Shareholder Benefits And Firm Performance

Previous research on international mergers and acquisitions has not looked at the valuation consequences of international acquisitions by firms from a developing economy. This study examines the announcement effect and the post-acquisition long-term performance of 96 Indian international acquisitions of U.S. firms made in the period 1999-2005. The study also explores the impact of the Indian acquiring firms' U.S. acquisitions on their underlying operating variables, and risk diversification. We find that while the international acquisition announcements by Indian firms create significant short-term shareholders' wealth, in the long-run international acquisitions have a negative impact on the shareholders' wealth. We also find a significant decrease in the acquiring firms' financial profitability ratios, though there is an evidence of risk-reduction due to global diversification.

Anyone can buy stock in a public company, but not all shareholders are equally committed to a company’s long-term success. In an increasingly fragmented financial world, shareholders’ attitudes toward the companies in which they invest vary widely, from time horizon to conviction. Faced with indexers, short-term traders, and activists, it is more important than ever for businesses to ensure that their shareholders are dedicated to their missions. Today’s companies need “quality shareholders,” as Warren Buffett called those who “load up and stick around,” or buy large stakes and hold for long periods. Lawrence A. Cunningham offers an expert guide to the benefits of attracting and keeping quality shareholders. He demonstrates that a high density of dedicated long-term shareholders results in numerous comparative and competitive advantages for companies and their managers, including a longer runway to execute business strategy and a loyal cohort against adversity. Cunningham explores dozens of corporate practices and policies—such as rational capital allocation, long-term performance metrics, and a shareholder orientation—that can help shape the shareholder base and bring in committed owners. Focusing on the benefits for corporations and their investors, he reveals what draws quality shareholders to certain companies and what it means to have them in an investor base. This book is vital reading for investors, executives, and directors seeking to understand and attract the kind of shareholders that their companies need.

Theory suggests that controlling shareholders can influence firm value through both shared benefits creation and private benefits consumption. Using negotiated control-block transfers from 31 countries, we look beyond ownership concentration and investigate how controlling shareholder heterogeneity influences the relative importance of these two effects. We document that a control transfer precipitates positive firm outcomes particularly when the vendor has maintained control over an extended period and the acquirer displays a strong incentive to engage in restructuring. In such cases, we observe a sustained positive price reaction, more focused corporate investments, lower leverage, higher operating efficiency, and superior long-term performance.

First Published in 2000. This book examines the shareholder activism of institutional investors and the effect of shareholder activism on portfolio performance. Institutional shareholder activism includes both traditional mechanisms of influence (e.g., filing shareholder proposals) and relationship investing (e.g., long-term interorganizational contacts between owners and a corporation’s top managers).

Executive compensation has gained widespread public attention in recent years, with the pay of top U.S. executives reaching unprecedented levels compared either with past levels, with the remuneration of top executives in other countries, or with the wages and salaries of typical employees. The extraordinary levels of executive compensation have been achieved at a time when U.S. public companies have realized substantial gains in stock market value. Many have cited this as evidence that U.S. executive compensation works well, rewarding managers who make difficult decisions that lead to higher shareholder values, while others have argued that the overly generous salaries and benefits bear little relation to company performance. Recent conceptual and empirical research permits for the first time a truly rigorous debate on these and related issues, which is the subject of this volume.

Shareholder value can no longer be seen as the latest craze in the corporate classroom. It's grown up. It's redefining the syllabus by which we learn to profit or perish. It has moved into the mainstream of global corporate life where would-be winners can no longer afford to ignore it.Drawing on the experience of PricewaterhouseCoopers' worldwide network of companies and clients, this new edition of a best-selling title will provide you with the key to unlocking the secrets to real wealth creation. The impact of the information revolution, the integration of capital markets, and the increased ability of investors to compare and contrast corporate performance has put shareholder value high on the corporate agenda. These days, investors injecting money into your company are looking for a financial return as good as, if not better than, if they had invested in any other. Today's businesses need to maximize value for their shareholders or watch their share price plummet as investors vote with their feet and transfer their money and their trust into competitors' hands.Benefits In Search of Shareholder Value explains the concept of shareholder value and shows how it can help companies and their managers make better, more informed, and proactive decisions. It looks at the philosophy of value creation and at the global financial environment in which value-based management can thrive, and it transforms the insights of market analysts into management tools that can be used throughout the company to add genuine improvements to performance. The book covers every aspect of learning how to deliver value to your investors, including: introducing the basic concepts of shareholder value analyzing the theory and history behind shareholder value establishing the true cost of your capital the market's preference for judging performance on cash flow rather than profit and loss how shareholder value is being applied within emerging economies. principels of value-based management

