1、中文 2572 字 ,1395 单词， 7900 英文字符 出处： Lundstrum L L. Entrenched management, capital structure changes and firm valueJ. Journal of Economics and Finance, 2009, 33(2): 161-175. 外文翻译 Entrenched management, capital structure changes and firm value Material Source: Springer Link Author: Leonard L. Lundstrum
2、1 Introduction A number of investigators, including Berger et al. (1997) and Garvey and Hanka(1999) report that managerial entrenchment affects the firms choice of leverage.Theory implies that debt constrains management discretion by either reducing the managers bargaining power (Noe and Rebello 199
3、6) or by reducing discretion over spending (Stulz 1990). Zwiebel (1996) argues that entrenched managers use their influence to lower debt levels to the point that capital structure maximizes empire building subject to sufficient efficiency to prevent a take over. Agency costs will be incurred at the
4、 time of security issuance if the manager makes a sub-optimal security issuance choice. Jensen and Meckling (1976) find that agency costs are decreasing in managerial share ownership. Yet Stulz (1988) argues that agency costs are not necessarily monotonically decreasing in managerial share ownership
5、 as there exists an “entrenchment” range over which the managers ability to deter takeovers dominates the “incentive” effect of managerial share ownership. We examine the relation between managerial share ownership and the likelihood, magnitude, and information content of security issues. When negot
6、iating debt covenants, creditors appear to respond to the fraction of shares held by the CEO. Begley and Feltham (1999) find that the number of covenants in debt contracts is increasing in the fraction of the firms shares held by the CEO. This evidence suggests that managerial share ownership may be
7、 important to understanding the agency problems associated with security issuance. The evidence that creditors demand more covenants for firms with high managerial share ownership suggests that the creditors concerns about agency conflicts are heightened when managerial share ownership is high. Shar
8、e ownership appears to not only affect creditor demands but also the leverage choice. Friend and Lang (1988), Mohd et al. (1998) and Nam et al. (2003) all conclude that leverage is decreasing in managerial share ownership. We examine two important extensions of these lines of inquiry. First, while t
9、heory implies that managerial share ownership affects the agency costs associated with issuance, security issuance announcement returns have yet to be tied empirically to managerial share ownership, with the limited exception of Limpaphayom and Ngamwutikul (2004) in the case of seasoned equity offer
10、ings. Friend and Lang (1988), Nam et al. (2003), and Mohd et al. (1998) all argue that their results indicate that agency problems are an important determinant of capital structure. While none of these investigators examine the valuation effects of these agency problems while controlling for outside
11、 block holder share ownership, we do. Second, none of the aforementioned papers reports whether the relationship between managerial share ownership and leverage change is monotonic over the range of managerial share ownership. These two gaps in the literature are addressed. Over an intermediate rang
12、e of managerial share ownership, firms issue significantly less debt than when managerial ownership is extreme. When managerial share ownership is large and block holder ownership is small, the firm experiences smaller announcement effects from security issues. The change in leverage is defined here
13、 as the average debt-to-asset ratio for the 2 years prior to the announcement date less the average debt-to-assets ratio for the 2 year ends subsequent to the announcement date. The debt-to-assets ratio is measured on a market value basis. Holderness (2003) articulates the differential incentives ar
14、ising from share ownership of outside block holders versus managers. Our findings with respect to outside block holders mitigating agency costs of security issuance are consistent with that of Chen and Yur-Austin (2007) who report that outside block holders help mitigate managerial extravagance with
15、 regard to discretionary spending, but our results are in conflict with the Singh and Davidson (2003) finding that outside block ownership offers limited reduction in agency costs. 2 Leverage change model The managers choice variables include the size of the security issuance. Examining just the bin
16、omial security issuance choice model may not fully reveal the relation between managerial share ownership and security issuance. For example, managerial share ownership may be unrelated to the propensity to issue equity, but still may influence the relative magnitudes of debt and equity issuances. T
17、o examine the effect of managerial share ownership on the magnitudes of debt and equity issuance, we analyze the relationship between managerial share ownership and the change in leverage from before the issuance to after the issuance. The change in leverage is defined here as the average debt-to-as
18、set ratio for the 2 year ends prior to the announcement date less the average debt-to-assets ratio for the 2 year ends subsequent to the announcement date. The firms debt-to-assets ratio is the book value of debt/(book value of debt + market value of equity). Therefore a decline in leverage results
19、in a positive leverage change. For ease of exposition, a decline in the leverage ratio is referred to hereafter as “de-leveraging”. The use of a 2-year average allows for capital structure re-adjustment and any signaling impacts of the issuance. Debt and equity issuances are pooled to measure the im
20、pact of ownership structure across security issue types. This specification is used to examine whether managerial share ownership is related to the relative magnitude of debt and equity issuances. An indicator variable is included to control for security type. Surplus leverage is defined as the actu
21、al debt-to-asset ratio less the target debt-toasset ratio, and is used to control for deviation from optimal capital structure. This ontrols for changes in leverage that are due to an adjustment towards the target. Tax payments/total book value of assets is included to control for the expected margi
22、nal tax benefits of debt. Controls for short- term deviations from target leverage are also included. Long-term debt divided by total assets and stock return volatility are used to control for expected financial distress costs. Following Lucas and McDonald (1990), the change in the leading indicator
23、s in the month of issuance announcement is included to control for the state of the economy. Masulis and Korwar (1986) find that firms reduce leverage after a stock runup, a high runup suggests optimal timing for equity issuances. Three alternative functional forms are admitted for managerial share
24、ownership. 3 Conclusion We analyze the relationship between managerial share ownership and the firms change in leverage around a security issuance for a hand-collected sample of 999 straight bond and stock issuances during calendar years 19891993. The sample consists exclusively of straight bond and
25、 equity issuances of AMEX, NYSE and NASD firms from the Corporate Finance Directory, published by Investment Dealers Digest. The sample excludes financials and utilities. In addition, shelf registered, secondary offerings, initial public offerings, convertible debt, combinations of debt and equity,
26、preferred stock and serial issuances have also been excluded making the security issue comparable with the literature. A complete set of announcement dates, balance sheet data, managerial and block share ownership data, and CRSP daily return data for the (240, 40) interval preceding the announcement
27、 date is available for a sample of 111 firms. The choice of security issuance, the change in firm leverage around the issuance and the issuance announcement return are examined. The change in firm leverage is measured on a market value basis and is the change in the debt-to-assets ratio from the ave
28、rage level of the 2 years preceding issuance to the 2 years subsequent allows for refinancing and rejiggering of the capital structure through buybacks, refinancings, etc. For robustness, three alternative functional forms for the relationship between leverage changes and managerial share ownership
29、are specified. We contribute by examining the evidence and filling two gaps in the literature. First, we empirically tie security issuance announcement returns to managerial share ownership while controlling for outside block share ownership. We find that when managerial share ownership is high the
30、market reacts more negatively to an issuance announcement. However, when managerial share ownership is high, announcement returns are about 256 basis points higher if outsider block share ownership is also high. Second, we find that the magnitude of de-leveraging around a security issuance is positi
31、vely related to managerial share ownership, and that this relation is confined to the “entrenchment” range of managerial share ownership. We find that entrenched managers do not exhibit greater propensity to issue equity, but rather they affect lower leverage by choosing smaller debt issuances and larger equity issuances. Our evidence indicates that ownership structure impacts the extent to which a firm reduces leverage around security issuances. In addition, we find that block share ownership attenuates the agency costs of security issuance associated with high managerial share ownership.
