This paper’s purpose is to compare nonprofits with pass-throughs in terms of valuation, leverage, and growth. To achieve this purpose, we use the Capital Structure Model. This model determines maximum firm valuation through incorporating real data (tax rates, credit spreads, and historical growth rates). Since this is the first study to offer our particular set results on valuation, leverage and growth, our findings are value-additive in terms of the comparative research on nonprofits and pass-throughs. The new and scientific value of our findings are further established by robust tests that modify values for key variables. Major findings include the following. Nonprofits have over a fifty percent valuation advantage over pass-throughs and achieve a four times greater increase in dollar value when going from nongrowth to growth. The latter accomplishments are attained with a smaller before-tax plowback ratio and less retained earnings. Such achievements occur because nonprofits are not taxed on earnings retained for growth. While nonprofits have somewhat greater optimal leverage ratios than pass-throughs, they gain a bit less in dollars added from debt unless growth rates increase as projected when tax rates are lowered. Nonprofits gain less percentage-wise from debt because their unlevered firm value is greater than pass-throughs.
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. AbstractPurpose -The purpose of this paper is to examine the contemporaneous relationship between changes in corporate reputations and stock prices. Design/methodology/approach -The Harris Interactive Reputation Quotient TM is used as a measure of corporate reputation. Stock return and risk measures are evaluated for each Reputation Quotient TM survey period for the years 1999-2007. Findings -The results provide evidence that, in the aggregate, firm reputations are procyclical. Additionally, firms with improved reputations enjoy lower volatility in their stock prices than firms with diminished reputations. Research limitations/implications -Due to the Harris Poll Online methodology, it is not clear that the price changes occur concurrently with the change in reputation. Originality/value -This paper contributes to the finance literature by examining the effect of a change in corporate reputation on stock price.
This study of firm reputations finds that firms with improved reputations, as measured by Harris Interactive, provide higher average rates of return on the announcement date than those firms with diminished reputations. Somewhat surprisingly, firms with improved reputations earned an 8.3% return over the following year whereas firms with diminished returns earned a higher 15.4 % return. One can only speculate that firms with diminished reputations might be making management decisions that enhanced profitability at the expense of positive public perceptions of the firm. Sharpe and Treynor measures, based on median returns, were significantly greater for those firms with above average changes in reputation.
PurposeThe purpose of this paper is to investigate the effect of executive severance contract maturity policies on the likelihood of forced turnover and the length of tenure for CEOs who are forced from their positions.Design/methodology/approachThe paper utilizes logistic and accelerated failure time models to test the hypothesis that severance contracts decrease information asymmetries resulting in an increased likelihood of forced turnover and a shortened tenure for those CEOs who are forced out.FindingsThe results provide evidence that fixed‐term severance contracts increase the likelihood of forced tenure and decrease the length of tenure for CEOs who experience a forced turnover during the period, while time‐independent contracts do not.Research limitations/implicationsThe limitation is the possibility that an omitted variable jointly determines the likelihood of the presence of a severance contract and the effect on forced turnover. Future research should investigate other possibilities beyond the CEO coming from outside of the firm.Practical implicationsThe findings confirm that the maturity policies of severance contracts affect forced turnover. The results suggest that there may be a benefit in designing severance contracts to expire to encourage more efficient turnover of underperforming CEOs.Originality/valueThis paper contributes to the empirical corporate finance and accounting literature by differentiating between forced and unforced turnover when analyzing the effects of severance contracts and demonstrating that the time dimension of severance contracts may provide the desired result of encouraging the identification of CEO‐firm mismatches.
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