Managerial ownership, capital structure and firm value

Abstract

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...

Pengaruh Aktivitas Pemasaran, Kinerja Keuangan, Dan Aset Tidak Berwujud Terhadap Nilai Perusahaan

“…Peningkatan jumlah hutang merupakan sinyal positif bagi investor. Ruan et al (2011) menunjukkan bahwa struktur modal perusahaan (leverage) berpengaruh terhadap nilai perusahaan karena pengawasan dari kreditor lebih ketat untuk memastikan perusahaan memaksimalkan kinerjanya. Dengan demikian, penelitian ini berhipotesis bahwa: H5 : Solvabilitas berpengaruh positif terhadap Nilai Perusahaan…”

Managerial Ownership, Board of Directors, Equity-based Compensation and Firm Performance: A Comparative Study between France and the United States

“…At the empirical study, the results are mitigated, but they converge on the finding of a non-linear relationship between two variables such as inverted U-shaped as the work of (McConnell and Servaes (1990), Hu and Zhou (2008) and Chen et al (2012)) or cubic type (N Form) such as studies by (Short and Keasey (1999), Ruan et al (2011) and Cheng et al (2012)) or quadratic relation as the study of (Cui and Mak (2002) and McConnell and Servaes (1990)) or quantum relation such as the study of (Davies et al(2005), .…”

“…We adapt a model of piecewise linear regression to highlight the effect of non-linearity of the managerial ownership, in accordance with the same approach in the studies of Morck et al (1988), Hess et al (2010), Ruan et al (2011) andCheng et al (2012). More precisely, the managerial ownership variable (.manag prop) is divided as follows:…”

“…However, according to Morck et al (1988) and Denis et al (1997) a high percentage of shares held by the manager, results in a reduction in the effectiveness of external governance mechanisms (capital market monitoring). A large number of previous studies shows that there is a non-linear relationship between managerial ownership and firm performance (Morck et al (1988), Davies et al (2005), Ng (2005), Cheng et al (2012) and Ruan et al (2011)). …”

Ownership And Determinants Capital Structure Of Public Listed Companies In Indonesia:a Panel Data Analysis

“…Ruan et al (2011) found an unlinier relationship between ownership and the firm value and capital structure.…”