Larry H.P. Lang

The Separation of Ownership and Control in East Asian Corporations

We examine the separation of ownership and control for 2,980 corporations in nine East Asian countries. In all countries, voting rights frequently exceed cash-flow rights via pyramid structures and cross-holdings. The separation of ownership and control is most pronounced among family-controlled firms and small firms. More than two-thirds of firms are controlled by a single shareholder. Managers of closely held firms tend to be relatives of the controlling shareholders family. Older firms are generally family-controlled, dispelling the notion that ownership becomes dispersed over time. Finally, significant corporate wealth in East Asia is concentrated among a few families.

The Ultimate Ownership of Western European Corporations

We analyze the ultimate ownership and control of 5,232 corporations in 13 Western European countries. Typically firms are widely held (36.93%) or family controlled (44.29%). Widely held firms are more important in the UK and Ireland,family controlled firms in continental Europe. Financial and large firms are more likely widely held,while non-financial and small firms are more likely family controlled. State control is important for larger firms in certain countries. Dual class shares and pyramids enhance the control of the largest shareholders,but overall there are significant discrepancies between ownership and control in only a few countries. r 2002 Elsevier Science B.V. All rights reserved. JEL classification: G32

Disentangling the Incentive and Entrenchment Effects of Large Shareholdings

This article disentangles the incentive and entrenchment effects of large ownership. Using data for 1,301 publicly traded corporations in eight East Asian economies, we find that firm value increases with the cash-flow ownership of the largest shareholder, consistent with a positive incentive effect. But firm value falls when the control rights of the largest shareholder exceed its cash-flow ownership, consistent with an entrenchment effect. Given that concentrated corporate ownership is predominant in most countries, these findings have relevance for corporate governance across the world.

A Test of the Free Cash Flow Hypothesis: The Case of Bidder Returns

The free cash flow hypothesis advanced by Jensen (1988) states that managers endowed with free cash flow will invest it in negative net present value (NPV) projects rather than pay it out to shareholders. Jensen defines free cash flow as cash flow left after the firm has invested in all available positive NPV projects. In this paper, we test this hypothesis on a sample of large investments made by firms, namely decisions to acquire control of other firms through tender offers.

Troubled debt restructurings*1: An empirical study of private reorganization of firms in default

Abstract This study investigates the incentives of financially distressed firms to restructure their debt privately rather than through formal bankruptcy. In a sample of 169 financially distressed companies, about half successfully restructure their debt outside of Chapter 11. Firms more likely to restructure their debt privately have more intangible assets, owe more of their debt to banks, and owe fewer lenders. Analysis of stock returns suggests that the market is also able to discriminate ex ante between the two sets of firms, and that stockholders are systematically better off when debt is restructured privately.

Managerial Performance, Tobin's Q, and the Gains from Successful Tender Offers

A honeycomb sandwich cast for supporting human or animal body portions. The cast has inner and outer cast layers which, in the finished cast, are rigid, and a central honeycomb core having honeycomb cells which are perpendicular to the skin of the underlying body portion. The honeycomb is securely attached, e.g., mechanically locked or bonded to the cast layers to form an integral, high strength, low weight honeycomb structure. An indentable, resiliently compressible fabric such as reticulated plastic foam may optionally be positioned between the faces of the honeycomb core and the cast layers. With use of such a foam, when the outer layer is applied normally by wrapping a bandage-like fabric about the body portion and the surrounding honeycomb core, a compressive force is generated which presses portions of the foam structure into the honeycomb cell openings to form a more secure interlock and prevent relative movement between the components of the cast. The foam structure can subsequently be rigidified to form a mechanical interlock between it and the honeycomb.

Contagion and competitive intra-industry effects of bankruptcy announcements

Abstract This paper investigates the effect of bankruptcy announcements on the equity value of the bankrupt firms competitors. On average, bankruptcy announcements decrease the value of a value-weighted portfolio of competitors by 1%. This negative effect is significantly larger for highly levered industries and industries where the unconditional stock returns of the nonbankrupt and bankrupt firms are highly correlated; the effect is significantly positive for highly concentrated industries with low leverage, suggesting that in such industries competitors benefit from the difficulties of the bankrupt firm.

Asset Sales, Firm Performance, and the Agency Costs of Managerial Discretion

We argue that management sells assets when doing so provides the cheapest funds to pursue its objectives rather than for operating efficiency reasons alone. This hypothesis suggests that (1) firms selling assets have high leverage and/or poor performance, (2) a successful asset sale is good news and (3) the stock market discounts asset sale proceeds retained by the selling firm. In support of this hypothesis, we find that the typical firm in our sample performs poorly before the sale and that the average stock-price reaction to asset sales is positive only when the proceeds are paid out.

The Measurement of Relatedness: An Application to Corporate Diversification

Employing commodity flow data from input-output (IO) tables, we construct two IO-based measures to capture interindustry and intersegment vertical relatedness and complementarity. At the industry level, we demonstrate that the new IO-based measures outperform traditional measures based on Standard Industry Classification (SIC) codes. At the firm level, we report that firms increase their degree of vertical relatedness and complementarity over time. The increasing pattern is robust; it is not sensitive to accounting changes in segment definition, different weighting methods, and different IO data employed. As an application, we examine the valuation effects of relatedness in the context of corporate diversification. Copyright 2000 by University of Chicago Press.

Pre and post-October 1987 stock market linkages between U.S. and Asian markets☆

Abstract This paper documents the presence of a common stochastic trend between the U.S. and the Asian stock market movements during the post-October 1987 period. The evidence suggests that the “cointegrating structure” that ties these stock market together has substantially increased since October 1987. The influence of the U.S. stock market innovations was also found to be greater during the post-October period. The results also indicate that the Asian equity markets are less integrated with Japans equity market than they are with the U.S. market.