Abstract not found

Scandals of corporate governance in the United States and Europe in the aftermath of the TMT bubble captured the public imagination. In play were the interests of senior executives in relation to investors, prompting debate over countries’ standards of corporate governance in the global market place. Ahold was (and is) an especially important instance, involving significant internal accounting and reporting failures and poor public disclosure of market-sensitive information. Ahold is also a global corporation crosslisted on major financial markets. In this paper, we report the analysis of market trading in Ahold stock between Amsterdam and New York. It is shown that greater volatility in Amsterdam daily closing prices presaged the crisis to come in Ahold shares implying leakage of information to privileged local insiders. It is also shown that in the aftermath of Ahold’s crisis, management responded to the lack of global investor confidence by improving transparency and governance standards consistent with the expectations of global investors. Implications are drawn for the pricing of corporate governance and the process of convergence in national standards of corporate governance. The continuity of different regimes of governance is subject to inter-market arbitrage especially if corporations seek to maintain and enhance their reputations in the global financial market place.

This paper examines the effect of managerial discretion on capital structure dynamics. Analyses of financing decisions indicate that managers with more discretion prefer issuing equity over debt. Examination of leverage changes suggests that increases in debt ratios due to positive and negative financial deficits are greater for managers with high discretion. Furthermore, when managers have high‐ discretion, debt changes seem to be more sensitive to issuance activities than to repurchase activities. For high‐discretion managers, market timing activities (equity issuance following increases in stock prices) and the passive response to stock price appreciations, result in greater declines in debt ratios. Finally, while firms tend to rebalance their capital structures over time regardless of the level of managerial discretion, the speed of target adjustment is much slower for high‐discretion managers.

(Please do not quote) This paper analyzes market reactions triggered by announcements that hedge funds and private equity investors purchase large blocks of voting rights. We argue that changes in shareholders’ wealth are related to the opportunity, possibility and motivation of being an active blockholder, who successfully reduces agency problems. The investigation is based on a unique data set of German public listed companies and relates their short-term and long-term stock performance to several corporate characteristics and market variables. We find positive abnormal returns following an announcement that an active shareholder acquired at least 5% of a company’s voting rights. Interestingly variables proxying for agency costs explain the market reaction for our private equity sub-sample. However, ownership characteristics provide only poor evidence for explaining the market reaction within our hedge fund sub-sample. Considering the long-term stock price performance, we observe considerably negative buyand-hold abnormal returns for both samples. However, our results indicate a misinterpretation by the capital market regarding a hedge fund’s motivations and activities.

managers say and what they do

We would like to thank the participants of WHU Campus for Finance: “Rationality of stock markets and empirical finance, ” Koblenz, January 2003. We are also indebted to Christoph Hinkelmann and Urs Peyer for their comments and suggestions. We further benefited from the criticism of Karl Pichler and Pius Zgraggen. Many thanks to Nancy Macmillan for the great editorial help. Shareholder value maximization: What managers say and what they do This paper examines whether Swiss firms maximize shareholder value. To find out, we survey the goals of 313 listed and unlisted firms. We then examine whether managers ’ decisions are consistent with their goals and analyze whether performance corresponds to intentions. Our results show that most managers pursue conflicting targets. Many also declare that they do not maximize shareholder value. And those who claim they do sometimes rely on investment criteria that are inconsistent with that target. Finally, we find that share-price performance is marginally better when managers claim to maximize shareholder value, particularly when stock prices have fallen. page 2Shareholder value maximization: What managers say and what they do 1.

Target firms are often faced with bidders that are not equally well informed. This reduces the competition between the bidders, since a less well informed bidder fears the winner’s curse more. We analyze how a target should optimally be sold in the presence of asymmetric bidders. We show that a sequential procedure can extract the highest possible transaction price. The target first offers an exclusive deal to a better informed bidder, without considering a less well informed bidder. If rejected, the target either offers an exclusive deal to the less well informed bidder (now ignoring the better informed bidder), or it encourages every bidder to participate in a modified first-price auction. We discuss the key factors that affect the optimal procedure, how deal protection devices can mitigate commitment problems, and also some empirical implications.

∗ For helpful comments on earlier versions of this paper, we are grateful to Mike Bradbury, Neil Crombie, Helen Roberts, Alan Stent, and to workshop participants at the University of Canterbury and the NZ