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Full-Text Articles in Business
How Do Firms Respond To Reduced Private Equity Buyout Activity?, Yi-Hsin Lo
How Do Firms Respond To Reduced Private Equity Buyout Activity?, Yi-Hsin Lo
Research Collection Lee Kong Chian School Of Business
This paper presents new evidence on the economic role of private equity buyouts by exploiting the staggered adoption of the constructive fraud provision by U.S. state courts. The law unintentionally shifts the credit default risk borne by existing unsecured creditors of the buyout target to the selling shareholders and lenders in the form of ex-post litigation risk, thereby discouraging buyout activity. Using a difference-in-differences framework, I find that firms raise less capital, reduce payouts and investments, and form alliances with employees. Firms also avoid positive NPV projects that carry too much risk. These findings are consistent with managers enjoying a …
Corporate Donations And Shareholder Value, Hao Liang, Luc Renneboog
Corporate Donations And Shareholder Value, Hao Liang, Luc Renneboog
Research Collection Lee Kong Chian School Of Business
Do corporate donations enhance shareholder wealth or reflect agency problems? We address this question for a global sample of firms whereby we distinguish between charitable and political donations, as well as between donations in cash and in kind. We find that charitable donations are positively related to financial performance and firm value, which is consistent with the value-enhancement hypothesis. This positive effect on firm value is stronger for cash than in-kind donations. In contrast, political donations do not appear to enhance shareholder value, but rather tend to reflect agency problems, as they are higher for firms with poor internal corporate …
The Unintended Effects Of The Sarbanes-Oxley Act, Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig
The Unintended Effects Of The Sarbanes-Oxley Act, Vidhi Chhaochharia, Clemens A. Otto, Vikrant Vig
Research Collection Lee Kong Chian School Of Business
The Sarbanes-Oxley Act (SOX) was passed in the wake of several scandals that rocked corporate America in 2001 and 2002. The objective behind SOX was to improve corporate governance by improving accounting disclosures. Compliance with Section 404 is considered by many to be the most costly requirement of SOX and has been argued to be a disproportionate burden for small firms. Consequently, firms with a public float below $75 million were granted several exemptions from compliance. We document an unintended effect of these exemptions: a weakening of corporate governance through a weakening of the market for corporate control.