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Managerial Voting Rights and Seasoned Public Equity Issues

Published online by Cambridge University Press:  06 April 2009

L. Paige Fields  and
Eric L. Mais
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Abstract

This paper examines the relation between changes in firm value associated with public equityissue announcements and management ownership, nonmanagement large block ownership, institutional ownership, information variables, and leverage. A significant negative relationis found between the ratio of announcement period abnormal returns to changes in management ownership and the level of management ownership. This result is consistent with Stulz (1988) who predicts that firm value increases at a decreasing rate as management control of voting rights increases. This finding is also consistent with improvements in alignment of interests, where such improvements diminish as management becomes entrenched. The announcement period abnormal returns appear to be unrelated to outside blockholdings (large block ownership or institutional holdings), information variables, or leverage.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 29 , Issue 3 , September 1994 , pp. 445 - 457
Copyright
Copyright © School of Business Administration, University of Washington 1994

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