Executive Stock Option Plans and Corporate Dividend Policy

Lambert, Richard A.; Lanen, William N.; Larcker, David F.

doi:10.2307/2330976

Cited by 323 publications

(161 citation statements)

References 21 publications

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“…Since exercise prices are often set in relation to stock prices over the preceding five trading days, some discounts (premia) may be observed because stock prices in the preceding week were below (above) the stock price at award. However, in contrast to Lambert, Lanen and Larcker (1989), there is such a wide distribution of award discounts/premia in our sample (with a central tendency of zero) that we are pressed to doubt a ‗prior-week' explanation (see endnote 5). Discounts to market directly reduce the exercise price or, equivalently, imply acquisition of underpriced stock.…”

Section: Icontrasting

confidence: 68%

Managerial ownership, capital structure and firm value

Ruan¹,

Tian²,

Ma³

2009

COC

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This paper extends prior research to examine the managerial ownership influences on firm performance through the choices of capital structures by using a new sample of S&P 500 firm in 2005. The empirical results of OLS regressions replicate the nonlinear relationship between managerial ownership and firm value. However, we found that the turning points had moved up in our sample compared with previous papers, which implies that the managerial control for pursuing self-interest, and the alignment of interests between managers and other shareholders can only be achieved now by management holding more ownership in a firm than that found in the previous studies. Managerial ownership also drives the capital structure as a nonlinear shape, but with a direction opposite to the shape of firm value. The results of simultaneous regressions suggest that managerial ownership affects capital structure, which in turn affects firm value. Capital structure is endogenously determined by both firm value and managerial ownership; while managerial ownership is not endogenously determined by the other two variables. As a part of good tradition we have focused on a wide international representation of contributions. We have contributions made by authors from many countries of the world both developed and developing. These are papers by authors from Japan, the USA, Spain, Australia, Taiwan, Qatar, Brazil, Denmark.In this issue we were fortunate in composing a section devoted to corporate governance in a particular region with application to Japan. This is the first time for our journal to publish the special section on corporate governance in Japan. This is a result of efforts undertaken by us to get and develop very good and future-oriented relationships with corporate governance experts from Japan. I think you will enjoy reading the papers on corporate governance in Japan.In this issue of the journal we came back to the traditional issue of corporate governance -ownership structure as a special section. Major attention is paid to the link between ownership structure and performance. Our contributors were fortunate in generating new ideas and made new findings in this way.Our strategic purpose is to develop the new concepts and practices how to overcome the financial crisis with the corporate governance toolkit including mechanisms, instruments and participants. SECTION 1. ACADEMIC INVESTIGATIONS AND CONCEPTS CORPORATE GOVERNANCE AND FINANCIAL CONTRACTING: BONDHOLDER TAKEOVER DEFENSES IN POISON PUTS 9Ai-Fen Cheng, Tao-Hsien Dolly KingBondholder governance through the use of bond covenants and the interactions between shareholder and bondholder governance mechanisms has been recently highlighted in the corporate governance literature. In this paper, we study bondholder governance mechanisms through takeover-related bond covenants (i.e., poison puts), confirm with agency theory on the characteristics of firms that are more likely to use these covenants, and emphasize the importance of bondholder governance in the overall struc...

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Section: Icontrasting

confidence: 68%

Managerial ownership, capital structure and firm value

Ruan¹,

Tian²,

Ma³

2009

COC

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“…Equity incentives have been associated with better operating performance (Core and Larcker, 2002), more and better acquisitions (Datta, Iskandar-Datta, and Raman, 2001;Cai and Vijh, 2007), larger restructurings and layo¤s (Dial and Murphy, 1995;Brookman, Chang, and Rennie, 2007), and more voluntary liquidations (Mehran, Nogler, and Schwartz, 1998). Options are also linked to lower dividends (Lambert, Lanen, and Larcker, 1989) and to a shift from dividends to share repurchases (Fenn and Liang, 2001;Kahle, 2002), likely because options are not usually dividend protected. Again, these correlations do not imply causal relationships -for example, …rms about to undertake acquisitions or restructurings may increase equity pay to boost incentives.…”

