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Full-Text Articles in Business
Securities Intermediaries And The Separation Of Ownership From Control, Jill E. Fisch
Securities Intermediaries And The Separation Of Ownership From Control, Jill E. Fisch
All Faculty Scholarship
The Modern Corporation and Private Property highlighted the evolving separation of ownership and control in the public corporation and the effects of that separation on the allocation of power within the corporation. This essay explores the implications of intermediation for those themes. The article observes that intermediation, by decoupling economic ownership and decision-making authority within the shareholder, creates a second layer of agency issues beyond those identified by Berle and Means. These agency issues are an important consideration in the current debate over shareholder empowerment. The article concludes by considering the hypothetical shareholder construct implicit in the Berle and Means …
Executive Compensation And The Maturity Structure Of Corporate Debt, Paul Brockman, Xiumin Martin, Emre Unlu
Executive Compensation And The Maturity Structure Of Corporate Debt, Paul Brockman, Xiumin Martin, Emre Unlu
Department of Finance: Faculty Publications
Executive compensation influences managerial risk preferences through executives’ portfolio sensitivities to changes in stock prices (delta) and stock return volatility (vega). Large deltas discourage managerial risk-taking, while large vegas encourage risk-taking. Theory suggests that short-maturity debt mitigates agency costs of debt by constraining managerial risk preferences. We posit and find evidence of a negative (positive) relation between CEO portfolio deltas (vegas) and short-maturity debt. We also find that shortmaturity debt mitigates the influence of vega- and delta-related incentives on bond yields. Overall, our empirical evidence shows that short-term debt mitigates agency costs of debt arising from compensation risk.
Intra-Industry Effects Of Takeovers: A Study Of The Operating Performance Of Rival Firms, Rupendra Paliwal
Intra-Industry Effects Of Takeovers: A Study Of The Operating Performance Of Rival Firms, Rupendra Paliwal
WCBT Faculty Publications
This paper investigates whether the managers of industry rivals act to mitigate their agency exposure and improve operating performance when one of the firms in the industry is subject to a takeover attempt. The results indicate that rival firms in general decrease free cashflows, improve operating performance, reduce capital expenditures, and increase leverage in response to a control threat within the industry. In particular, rival firms with potentially higher agency costs i.e., fewer investment opportunities and high cash or high free cashflows exhibit a higher reduction in cash levels and free cashflows subsequent to a control threat in their industry. …