Alberto de Miguel

Determinants of capital structure: new evidence from Spanish panel data

This paper analyzes the firm characteristics which are determinants of capital structure, according to different explanatory theories, and how institutional characteristics affect capital structure. We have developed a target adjustment model, which has then been confirmed by our empirical evidence. It highlights the fact that the transaction costs borne by Spanish firms are inferior to those borne by U.S. firms. Our results are consistent with tax and financial distress theories and with the interdependence between investment and financing decisions; they also provide additional evidence on the pecking order and free cash flow theories. Finally, the evidence obtained confirms the impact of some institutional characteristics on capital structure.

An investigation of insider trading profits in the Spanish stock market

Abstract This paper investigates the profitability and information content of insider trading in the Spanish stock market. Our results show that insiders earn excess profits when investing on corporate nonpublic information, while outsiders mimicking them fail to obtain those excess returns. The paper also investigates the relevance of a third party investing on the insider’s behalf. The study further focuses on some methodological aspects, such as the need to take estimation periods that are not affected by other events or by other prediction periods, and the need to allow volatility during insider trading events to have interday memory.

Ownership structure and diversification in a scenario of weak shareholder protection

This work examines the influences of ownership concentration and insider ownership on corporate strategies for diversification within a scenario characterized by poor protection of shareholder interests. We find evidence of a quadratic relationship between ownership concentration and diversification, and a cubic relationship between diversification and insider ownership. These results point towards the high probability of both expropriation and entrenchment phenomena, respectively, in this kind of scenario. We also find that concentrated ownership requires high levels of insider ownership, in order to prevent negative externalities of diversification. Another result shows that entrenchment externalities affect diversification before they erode firm value, which suggests that for low levels of diversification, firm value is still not negatively affected. Additionally, our results show that control mechanisms, such as debt, director remuneration and compliance with codes of good practice, are negatively related to the level of diversification. Overall, our results confirm the theoretical relevance of agency theory in explaining managerial attitudes towards corporate strategy, i.e. diversification. Furthermore, companies characterized by deficiencies in shareholder legal protection, concentrated ownership structures and a higher likelihood of managers being entrenched, should focus on the correct functioning of corporate governance mechanisms.

Dividends and Market Signalling: An Analysis of Corporate Insider Trading

This study tests the multiple-signal theory of dividends of John Lang (1991) in the context of a European market. Our evidence shows that investors are more sensitive to insider trading signals than to signalled changes in existing dividends. In effect, the insider sales signal is universally understood as bad news. After controlling for the quality of a firms investment opportunities, investors are found to penalise dividend outflows by mature firms that exhibit more informed insider sales activity. Finally, we offer an innovative exploration of the role of earnings announcements in market reaction to the dividend signal.

Efectos de la regulación bursátil sobre la eficiencia de los mercados de valores. Comparación entre España y Reino Unido

RESUMEN Este trabajo presenta el primer estudio comparado sobre la rentabilidad obtenida por los directivos en sus operaciones con acciones propias en dos mercados de valores caracterizados por marcos legales diferentes: España y Reino Unido. Analiza si las diferencias en el grado de regulación y coerción del «abuso de mercado» producen diferencias en el grado de eficiencia del mercado. Esto permitirá expresarnos sobre el grado de efectividad de los denominados close periods o periodos de censura implantados en Reino Unido o sobre el mayor rigor en el cumplimiento de los plazos fijados por ley para el anuncio pùblico de las operaciones de directivos. Los resultados evidencian que las mayores restricciones establecidas en el Reino Unido no impiden que los directivos obtengan rentabilidades anormales, detectadas por igual en ambos países, pero sí contribuyen positivamente sobre la transparencia del mercado y la correcta formación de precios al favorecer la forma semi-fuerte de eficiencia.

Target leverage and speed of adjustment along the life cycle of European listed firms

This paper analyzes differences in target leverage and speed of adjustment across three life cycle stages of European listed firms: introduction, growth and maturity. We determine that profitability and tangibility are the most stable determinants, whereas growth opportunities and size exhibit changing effects across stages. The speed of adjustment does not increase as the firms evolve, as firms in introduction are able to adjust the fastest. Firms changing stage adjust leverage at a lower speed, and their target is more affected by profitability, primarily when the change is from growth to maturity. Finally, we confirm the existence of long-term debt targets, by providing evidence that the next-year target is a relevant factor to explain current debt when firms change from one stage to another.

Propiedad y Gestión en el Mercado de Control Empresarial: Un Enfoque de Agencia

RESUMEN En el presente trabajo, se analiza el efecto de diversos mecanismos de control propuestos en la literatura para mitigar el conflicto de agencia asociado a la divergencia de intereses existente entre la propiedad y la dirección en un contexto de tomas de control empresariales. Dichos mecanismos pueden alinear los intereses de los directivos y accionistas en la empresa, de manera que contribuyan junto con la actuación del mercado de control a la valoración de la empresa en el mercado. Pero también la actuación del mercado de control puede ser alter nativa al empleo de los restantes mecanismos de control. Los resultados muestran el empleo eficiente de la deuda por las empresas objetivo de oferta pública de adquisición de valores, así como el efecto alternativo de las mismas sobre los restantes mecanismos de control en la empresa.

Insider Trading and Corporate Governance in the Banking Sector. New Lessons on the Entrenchment Effect

This paper uses panel data estimation under the assumptions of the agency theory of insider trading to identify the factors enhancing bank insider trading. We conclude that the more entrenched the directors, the less prestigious the bank, the bigger the firm and the lower the charter values for high levels of ownership, the higher the intensity of insider trading activity. Thus, the emerging picture is of a scenario where insider trading activity is triggered by the absence of efficient control mechanisms, either external (regulators control the level of bank capitalization but it is not easy for them to also control other opportunistic behaviors) or internal (shareholders fail to control managers when managers’ stakes are very low or very high).

How do Managerial Entrenchment and Expropriation Affect Control Mechanisms

This paper proposes a new empirical approach that allows us to appropriately control for the non-linearities of ownership with respect to firm value when analysing how managerial entrenchment and expropriation affect the relations among control mechanisms. Unlike findings in previous US-based studies, which in general point to substitutability among mechanisms, our results show that control mechanisms (especially insider ownership, debt and dividends) are used in a complementary way by Spanish firms. In addition, this complementarity is only observed when the interests of managers and owners converge, but not when there are controlling owners - insiders or outsiders - whose interests need not coincide with those of minority shareholders. Therefore, managerial entrenchment and expropriation effects do influence the relationship among agency-cost control mechanisms.