1、 1 外文翻译 原文 Entrenched management, capital structure changes and firm value Material Source: http:/ e143697042062757/ Author:Leonard L. Lundstrum The relationship between managerial share ownership and the firms change in leverage around a security issuance is examined. We find that entrenched manage
2、rs are not more likely to issue equity, however they do affect lower leverage by choosing debt issuances which are smaller and equity issuances that are larger than those chosen by managers that are not entrenched. The magnitude of the decline in leverage that occurs from before the issuance to afte
3、r the issuance is positively related to managerial share ownership. In addition, this relationship is confined to only the “entrenchment” range of managerial share ownership. The market reacts negatively to an issuance announcement when managerial share ownership is high. 1 Introduction A number of
4、investigators, including Berger et al. (1997) and Garvey and Hanka(1999) report that managerial entrenchment affects the firms choice of leverage.Theory implies that debt constrains management discretion by either reducing the managers bargaining power (Noe and Rebello 1996) or by reducing discretio
5、n over spending (Stulz 1990). Zwiebel (1996) argues that entrenched managers use their influence to lower debt levels to the point that capital structure maximizes empire building subject to sufficient efficiency to prevent a takeover. Agency costs will be incurred at the time of security issuance i
6、f the manager makes a sub-optimal security issuance choice. Jensen and Meckling (1976) find that agency costs are decreasing in managerial share ownership. Yet Stulz (1988) argues that agency costs are not necessarily monotonically decreasing in managerial share ownership as there exists an “entrenc
7、hment” range over which the managers ability to deter takeovers 2 dominates the “incentive” effect of managerial share ownership. We examine the relation between managerial share ownership and the likelihood, magnitude, and information content of security issues. When negotiating debt covenants, cre
8、ditors appear to respond to the fraction of shares held by the CEO. Begley and Feltham (1999) find that the number of covenants in debt contracts is increasing in the fraction of the firms shares held by the CEO. This evidence suggests that managerial share ownership may be important to understandin
9、g the agency problems associated with security issuance. The evidence that creditors demand more covenants for firms with high managerial share ownership suggests that the creditors concerns about agency conflicts are heightened when managerial share ownership is high. Share ownership appears to not
10、 only affect creditor demands but also the leverage choice. Friend and Lang (1988), Mohd et al. (1998) and Nam et al. (2003) all conclude that leverage is decreasing in managerial share ownership. We examine two important extensions of these lines of inquiry. First, while theory implies that manager
11、ial share ownership affects the agency costs associated with issuance, security issuance announcement returns have yet to be tied empirically to managerial share ownership, with the limited exception of Limpaphayom and Ngamwutikul (2004) in the case of seasoned equity offerings. Friend and Lang (198
12、8), Nam et al. (2003), and Mohd et al. (1998) all argue that their results indicate that agency problems are an important determinant of capital structure. While none of these investigators examine the valuation effects of these agency problems while controlling for outside blockholder share ownersh
13、ip, we do. Second, none of the aforementioned papers reports whether the relationship between managerial share ownership and leverage change is monotonic over the range of managerial share ownership. These two gaps in the literature are addressed. Over an intermediate range of managerial share owner
14、ship, firms issue significantly less debt than when managerial ownership is extreme. When managerial share ownership is large and blockholder ownership is small, the firm experiences smaller announcement effects from security issues. The change in leverage is defined here as the average debt-to-asse
15、t ratio for the 2 years prior to the announcement date less the average debt-to-assets ratio for the 2 year ends subsequent to the announcement date. The debt-to-assets ratio is measured on a market value basis. Holderness (2003) articulates the differential incentives arising from share 3 ownership
16、 of outside blockholders versus managers. Our findings with respect to outside blockholders mitigating agency costs of security issuance are consistent with that of Chen and Yur-Austin (2007) who report that outside blockholders help mitigate managerial extravagance with regard to discretionary spen
17、ding, but our results are in conflict with the Singh and Davidson (2003) finding that outside block ownership offers limited reduction in agency costs. The balance of this paper is laid out as follows: the model is presented in the next section; the sample and descriptive statistics are discussed in
18、 the third section; the fourth section presents the empirical specification and results; the conclusion follows. 2 Model Three models are used to complete the analysis. First, a choice model for security issuance type, second, a leverage change model and third, an abnormal announcement return model.
