Claire E. Crutchley

A Test of the Agency Theory of Managerial Ownership, Corporate Leverage, and Corporate Dividends

A Test of the Agency Theory of Managerial Ownership, Corporate Leverage, and CorporateDividends Author(s): Claire E. Crutchley and Robert S. Hansen Source: Financial Management, Vol. 18, No. 4 (Winter, 1989), pp. 36-46 Published by: Wiley on behalf of the Financial Management Association International Stable URL: http://www.jstor.org/stable/3665795 Accessed: 31-03-2015 15:42 UTC

Agency problems and the simultaneity of financial decision making: The role of institutional ownership

Abstract This study investigated the simultaneity of four financial variables that are hypothesized to control agency costs. It builds a model showing that leverage, dividends, insider ownership, and institutional ownership are determined simultaneously as each of the variables is hypothesized to affect agency costs. We found that in 1987, institutional ownership was determined simultaneously with leverage, dividends, and insider ownership, but the coefficients do not support agency hypotheses. However, in 1993, we found a simultaneous system consistent with institutional ownership being a substitute for agency control variables.

An Examination of Board Stability and the Long-Term Performance of Initial Public Offerings

We study the long-term stock performance of initial public offerings (IPOs). We examine how past performance affects the board of directors’ stability and how changes in boards affect subsequent performance. We introduce a dynamic, scale invariant stability metric to measure such changes. Our results indicate that among IPO firms, those with poorer initial performance experience greater board instability and that greater board stability is associated with improvement in subsequent performance. These results indicate that board members leave poorly performing firms, rather than shareholders replacing ineffective boards. Retaining boards that experience initial good performance is associated with continued success.

Early internet IPOs versus subsequent entrants

This paper examines whether investors in early Internet IPOs earned superior returns to those who invested in later entrants. We document three differences between early public firms in a new Internet technology and their followers: underpricing, operating characteristics at the IPO, and stock price performance after the IPO. We find that there is value in going public relatively early in a new Internet technology. Specifically, long-term returns are significantly higher for the early entrants. We also find evidence, consistent with previous studies that examine hot IPO markets, that the early public firms have better operating characteristics at the IPO than later entrants.

Market reaction to equity offer reasons: What information do managers reveal?

Prior studies have had limited success explaining the negative market reaction to common stock announcements using firm and offer specific variables. We employ apiecewise linear model to test the relationship between announcement returns and firm and offer specific variables by specific offer reason as stated by management. We find evidence that managers are signalling the quality of the new investment when issuing equity for the offer-motive capital expenditures; this is support for the announcement of the equity issue being a signal of wasteful investment. We also find that the announcement of equity issues signals overvaluation when the equity offer is for general purposes.

European Board Quality and Female Representation: The Impact of Quotas

This paper examines the relationship between the presence of female board members and board quality across two groups of European countries between 2000 and 2011. Using simultaneous regression analysis, we find that female representation is associated with board quality and board independence. Our findings suggest that in the Nordic countries, the greater the female percentage of board members, the greater the independence on the board. Quotas decrease this positive association. In the Southern Europe, the greater the percentage of females, the lower the board independence, but voluntary gender quotas help in reducing this negative relationship. The paper provides empirical evidence that the quality of the board varies based on the gender of directors. In Nordic countries, females appear to improve board quality while the opposite is true in Southern Europe. There is also evidence that three females on the board improves board quality. This paper also reveals that voluntary and required quotas do affect board structure.