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On the Incentive Problems in Financial Conglomerates

Lóránth, Gyöngyi - C.E.P.R. Discussion Papers - 2002

This paper analyses the effects of scope expansion on the core activity of banks and provides a rationale for their interest in offering a wider product range. We show that scope economies may stem from moral hazard in the core business, and argue that a cost of scope expansion might be the...

Persistent link: https://www.econbiz.de/10005791861

Toeholds and Takeovers

Bulow, Jeremy I.; Huang, Ming; Klemperer, Paul - C.E.P.R. Discussion Papers - 1996

Part ownership of a takeover target can help a bidder win a takeover auction, often at a low price. A bidder with a ‘toehold’ bids aggressively in a standard ascending auction because its offers are both bids for the remaining shares and asks for its own holdings. While the direct effect of...

Persistent link: https://www.econbiz.de/10005136550

Does the director labor market offer ex post settling-up for CEOs? The case of acquisitions

Harford, Jarrad; Schonlau, Robert J. - In: Journal of Financial Economics 110 (2013) 1, pp. 18-36

We examine the rewards for experience and ability in the director labor market. We show that large acquisitions are associated with significantly higher numbers of subsequent board seats for the acquiring CEO, target CEO, and the directors. We also find that, in the case of acquisitions,...

Persistent link: https://www.econbiz.de/10010702373

Understanding discretion in conservatism: An alternative viewpoint

Roychowdhury, Sugata; Martin, Xiumin - In: Journal of Accounting and Economics 56 (2013) 2, pp. 134-146

Various studies have investigated variation in reporting conservatism with pre-specified contractual incentives. Lawrence et al. (forthcoming), hereafter LSS, propose a model to control for “normal” or “non-discretionary” conservatism while testing for variation in conservatism with...

Persistent link: https://www.econbiz.de/10011043082

Corporate investment and changes in GAAP

Shroff, Nemit - 2012

This paper investigates whether changes in Generally Accepted Accounting Principles (GAAP) affect corporate investment … decisions. Using a sample containing forty nine changes in GAAP, I find that changes in accounting rules affect investment … decisions. I then examine two mechanisms through which changes in GAAP affect investment. First, I find that changes in GAAP …

Persistent link: https://www.econbiz.de/10010195104

Multiple Versus Single Banking Relationships

Detragiache, Enrica; Garella, Paolo; Guiso, Luigi - C.E.P.R. Discussion Papers - 1997

This paper develops a theoretical model in which firms may choose multiple banking relationships to reduce the risk that financing will be denied by ‘relationship banks’ should the latter experience liquidity problems and refuse to roll over lines of credit. The inability to refinance from...

Persistent link: https://www.econbiz.de/10005504283

Active Agents, Passive Principals: Does High-Powered CEO Compensation Really Improve Incentives

Dow, James; Raposo, Clara - C.E.P.R. Discussion Papers - 2002

In this Paper we use agency theory to study the active role of the CEO in the formulation of corporate strategy. We allow the agent (CEO) to play a role in defining the parameters of the agency problem, in an incomplete contracting model in which the agent can be rewarded based only on financial...

Persistent link: https://www.econbiz.de/10005504388

Excessive continuation and Dynamic Agency Costs of Debt

Décamps, Jean Paul; Faure-Grimaud, Antoine - C.E.P.R. Discussion Papers - 2000

This paper analyses the incentives of the equityholders of a leveraged company to shut it down in a continuous time, stochastic environment. Keeping the firm as an ongoing concern has an option value but equity and debt holders value it differently. Equity holders' decisions exhibit excessive...

Persistent link: https://www.econbiz.de/10005504424

Bureaucracy as a Mechanism to Generate Information

Novaes, Walter; Zingales, Luigi - C.E.P.R. Discussion Papers - 2003

Firms that maintain no formal record of actions and events would hardly be considered well managed. Yet, organizations that require the recording of actions and the filing of reports are often labeled ‘bureaucratic’ and inefficient. This Paper argues that the thin line between efficient...

Persistent link: https://www.econbiz.de/10005504447

Investor Sentiment and Pre-Issue Markets

Cornelli, Francesca; Goldreich, David; Ljungqvist, … - C.E.P.R. Discussion Papers - 2004

What role do sentiment investors play in the pricing of newly listed stocks? We derive conditions under which we can distinguish between sentiment and rational pricing behaviour and test for the rationality of small investors’ demand for new stock issues using data from pre-issue (or...

Persistent link: https://www.econbiz.de/10005504464