Jonathan P. O'Brien

Do Shareholders or Stakeholders Appropriate the Rents from Corporate Diversification? The Influence of Ownership Structure

Prior work on the performance consequences of corporate diversification has treated all powerful owners as seeking the same benefits from diversification (i.e, higher profit rather than growth) and therefore limiting value appropriation by other stakeholders such as employees and managers. In contrast, we distinguish between domestic “relational” owners and foreign “transactional” owners in Japanese corporations. Although transactional owners do indeed prioritize profitability when diversifying, relational owners primarily seek growth rather than profits from diversification. Furthermore, relational owners also allow managers and employees to appropriate more of the rents arising from diversification than do transactional owners.

The Implications of Debt Heterogeneity for R&D Investment and Firm Performance

An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.

Can Two Wrongs Make a Right? State Ownership and Debt in a Transition Economy

Existing literature suggests that both state ownership and debt have detrimental performance consequences in transition economies. Paradoxically, however, we contend that the confluence of these two conditions may not be harmful. By considering the interactions between the governance properties of state ownership and debt, interpreted in light of the institutional context of China (i.e. the interplay between local governments, managers, and central banks), we argue that state ownership and debt can potentially offset each others detrimental effects. We test our hypotheses with a sample of over 1300 Chinese firms that were listed on the Shanghai and Shenzhen Stock exchanges between 2003 and 2005. Results of the tests confirm that while debt and state ownership each have a negative impact on firm performance when used in isolation, their interaction has a positive impact on firm performance.

What Types of Bondholders Impede Corporate Innovative Activities

This study investigates whether institutional bond blockholders (i.e., bond funds that hold more than 5% of a firms outstanding bonds) impede firm innovative activities, and if they do, through which channels. We find that long-term bond blockholders do not discourage firms from conducting innovative activities. Short-term bond blockholders, however, significantly reduce both firm investments in RD Innovation; Investment Horizon; Wall Street Walk

STAKEHOLDER INFLUENCES ON DIVERSIFICATION: IMPLICATIONS FOR SHAREHOLDERS AND STAKEHOLDERS.

The article presents the results of research into the relative influence of stakeholders and shareholders on corporate strategic planning in terms of diversification and performance, focusing on co...

TRANSACTION COST ECONOMICS AND CEO STOCK-HOLDINGS.

Using agency theory (AT), we argue that the confluence of advancing age and large stockholdings will cause CEOs to become overly risk-averse. Moreover, we argue that transaction cost economics can serve as a useful complement to AT because it explicates the internal and external contingencies that critically moderate this relationship.

REVISITING THE AGENCY THEORETIC VIEW OF CAPITAL STRUCTURE.

The article discusses the role of debt as a constraint on corporate growth, noting that inappropriate investments are usefully restrained by debt, and distinguishing between the effects of debt in the form of public securities as opposed to embedded debt in the form of loans. A study of more than 1800 Japanese companies in the 1993 to 2001 period is discussed. The results indicate that public debt is better for restraining undesirable corporate growth. Sociological factors which account for this difference are analyzed.