The Effect of Internal and External Corporate Governance on Dual Class Firms
0
조회
0
다운로드
1
인용
0
참고문헌
키워드
초록
We examine the effects of internal and external corporate governance and monitoring mechanisms on the dual-class status and the firm value of dual-class firms. Employing 736 dual-class firms and 7,027 single-class firms in U.S., we find that dual-class firms tend to be larger, and have higher director ownership, higher institutional ownership, lower blockholdings, and a smaller fraction of independent directors on their boards than single-class firms. In addition, we observe that dual-class firms are followed by a smaller number of security analysts. After correcting for endogeneity bias, our results show that not only firms with higher analyst coverage, but also firms with higher analyst following and a lower wedge, measured as the difference between voting rights and cash flow rights, are strongly associated with Tobin s q. In contrast, blockholders ownership, board independence, and institutional ownership play a relatively insignificant role in enhancing dual-class firm value. We interpret these results to suggest that security analysts are one of the most effective monitoring mechanisms that influence both the dual-class choice and firm value. Our results are not attributed either to the difference in firm size or to an industry effect.
Abstract
We examine the effects of internal and external corporate governance and monitoring mechanisms on the dual-class status and the firm value of dual-class firms. Employing 736 dual-class firms and 7,027 single-class firms in U.S., we find that dual-class firms tend to be larger, and have higher director ownership, higher institutional ownership, lower blockholdings, and a smaller fraction of independent directors on their boards than single-class firms. In addition, we observe that dual-class firms are followed by a smaller number of security analysts. After correcting for endogeneity bias, our results show that not only firms with higher analyst coverage, but also firms with higher analyst following and a lower wedge, measured as the difference between voting rights and cash flow rights, are strongly associated with Tobin s q. In contrast, blockholders ownership, board independence, and institutional ownership play a relatively insignificant role in enhancing dual-class firm value. We interpret these results to suggest that security analysts are one of the most effective monitoring mechanisms that influence both the dual-class choice and firm value. Our results are not attributed either to the difference in firm size or to an industry effect.
참고문헌 (65)
- Abadie, A, "Semiparametric estimator of instrumental variable models for causal effects", NBER #260, ~ (2000)
- Adams R, "One share - one vote: The empirical evidence", Review of Finance, 12(l), pp.51~91 (2008)
- Allen, F, "A theory of dividends based on tax clientele", Journal of Finance, 55, pp.2499~2536 (2001)
- Anderson, R, "Founding family ownership and firm performance : Evidence from the S&P 500", Journal of Finance, 58(3), pp.1301~1327 (2003)
- Bacon, C, "The board of directors and dual-class recapitalizations", Financial Management, 26, pp.5~22 (1997)
- Bebchuk, L, "Concentrated Corporate Ownership", pp.445~460 (2000)
- Bebchuk, L, "What matters in corporate governance?", Review of Financial Studies, 22(2), pp.783~827 (2009)
- Bebchuk, L, "The costs of entrenched boards", Journal of Financial Economics, 78, pp.409~433 (2005)
- Berger, P, "Managerial entrenchment and capital structure decisions", Journal of Finance, 51, pp.1411~1438 (1997)
- Boone, A, "The determinants of corporate board size and composition: An empirical analysis", Journal of Financial Economics, 85(1), pp.66~101 (2007)
- Brickley, J, "Outside directors and the adoption of poison pills", Journal of Financial Economics, 35, pp.371~390
- Bushman, R, "insider trading restrictions and analysts’ incentives to follow firms", Journal of Finance, 60, pp.35~66 (2005)
- Byrd, J, "Do outside directors monitor managers? Evidence from tender offer bids", Journal of Financial Economics, 32, pp.195~222 (1992)
- Campbell, H, "Understanding risk and return", Journal of Political Economy, 104, pp.298~345 (1996)
- Chung, K, "The impact of security analysts’ monitoring and marketing functions on the market value of firms", Journal of Financial and Quantitative Analysis, 31, pp.493~512 (1996)
- Claessons, S, "Disentangling the incentive and entrenchment effects of large shareholdings", Journal of Finance, 57, pp.2741~2772 (2002)
- Coles, J, "Boards: Does one size fit all?", Journal of Financial Economics, 87, pp.329~356 (2008)
- Cremers, M, "Governance mechanisms and equity prices", Journal of Finance, 60, pp.2859~2894 (2005)
- DeAngelo, H, "Managerial ownership of voting rights", Journal of Financial Economics, 14, pp.33~69 (1985)
- Demsetz, H, "The structure of corporate ownership : causes and consequences", Journal of Political Economy, 93, pp.1155~1177 (1985)
- Donald, S, "Choosing the number of instruments", Econometrica, 69, pp.1161~1191 (2001)
- Fama, E, "Separation of ownership and control", Journal of Law and Economics, 26, pp.301~325 (1983)
- Gompers, P, "Corporate governance and equity prices", Quarterly Journal of Economics, 118, pp.107~155 (2003)
