Equity carve-outs and managerial discretion

Article Abstract:

This study proposes a managerial discretion hypothesis of equity carve-outs in which managers value control over assets and are reluctant to carve out subsidiaries. Thus, managers undertake carve-outs only when the firm is capital constrained. Consistent with this hypothesis, firms that carve out subsidiaries exhibit poor operating performance and high leverage prior to carve-outs. Also consistent with this hypothesis, in carve-outs wherein funds raised are used to pay down debt, the average excess stock return of +6.63 percent is significantly greater than the average excess stock return of -0.01 percent for carve-outs wherein funds are retained for investment purposes. (Reprinted by permission of the publisher.)

Analysis, Finance, Subsidiary corporations, Subsidiaries, Securities, Corporations, Corporate finance, Financial management

---

Corporate performance, corporate takeovers, and management turnover

Article Abstract:

This paper examines the hypothesis that an important role of corporate takeovers is to discipline the top managers of poorly performing target firms. We document that the turnover rate for the top manager of target firms in tender offer-takeovers significantly increases following completion of the takeover and that prior to the takeover these firms were significantly under-performing other firms in their industry as well as other target firms which had no post-takeover change in the top executive. We interpret the results to indicate that the takeover market plays an important role in controlling the nonvalue maximizing behavior of top corporate managers. (Reprinted by permission of the publisher.)

Evaluation, Acquisitions and mergers, Management, Executive ability

---

A model for the determination of 'fair' premiums on lease cancellation insurance policies

Article Abstract:

Lessors are protected by lease cancellation insurance against early termination of operating leases that can be cancelled. A contingent claims model is presented for finding the 'fair' premium for such an insurance policy, with comparative statistics considered and some numerical examples presented to illustrate the model. The insurance premium is shown to be sensitive to the expected rate of economic depreciation of the leased asset and to the systematic and non-systematic risk of the leased asset, as well as being sensitive to several other factors.

Economic aspects, Leases, Lease and rental services industry, Insurance, Business insurance, Insurance policies

Similar abstracts:

• Abstracts: Adjustment costs and capital asset pricing. Information, asset prices, and the volume of trade. The geometry of the maximum likelihood estimator of the zero-beta return
• Abstracts: A VARMA analysis of the causal relations among stock returns, real output, and nominal interest rates. The losses realized in bank failures
• Abstracts: The Rule 415 experiment: equity markets. The shelf registration of debt and self selection bias. The pricing effects of interfirm cash tender offers

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.