19、 2.1 Choice model The following framework is employed to investigate an empirical model of security issuance choice. Equity issuances take a value of one in the choice model; debt issuances a value of zero. A parsimonious set of choice determinants are pervasive in the existing empirical work, and a
20、re employed in the model. Additional variables that reflect the theoretical literature on ownership structure are also included. As the functional form of the impact of managerial share ownership, if it exists, is unknown, three common specifications are utilized. Additional variables are used to co
21、ntrol for deviation from an optimal capital structure and are discussed in greater detail below. Deviation from optimal capital structure .The theory implies that a firms capital structure choice results from trading off the tax and incentive benefits of debt financing with leverage-related financia
22、l distress costs. These tradeoffs result in an optimal, or target, debt ratio for the firm. Prior research has found that the firms deviation from its target ratio helps explain the firms choice of security type issued. Marsh (1982), and Hovakimian et al. (2001) find that managers behave as if they
23、pursue a target debt ratio.An industry-average market-value based target is used here. The firms debt-to-assets ratio is used as the empirical proxy for the firms leverage. Following Hovakimian et al. The debt-to-assets ratio is defined as: book value of debt/(book value of debt + market value of eq
24、uity). Surplus leverage is 4 calculated as the firms debt-to-asset ratio less its target ratio. Therefore a positive value of surplus leverage indicates that the firms actual leverage exceeds its target. The procedure for estimating the firms deviation from target is described in more detail in Sect
25、ion . 2.2 Taxation MacKie-Mason (1990) finds that the firms tax status affects the choice of financing type, while Graham (1996) reports that high tax rate firms issue more debt than do low tax rate firms. It follows that firms with a higher marginal tax rate stand to benefit more from the tax shiel
26、d provided by debt financing. We follow Jung et al(1996) and Bayless (1994), in their respective analyses of the security issuance decision, and use tax payments/total book value of assets as a measure of tax shield benefits associated with debt financing. Tax payments/assets therefore controls for
27、short-term deviations from the target debt ratio which are driven by the expected marginal tax benefits of debt financing. Costs of financial distress Following Jung et al. (1996), the firms daily stock return volatility and the firms book value of long-term debt/assets are both used to proxy for ex
28、pected financial distress costs. Daily stock return volatility is measured over days (-240, -40) in event time, where day 0 is the day of the issuance announcement. Asymmetric information Myers and Majluf (1984) imply that issuing equity becomes more expensive as asymmetric information between insid
29、ers and outsiders increases. As a result, firms for which information asymmetry is large should issue debt if they can, or else abstain from raising funds to avoid selling under-priced securities. Korajczyk et al. (1991) suggest that firms should time equity issuances for periods of low information
30、asymmetry. Lucas and McDonald (1990) suggest that information asymmetries are decreasing in runup. Lucas and McDonald contend that a firm is more likely to have good projects and raise funds if its returns before the issue are high (i.e. return “runup” is large) and leading economic indicators are f
31、avorable. The firms stock return runup is defined as the past 11-month cumulative excess returns over the NYSE/AMEX equally-weighted index. The first difference of the 6-month leading indicators, in the announcement month, is used here to proxy for economic conditions. Managerial opportunism Both Mo
32、rck et al. (1988) and McConnell and Servaes(1990) report a non-monotonic empirical relation between firm value and managerial share ownership. Morck et al. (1988) estimate a piece-wise linear 5 functional form of firm value over managerial share ownership. Morck et al. report that firm value is decr
33、easing over the 525% range of managerial share ownership, a finding which is consistent with Stulzs (1988) contention that there exists an “entrenchment” range of managerial share ownership. McConnell and Servaes allow managerial share ownership to impact firm value in a quadratic form, and find hig
34、h levels of insider ownership to be negatively related to firm value. There is no consensus in the extant literature with respect to the exact functional form that captures the net impact of the“entrenchment” and “incentive” effects of managerial share ownership as they relate to security issuance.