- Gompers, P, "Extreme governance : an analysis of dual-class firms in United States", Review of Financial Studies, 23(3), pp.1051~1088 (2010)
- Greene W, "Econometric Analysis" (1993), Prentice-Hall
- Hahn, J, "A new specification test for the validity of instrumental variables", Econometrica, 70, pp.163~189 (2002)
- Hahn, J, "Weak instruments : Diagnosis and cures in empirical economics", American Economic Review, 93, pp.118~125 (2003)
- Harris, M, "A theory of board control and size", Review of Financial Studies, 21(4), pp.1797~1832 (2008)
- Heckman, J, "The common structure of statistical models of truncation, sample selection and limited dependent variables and a simple estimator for such models", Annals of Economic and Social Measurement, 5, pp.475~492 (1976)
- Heckman, J, "Sample selection as a specification error", Econometrica, 47, pp.153~161 (1979)
- Heckman, J, "Alternative methods for evaluating the impact of interventions, Ch. 4 in Longitudinal Analysis of Labor Market Data" (1985), Cambridge University Press
- Hermalin, B, "The effects of board composition and direct incentives on firm value", Financial Management, 20, pp.101~112 (1991)
- Hermalin, B, "Endogenously chosen boards of directors and their monitoring of the CEO", American Economic Review, 88, pp.96~118 (1998)
- Hermalin, B, "Boards of directors as an endogenously determined institution: A survey of the economic literature", FRBNY Economic Policy Review, pp.7~26 (2003)
- Jennifer, F, "Earnings and dividend informativeness when cash flow rights are separated from voting rights", Journal of Accounting and Economics, 39, pp.329~360 (2005)
- Jensen, M, "Theory of firm : Managerial behavior, agency costs, and capital structure", Journal of Financial Economics, 3, pp.305~360 (1976)
- Jensen, M, "Agency costs of free cash flow, corporate finance, and takeovers", American Economic Review, 76, pp.323~329 (1986)
- Jensen, M, "The modern industrial revolution, exit, and the failure of internal control systems", Journal of Finance, 48, pp.831~880 (1993)
- Jo, H, "Disclosure frequency and earnings management", Journal of Financial Economics, 84, pp.561~590 (2007)
- Kai, L, "Self-selection models in corporate finance", University of British Columbia and University of Maryland, ~ (2007)
- Klein, A, "Audit committee, board of director characteristics, and earnings management", Journal of Accounting and Economics, 33(3), pp.375~400 (2002)
- Corporate governance, analyst following, and firm behavior, "Knyazeva, D", New York University, ~ (2007)
- Does Corporate Governance Really Matter?, "Larcker, D", University of Pennsylvania, ~ (2004)
- Lim, T, "Rationality and Analysts’ Forecast Bias", Journal of Finance, 56, pp.369~385 (2001)
- Linck, J, "The determinants of board structure", Journal of Financial Economics, 87(2), pp.308~328 (2008)
- Lyon, B, "improved methods for tests of long-run abnormal stock returns", Journal of Finance, 54, pp.165~201 (1999)
- Maddala, G, "Limited dependent and quantitative variables in econometrics" (1983), Cambridge University Press
- Masulis, R, "Agency problems at dual-class companies", Journal of Finance, 64(4), pp.1697~1727 (2009)
- McConnell, J, "Additional evidence on equity ownership and corporate value", Journal of Financial Economics, 27, pp.595~612 (1990)
- Mehran, H, "Executive compensation structure, ownership, and firm performance", Journal of Financial Economics, 38, pp.163~184 (1995)
- What is the difference between “endogeneity” and “sample selection bias?, "Millimet, D", Southern Methodist University, ~ (2001)
- Moffit, R, "The Handbook of Labor Economics, Vol. III" (1999), North-Holland
- Monks, R, "Corporate Governance" (2004), Blackwell Publishing
- Morck, R, "Management ownership and market valuation : An empirical analysis", Journal of Financial Economics, 20, pp.293~316 (1988)
- The mysterious growing value of the S&P 500 membership, "Morck, R", University of Alberta, ~ (2001)
- Moyer, R, "Substitutes for voting rights : Evidence from dual class recapitalizations", Financial Management, 21, pp.35~47 (1992)
- Raheja, C, "Determinants of board size and composition : A theory of corporate boards", Journal of Financial and Quantitative Analysis, 40, pp.283~306 (2005)
- Firm value, risk, and growth opportunities, "Shin, H", ~, pp.NBER working paper #7808 (2000)
- Shleifer, A, "Large shareholders and corporate control", Journal of Political Economy, 94, pp.461~488 (1986)
- Stock, J, "A survey of weak instruments and weak identification in generalized method of moments", Journal of Business and Economic Statistics, 20, pp.518~529 (2002)
- Tobin, J, "Estimation of relationships for limited dependent variables", Econometrics, 26, pp.24~36 (1958)
- Villalonga, B, "How do family ownership, control, and management affect firm value?", Journal of Financial Economics, 80, pp.385~417 (2006)
- Weisbach, M, "Outside directors and CEO turnover", Journal of Financial Economics, 20, pp.431~460 (1988)
- Yermack, D, "Higher market valuation of companies with a small board of directors", Journal of Financial Economics, 40, pp.185~211 (1996)
- Yu, F, "Analyst coverage and earnings management", Journal of Financial Economics, 88, pp.245~271 (2008)