can be bought and sold. Thus, its major subjects include dividends, capital structure, financial distress, takeovers, restructurings, and managerial incentives. *Takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues *Discusses everything from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. *Contributors are leading empirical researchers that remain active in their respective areas of expertise *Writing style makes the chapters accessible to industry practitioners
Download or read book Capital Structure and Corporate Financing Decisions written by H. Kent Baker and published by John Wiley & Sons. This book was released on 2011-03-31 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.
Download or read book Managerial Incentives and Investment Policy in Family Firms written by Mieszko Mazur and published by . This book was released on 2018 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides evidence that CEO incentive pay mediates the effect of family preferences on corporate investment policy. Our study focuses on the option portfolio volatility sensitivity vega, which motivates the risk-taking behavior of undiversified managers. After controlling for factors that affect incentive pay and investment policy simultaneously, we find that one-third of underinvestment in riskier R&D projects in active family firms can be attributed to a significantly lower vega. Passive family firms allocate more capital to R&D as opposed to active family firms, and are more active in M&A deal making. In contrast to many prior studies, pay incentives and families are not associated with capital expenditures. Overall, our empirical results suggest that CEO pay incentives induce investment policy contingent on firm risk. Family CEO incentive pay manifests the family preference for lower risk, especially in firms with higher firm risk. Nonetheless, after replacing family CEOs with outside professionals, investments in both R&D and M&A increase, which is consistent with the family preference for extended investment horizons. Interestingly, such a preference seems not to be manifested in incentive pay.
Download or read book Capital Structure and Managerial Compensation written by Riccardo Calcagno and published by . This book was released on 2018 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that the relative seniority of debt and managerial compensation has important implications on the design of remuneration contracts. Whereas the traditional literature assumes that debt is senior to remuneration, we show that this is frequently not the case according to bankruptcy regulation and as observed in practice. We theoretically show that including risky debt changes the incentive to provide the manager with stronger performance-related incentives (quot;contract substitutionquot; effect). If managerial compensation has priority over the debt claims, higher leverage produces lower power-incentive schemes (lower bonuses) and a higher base salary. With junior compensation, we expect more emphasis on pay-for-performance incentives. The empirical findings are in line with the regime of remuneration seniority as the base salary is significantly higher and the performance bonus is lower in financially distressed firms.
Download or read book Operational Decisions Capital Structure and Managerial Compensation written by Xiaodong Xu and published by . This book was released on 2005 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: While firm growth critically depends on financing ability and access to external capital, the operations management literature seldom considers the effects of financial constraints on the firms' operational decisions. Another critical assumption in traditional operations models is that corporate managers always act in the firm owners' best interests. Managers are, however, agents of the owners of the company, whose interests are often not aligned with those of equity-holders or debt-holders; hence, managers may make major decisions that are suboptimal from the firm owners' point of view. This paper builds on a news vendor model to make optimal production decisions in the presence of financial constraints and managerial incentives. We explore the relationship between operating conditions and financial leverage and observe that financial leverage can increase as margins reach either low or high extremes. We also provide some empirical support for this observation. We further extend our model to consider the effects of agency costs on the firm's production decision and debt choice by including performance-based bonuses in the manager's compensation. Our analyses show how managerial incentives may drive a manager to deviate from firm-optimal decisions and that low-margin producers face significant risk from this agency cost while high-margin producers face relatively low risk in using such compensation.