Section: The E¤ects Of Pay On Policies Pro…tability and Executive Rmentioning

confidence: 99%

Executive Compensation: A Survey of Theory and Evidence

Edmans¹,

Gabaix²,

Jenter³

2017

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top executive pay over time and across firms, the changing composition of pay; and the strength of executive incentives. We compare pay in U.S. public firms to private and non-U.S. firms. We then critically analyze three non-exclusive explanations for what drives executive pay -shareholder value maximization by boards, rent extraction by executives, and institutional factors such as regulation, taxation, and accounting policy. We confront each hypothesis with the evidence. While shareholder value maximization is consistent with many practices that initially seem inefficient, no single explanation can account for all facts and historical trends; we highlight major gaps for future research. We discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. Our survey has two main goals. First, we aim to tightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay. Second, we aim to provide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research. JEL-Codes: D310, D860, G340, M120. Terms of use: Documents in

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“…Author found out mergers reduce the profitability of the merging companies. Lambert et al (1989) 10 found that acquisitions which increase the total stock return are in larger number comparatively. In addition, from examining the stock return performance of the companies that are acquired on that date when the merger was announced and was approved, there was no indication that risk reducing mergers tend to occur at expense of the shareholder wealth.…”

mentioning

confidence: 99%

Profitability Analysis of Mergers and Acquisitions: An Event Study Approach

Dilshad

2013

Business and Economic Research

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The purpose of this research is to test the efficiency of market with respect to announcements of mergers and acquisitions using an event study methodology. Specifically, this study analyzed the effects of banks mergers and their announcements on the prices of stocks, in Europe. We study 18 deals that involve banks in Merger and Acquisition from year 2001 to 2010 in order to investigate the returns of shareholder of the targets and acquirers. Evidence here supports that significant cumulative abnormal returns were short lived for the acquirers. At the end of the event window, the cumulative abnormal returns were 0. Evidence of excess returns after the merger announcement was also observed along with the leakage of information that resulted in the rise of stock prices few days before the announcement of merger or acquisition. At the same time, the results of cumulative abnormal returns showed that target banks earned abnormal returns on the merger announcement day.Keywords: Market efficiency, Mergers, Acquisitions, Shareholders, Banks, Information Profitability Analysis of Mergers and AcquisitionsMergers and acquisitions around the globe represent a huge reallocation of resources, within and across countries and therefore, it has been the interest of empirical studies for many years. There have been three merger waves in the 1960s with the multinational takeovers, in the 1980s there were aggressive takeovers and in the 1990s, there were global takeovers. Historically, the huge number of these merger and acquisitions were concentrated in the United States of America and United Kingdom. Extensive research has been done on whether acquisitions are profitable or lead to wealth reduction for shareholders and empirical studies have revealed that mergers tend to provide a mixed performance to the shareholders involved. Research ISSN 2162-4860 2013 www.macrothink.org/ber 90 Sherman et al. (2011) 1 stated that mergers and acquisitions are one of the most effective ways to accelerate the implementation of a plan to grow rapidly. The impact of technology has increased the pace of the mergers and acquisitions. Business and EconomicWhen a merger or an acquisition is announced, a significant amount of information is revealed about that particular deal and this information can be used to evaluate the reaction of stock market to a merger or an acquisition announcement. Mergers and Acquisitions have created an intense competition for all the companies. In this era, acquisitions are increasing at a rapid pace and are being bid up at a higher rate. Banks have been undergoing a process of consolidation and restructuring. Factors such as globalization and competition have compelled banks to improve their effectiveness in providing financial services to meet the increasing demands for quality products and services. This leads to an appropriate assessment of banks performance reflecting their ability to survive the ongoing waves of activities such as mergers and acquisitions. Banks can increase their scale of operations to ge...

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Executive Stock Option Plans and Corporate Dividend Policy

Cited by 323 publications

References 21 publications

Managerial ownership, capital structure and firm value

Managerial ownership, capital structure and firm value

Executive Compensation: A Survey of Theory and Evidence

Profitability Analysis of Mergers and Acquisitions: An Event Study Approach

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