Corporate control contests and capital structure

Harris, Milton; Raviv, Artur

doi:10.1016/0304-405x(88)90040-2

Cited by 568 publications

(332 citation statements)

References 17 publications

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“…However, previous studies examining the relationship between managerial entrenchment and leverage decisions have produced mixed results (see Stulz 1990;Berger et al 1997;Fama 1980). For example, Stulz (1990) and Harris and Raviv (1988) present evidence to support the view that entrenchment motives may lead managers to increase leverage beyond the optimal point, in order to increase their control and reduce pressure from external shareholders. Conversely, Fama (1980) notes that entrenched managers may prefer less leverage than is optimal because of their preference for lower firm risk to protect their underdiversified human capital.…”

Section: The Chinese Growth Enterprises Market Boardmentioning

confidence: 72%

“…As the use of debt reduces the need for external equity, it provides SME managers with the ability to issue more debt without diluting ownership and control to pursue their own private interest. One plausible explanation for our findings is managerial entrenchment motives, which may cause managers to increase leverage, in order to inflate the voting power of their equity stakes, reduce the possibility of takeover attempts, and retain their jobs (Harris and Raviv 1988). Consequently, the use of managerial shareholding as a means to mitigate conflict of interests in SMEs in China appears ineffective.…”

Section: Managerial Shareholding Cash Compensation and Debt Ratiomentioning

confidence: 83%

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Capital structure of Chinese listed SMEs: an agency theory perspective

2016

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Prior work examining the antecedents of capital structure for small and medium-sized enterprises in emerging markets is limited. This paper sheds light on how the corporate governance mechanisms adopted by firms on the newly established Growth Enterprise Market (GEM) in China influence their use of debt. We find that the financial leverage of GEM firms is positively influenced by executives' shareholding and their excess cash compensation. Ownership concentration appears to reduce leverage, whereas the percentage of tradable shares increases leverage. In contrast, institutional investors' shareholding does not influence the level of debt. Traditional factors such as tax and operating cash flow are insignificant in explaining the debt levels among GEM firms.

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Section: The Chinese Growth Enterprises Market Boardmentioning

confidence: 72%

Section: Managerial Shareholding Cash Compensation and Debt Ratiomentioning

confidence: 83%

Capital structure of Chinese listed SMEs: an agency theory perspective

2016

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“…Controlling shareholders may pay themselves excessive compensation, the power to elect board members, the ability to consume perquisites and to transfer resources at the expense of the firm and minority shareholders (Grosman and Hard, 1988;Harris and Raviv, 1988;Maury and Pajuste, 2010). Therefore, the relevant agency problem is expropriation of minority shareholders by the large shareholders.…”

Section: Literature Reviewmentioning

confidence: 99%

Ownership-Control Discrepancy and Dividend Policy: Evidence from Tunisia

Guizani¹,

Kouki²

2011

IBR

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This paper examines the relation between the ownership-control discrepancy and dividend policy of Tunisian firms. Using data of 44 Tunisian firms, the current study provides evidence in support of the expropriation hypothesis. The empirical results show that the largest shareholder maintains a controlling power measured by Banzhaf index in excess of his cash flow rights which, leads to a low level of dividend payout ratios. In contrast, when the control power is shared between multiple large shareholders, Tunisian firms are likely to pay large dividends.

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“…First, the importance of new blockholders is demonstrated. Prior research suggests that the ex ante level of stock ownership concentration and its division between management and outsiders is important in determining the likelihood of a takeover (see Manne, 1965;Bradley, 1980;Grossman and Hart, 1980;Shleifer and Vishny, 1986;Harris and Raviv, 1988;Stulz, 1988). In this research, the ex post changes in ownership concentration are important to the ultimate contest outcome.…”

Section: Introductionmentioning

confidence: 99%

The influence of professional investors on the failure of management buyout attempts

Peck

1996

Journal of Financial Economics

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In a sample of 111 MBO offers between 1984 and 1987, almost 30% attract new blockholders. These blockholders are primarily professional investors who act to facilitate a takeover by a higher bidder, thus increasing returns to both themselves and other public shareholders. In contrast, I find little evidence that pre-existing blockholders, particularly institutional holders, affect either the offer outcome or actively participate in the buyout contest once it begins. The overall pattern of results suggests that professional investors, particularly equity-holding companies, are 'control specialists' who provide valuable services as brokers in the market for corporate control.

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Corporate control contests and capital structure

Cited by 568 publications

References 17 publications

Capital structure of Chinese listed SMEs: an agency theory perspective

Capital structure of Chinese listed SMEs: an agency theory perspective

Ownership-Control Discrepancy and Dividend Policy: Evidence from Tunisia

The influence of professional investors on the failure of management buyout attempts

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