Marc Zenner

A requiem for the USA Is small shareholder monitoring effective

Abstract From 1986 to 1993, the United Shareholders Association (USA) provided a conduit through which small shareholders could unite and attempt to influence the governance of large US corporations. We show that the USA targeted large firms that underperformed the market, that its influence increased from 1990 to 1993, and that USA-Sponsored proposals were more successful when the target firm was a poor performer with high institutional ownership. The announcement of 53 USA-negotiated agreements is associated with an average abnormal return of 0.9% or a total shareholder wealth gain of

Pay for performance? Government regulation and the structure of compensation contracts

1.3 billion, suggesting that USA-sponsored shareholder activism enhanced shareholder value.

How managerial wealth affects the tender offer process

A gas flow cartridge in which to conduct a coagulation-related test uses an elongated pin member movably positioned within a communication opening which separates a reagent chamber from a reaction chamber. A first portion of the pin member has an operative configuration for sealing the communication opening when the first portion is positioned in the communication opening. A second longitudinally displaced portion of the pin member opens the communication opening to further communication therethrough upon longitudinal movement of the pin member. At the commencement of an analytical test, a plug member is moved upwardly to contact the pin member and move the first portion out of the communication opening and the second portion into the communication opening. The upward movement of the lower plug member forces the contents of the reagent chamber through the opened communication opening and into the reaction chamber. A pointed needle-like member pierces a membrane of the lower plug member and injects gas into the cartridge. The gas also flows through the opened communication opening.

Country risk measures: how risky are they?

Abstract We present empirical evidence on the relation between changes in managerial wealth and tender offer characteristics. Changes in managerial wealth resulting from a tender offer are negatively related to the likelihood of managerial resistance to a tender offer and positively related to the likelihood of tender offer success. We also document that the abnormal returns to tender offers are lower for hostile than for friendly offers if we control for the tender offer premium. Finally, we find that the top executive gains, whereas outside shareholders do not gain, from managements decision to resist the tender offer.

CEO Compensation in the 1990s: Shareholder Alignment or Shareholder Expropriation?

As global competition drives corporations into distant, unfamiliar markets, managers are searching for ways to minimize their uncertainty. When formulating their strategies for such environments, managers frequently rely on country risk analysis. Assuming that country risk analysis is an objective, fact-finding process, many managers fail to question these risk reports. The focus of this paper is on the usefulness of these country risk measures. Specifically, the purpose is to investigate the extent to which country risk measures can predict periods of intense instability. We examine eleven widely used measures of country risk across seventeen countries during a nineteen-year time period. Currency fluctuations are used as a surrogate for overall country risk. Results from the empirical analysis indicate that commercial risk measures are very poor at predicting actual realized risks. This result raises important questions about the usefulness of these measures and why managers still choose to use them.

Executive Compensation of Large Acquirors in the 1980s

CEO compensation has been much debated in the 1990s, both in academic circles and in the media. We contrast two views on CEO compensation. The first view is that there has been a very positive trend in CEO compensation - that compensation committees have become more responsive to shareholder requests to better link compensation and performance. This trend may have been, at least in part, responsible for the incredible stock returns of the last few years. The contrasting view states that the strong stock market of the last few years has allowed CEOs to obtain excessively high financial rewards at the expense of largely powerless shareholders. We discuss these views and provide evidence that corroborates both positions. While we are unable to side with one view or the other beyond a reasonable doubt, we speculate that a downturn in the economy will allow researchers to identify which position dominates.

Agency Conflicts in Closed-End Funds: The Case of Rights Offerings

To examine the role of executive compensation in corporate acquisition decisions, we compare the compensation of top executives in two groups of firms: firms undertaking large acquisitions and a control sample of non-acquirors. Before the acquisition, we find a positive relation between firm size and compensation for executives of acquirors. However, we do not find such a relation for non-acquirors. This result suggests an ex ante expectation that larger firm size for the acquirors will result in larger managerial compensation. Ex post, however, the increase in total compensation is not attributable to the size increase resulting from the acquisition. In separating good from bad acqusitions, we find that good acquisitions increase compensation. However, bad acquisitions do not have a material impact on executive compensation.

Taxes and the Returns to Foreign Acquisitions in the United States

We study 120 rights offerings by closed-end funds over 1988-1998. On average, rights offerings are announced when funds trade at a premium. This premium turns into a discount over the course of the offering. The premium decline is more severe when the increases in investment advisor’s compensation are larger and when the fund uses affiliated broker-dealers to solicit subscriptions to the offer. A clinical analysis shows that rights offerings allow investment advisors to sidestep fee rebates and increase pecuniary benefits to affiliated entities. Overall, our results suggest the presence of significant conflicts of interests in rights offerings by closed-end funds.

Who Opts Out of State Antitakeover Protection?: The Case of Pennsylvania's SB 1310

This paper documents a substantial intertemporal variation in the abnormal returns of U.S. companies acquired by foreign firms over the 1979-1988 period. Returns decrease after 1980, when the 1981 Economic Reform Tax Act was passed, and increase after 1986, when the Tax Reform Act went into effect. Similar results hold for acquisitions of partial ownership interests in U.S. firms by foreign companies. These findings are unchanged after controlling for exchange rates and for the other characteristics of the acquisitions. Overall, our findings are consistent with the conjecture that the U.S. tax system has a substantial impact on the benefits of foreign acquisitions in the U.S.

Do independent directors enhance target shareholder wealth during tender offers

In 1990, Pennsylvania enacted Senate Bill 1310, containing five provisions designed to make takeovers prohibitively expensive but allowing firms to opt out of some or all of the laws provisions. We find that firms that opted out of SB 1310 had lower insider control of voting rights and were less likely to have a poison pill in place prior to the laws enactment, even after controlling for firm size and the monitoring activities of blockholders and outside directors. In addition, we find that opt-out firms spent less on R&D than non-opt-out firms. Our result suggest that some boards value takeover defense (whether firm or state-level) whereas others prefer to be subject to an active market for corporate control.