Download or read book A Study on Capital Structure and Corporate Governance written by Ryoonhee Kim and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Capital structure and corporate governance are the important areas that represent salient part of corporate finance research. By studying various aspects of the two areas, this study attempts to deepen our understanding of the two. First, this study provides both a theoretical model and empirical evidence on the interaction between capital structure and managerial incentive compensation (one of key measures of corporate governance). Researchers acknowledge that the two interact to each other and the interaction should affect their optimal determination, but few studies formally consider the interaction. This study shows that due to the interaction through agency conflicts, key firm characteristics that represent agency costs affect leverage and managerial incentive compensation in opposite directions. After controlling for the opposite interactions, the two are shown to be positively related. Second, this study provides empirical evidence on the interaction between financial structure and product market performance by examining business group affiliated firms. The firms that are affiliated to a business group is not only affected by their own financial position, but also affected by the position of business groups which the firms belong to. The empirical investigation suggests that affiliated firms lose market shares to their rivals in their product market when their business group is financially weak due to high group leverage. Third, this study examines whether special governance structure of business groups is actually beneficial to the groups0́9 member firms. The study exploit unique dataset of firms that were once stand alone, but later acquired by business groups. The empirical methodology we employ can account for the fact that the firms which are acquired by business groups can be very different from other firms which are not acquired. The findings from matching estimator suggest that performance increase of the acquired firms is significantly greater than the performance of matched stand alone firms, implying that business groups are actually helping their affiliated firms to perform better than stand alone firms.
Download or read book Financing Decisions when Managers are Risk Averse written by Katharina Lewellen and published by . This book was released on 2003 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of financing decisions onrisk-averse managers. Leverage raises stock volatility, driving a wedge between the cost of debt to shareholders and the cost to undiversified, risk-averse managers. I quantify these "volatility costs" of debt and examine their impact on financing decisions. The paper finds: (1) the volatility costs of debt can be large, particularly if the CEO owns in-the-money options; (2) higher option ownership tends to increase, not decrease, the volatility costs of debt; (3) a stock price increase typically reduces managerial preference for leverage, consistent with prior evidence on security issues. Empirically, I estimate the volatility costs of debt for a large sample of U.S. firms and test whether these costs affect financing decisions. I find evidence that volatility costs affect both the level of and short-term changes in debt. Further, a profit model of security issues suggests that managerial preferences help explain a firm's choice between debt and equity. Keywords: Executive Compensation, Stock Options, Risk Incentives, Leverage. JEL Classifications: G3, G32, M52.
Download or read book Human Capital Intensive Firms written by Yiming Qian and published by . This book was released on 2003 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: I study the incentives of nonmanagement key personnel in human-capital-intensive firms. I show that their compensation structure and hence their incentives depend on the firm's capital structure and top management compensation. The feasible set of renegotiation-proof contracts decreases as debt rises. Debt leads to inferior risk-sharing even if investments are efficient in equilibrium. Therefore, the optimal debt level decreases with the human-capital intensity of the firm. I find strong empirical evidence that there is a negative relation between leverage and human-capital intensity. Moreover, the more specific the firm's assets, the stronger becomes this negative relation.
Download or read book Option Incentives Leverage and Risk Taking written by Kyonghee Kim and published by . This book was released on 2018 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: While extensive research examines the relation between option incentives in executive compensation and risk-taking by managers, the impact of capital structure on this relationship has received little empirical attention. Prior work suggests that heightened managerial career concerns arising from financial risk and monitoring by debt holders will result in leverage having a dampening effect on the relation between managerial risk-taking and equity-linked incentives. We empirically evaluate this contention and find leverage significantly weakens the positive relation between option incentives in flow compensation and managerial risk-taking. These results hold after accounting for the endogeneity of both, firm leverage and incentive compensation decisions. The attenuating effect holds for both short-term and long-term components of debt but is stronger for the short-term component. Overall, the results highlight the influence of capital structure on the relationship between option incentives and managerial risk-taking.
Download or read book Symposium on Managerial Incentives and Corporate Performance Effects of Executive Compensation Organzational Structure Takeovers and Government Policy written by Ray Ball and published by . This book was released on 1993 with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Impact of Asymmetric Information Between Managers and Investors on Managerial Incentives and Optimal Compensation Contracts written by Marcel A. Priebsch and published by . This book was released on 2004 with total page 176 pages. Available in PDF, EPUB and Kindle. Book excerpt: