Agency Costs, Mispricing, and Ownership Structure /
Chernenko, Sergey.
Agency Costs, Mispricing, and Ownership Structure / Sergey Chernenko, C. Fritz Foley, Robin Greenwood. - Cambridge, Mass. National Bureau of Economic Research 2010. - 1 online resource: illustrations (black and white); - NBER working paper series no. w15910 . - Working Paper Series (National Bureau of Economic Research) no. w15910. .
April 2010.
Standard theories of corporate ownership assume that because markets are efficient, insiders ultimately bear agency costs and therefore have a strong incentive to minimize conflicts of interest with outside investors. We show that if equity is overvalued, however, mispricing offsets agency costs and can induce a controlling shareholder to list equity. Higher valuations support listings associated with greater agency costs. We test the predictions that follow from this idea on a sample of publicly listed corporate subsidiaries in Japan. When there is greater scope for expropriation by the parent firm, minority shareholders fare poorly after listing. Parent firms often repurchase subsidiaries at large discounts to valuations at the time of listing and experience positive abnormal returns when repurchases are announced.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Agency Costs, Mispricing, and Ownership Structure / Sergey Chernenko, C. Fritz Foley, Robin Greenwood. - Cambridge, Mass. National Bureau of Economic Research 2010. - 1 online resource: illustrations (black and white); - NBER working paper series no. w15910 . - Working Paper Series (National Bureau of Economic Research) no. w15910. .
April 2010.
Standard theories of corporate ownership assume that because markets are efficient, insiders ultimately bear agency costs and therefore have a strong incentive to minimize conflicts of interest with outside investors. We show that if equity is overvalued, however, mispricing offsets agency costs and can induce a controlling shareholder to list equity. Higher valuations support listings associated with greater agency costs. We test the predictions that follow from this idea on a sample of publicly listed corporate subsidiaries in Japan. When there is greater scope for expropriation by the parent firm, minority shareholders fare poorly after listing. Parent firms often repurchase subsidiaries at large discounts to valuations at the time of listing and experience positive abnormal returns when repurchases are announced.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.