35、We use three alternative specifications for the relationship between managerial share ownership and the security issuance choice. Specification (1) is linear in managerial share ownership. Specification (2) is analogous to the piece-wise linear specification set forth by Morck et al. (1988), with se
36、parate slopes admitted for managerial share ownership of 05%, 525%, and above 25%, and with separate slopes admitted for block ownership of 05%, 525%, and above 25%. Specification (3) uses two indicator variables; an indicator equal to 1 if managerial share ownership is above its sample median, and
37、a second indicator variable equal to 1 if block ownership exceeds its sample median, and also the interaction of these two indicators. Outside ownership and monitoring Shleifer and Vishny (1986) report that the benefits of improved performance are increasing in block size. And so greater share owner
38、ship by blockholders can attenuate managerial opportunism with respect to security issuance. Block share ownership is the fraction of the firms shares held by all 5% blockholders. 2.3 Leverage change model The managers choice variables include the size of the security issuance. Examining just the bi
39、nomial security issuance choice model may not fully reveal the relation between managerial share ownership and security issuance. For example, managerial share ownership may be unrelated to the propensity to issue equity, but still may influence the relative magnitudes of debt and equity issuances.
40、To examine the effect of managerial share ownership on the magnitudes of debt and equity issuance, we analyze the relationship between managerial share ownership and the change in leverage from before the issuance to after the issuance. The change in leverage is defined here as the average debt-to-a
41、sset ratio for the 2 year ends prior to the announcement date less the average debt-to-assets ratio for 6 the 2 year ends subsequent to the announcement date. The firms debt-to-assets ratio is the book value of debt/(book value of debt + market value of equity). Therefore a decline in leverage resul
42、ts in a positive leverage change. For ease of exposition, a decline in the leverage ratio is referred to hereafter as “de-leveraging”. The use of a 2-year average allows for capital structure re-adjustment and any signaling impacts of the issuance. Debt and equity issuances are pooled to measure the
43、 impact of ownership structure across security issue types. This specification is used to examine whether managerial share ownership is related to the relative magnitude of debt and equity issuances. An indicator variable is included to control for security type. Surplus leverage is defined as the a
44、ctual debt-to-asset ratio less the target debt-to-asset ratio, and is used to control for deviation from optimal capital structure. This controls for changes in leverage that are due to an adjustment towards the target. Tax payments/total book value of assets is included to control for the expected
45、marginal tax benefits of debt. Controls for short- term deviations from target leverage are also included. Long-term debt divided by total assets and stock return volatility are used to control for expected financial distress costs. Following Lucas and McDonald (1990), the change in the leading indi
46、cators in the month of issuance announcement is included to control for the state of the economy. Masulis and Korwar (1986) find that firms reduce leverage after a stock runup, a high runup suggests optimal timing for equity issuances. Three alternative functional forms are admitted for managerial s
47、hare ownership. 2.4 Abnormal announcement return model The 2-day abnormal announcement returns for debt and equity issuances are pooled. Bayless and Chaplinsky (1991) find that the announcement return is increasing in the probability of a debt issuance for debt issues and decreasing in the probabili
48、ty of a debt issuance for equity issues. Therefore two separate control variables are included. One control is for the estimated probability of debt issuance when the firm actually issues debt and the other for the estimated probability of debt issuance when the firm actually issues equity. Total as
49、sets are used to control for size effects. An indicator variable is included to control for security type, the indicator variable takes a value of one for debt issues and zero otherwise and is interacted with the estimated probability of a debt issuance. This controls for the mean difference in reaction to debt and equity issuances found by Bayless (1994), who pooled debt and equity announcement returns. 7 译文 根深蒂固的管理，改变了的资本结构和企业价值 资料来源 : http:/ e14369704206
