Purpose - The purpose of this paper is to examine the risk-incentive effect of CEO stock options in the banking industry. Design/methodology/approach - For a sample of industrial mergers, Williams and Rao find that the risk-incentive effect of CEO stock options is associated with higher...

Purpose – The purpose of this paper is to examine the risk‐incentive effect of CEO stock options in the banking industry. Design/methodology/approach – For a sample of industrial mergers, Williams and Rao find that the risk‐incentive effect of CEO stock options is associated with higher...

Extant literature identifies board composition and the market for takeovers as two important measures for controlling the agency problem associated with top management. This study tests the substitution hypothesis that outside directors on the board and the effectiveness of takeover markets are...

In this paper, we present a model to determine the interest cost of high‐yield (HY) bond financing. We first denmonstrate that, with a relatively high coupon rate, HY bonds have a significantly higher call risk than investment‐grade bonds, and the effective life of the bond is closer to the...

In the last decade, involvement of foreign‐based firms in the United States through setting up of joint ventures and subsidiary operations has increased tremendously. Many of these subsidiaries have securities traded in the local market but have the added flexibility of raising capital outside...

This paper tests the mimicking propositions from signalling theory as they relate to stated firm objectives and firm performance. We classify the corporate objectives of a large sample of firms and evaluate firm performance relative to these objectives. We find that poorly performing firms more...

This paper reports the results of an empirical study of the determinants of capital structure of large Latin American companies. Variations with regard to the country, industry, and size of a company are examined for a sample of two hundred and thirty large companies located in twentytwo Latin...

So far, the overall performance track record for corporate mergers and acquisitions has not been very encouraging. Both the academic and trade literature report that on average the gains to stockholders of acquiring companies tend to be small or non‐ existent.

Justifying new manufacturing technology is usually very difficult since the most important benefits are often strategic and difficult to quantify. Traditional capital budgeting procedures that rely on return measures based on direct cost savings and incremental future cash flows do not normally...

This paper contends that, contrary to conventional wisdom, it may be rational to manage translation exposure. Accounting procedures for the translation of foreign currency accounts influence the reported income of a multi‐national firm. With non‐zero agency costs, reported income impacts...