This book integrates elements from agency theory and signalling theory and draws upon recent changes in the Australian payout policy and incentives pay for risk-averse employees to provide theoretical and empirical analyses that explain the paradox of the popularity of on-market stock buyback activities in a market environment characterised by reasonably high share prices. The authors utilise a dynamic model that rationalises this paradox, which is divided into three components. The first component predicts that executives may be conducting on-market stock buyback programmes (SBPs) to adjust equity-based remuneration for risk-averse employees, thereby motivating their performance without granting them additional costly equity incentive plans (EIPs); the second component predicts that companies are likely to invest in SBPs to increase the ownership stakes of employees in the firm, thereby inducing risk-averse employees to increase their productivity which increases firm value; while the third component predicts that shareholders would benefit from incentives-induced buybacks if a firm’s opportunity cost of funds spent on buybacks is less than its inverse price-to-earnings ratio. The authors’ findings highlight differences in the market responses towards announced repurchase motives, implying that not all incentives-induced buybacks are value-destructive buybacks. Specifically, the widespread assumption that SBPs stifle investments in human and capital stock may be subjective as the findings show that incentives-induced buybacks may be value-creative or value-destructive depending on share repurchase motives of SBPs. This book will be a useful guide for scholars and researchers of finance, corporate finance, financial economics and financial accounting.

The company is under-performing, its share price is trailing, and the CEO gets...a multi-million-dollar raise. This story is familiar, for good reason: as this book clearly demonstrates, structural flaws in corporate governance have produced widespread distortions in executive pay. Pay without Performance presents a disconcerting portrait of managers' influence over their own pay--and of a governance system that must fundamentally change if firms are to be managed in the interest of shareholders. Lucian Bebchuk and Jesse Fried demonstrate that corporate boards have persistently failed to negotiate at arm's length with the executives they are meant to oversee. They give a richly detailed account of how pay practices--from option plans to retirement benefits--have decoupled compensation from performance and have camouflaged both the amount and performance-insensitivity of pay. Executives' unwonted influence over their compensation has hurt shareholders by increasing pay levels and, even more importantly, by leading to practices that dilute and distort managers' incentives. This book identifies basic problems with our current reliance on boards as guardians of shareholder interests. And the solution, the authors argue, is not merely to make these boards more independent of executives as recent reforms attempt to do. Rather, boards should also be made more dependent on shareholders by eliminating the arrangements that entrench directors and insulate them from their shareholders. A powerful critique of executive compensation and corporate governance, Pay without Performance points the way to restoring corporate integrity and improving corporate performance.

We develop a model in which firms select share prices by trading off the benefits of institutional investor monitoring against the value of a broad shareholder base. Firms that anticipate small gains from institutional monitoring target a retail investor clientele by setting lower share prices while firms that anticipate large gains from institutional monitoring target an institutional investor clientele by setting higher share prices. Our model also implies that high-priced stocks will be of higher quality than low-priced stocks, and that higher quality firms will more persistently maintain their quality over time and choose higher split-to prices when they split their shares. Our empirical findings confirm these predictions, providing strong support for our notion that share price levels are endogenously determined based on a firm's preferred ownership clientele.

An in-depth look at the trouble with shareholder value thinking and at better options for models of corporate purpose. Executives, investors, and the business press routinely chant the mantra that corporations are required to “maximize shareholder value.” In this pathbreaking book, renowned corporate expert Lynn Stout debunks the myth that corporate law mandates shareholder primacy. Stout shows how shareholder value thinking endangers not only investors but the rest of us as well, leading managers to focus myopically on short-term earnings; discouraging investment and innovation; harming employees, customers, and communities; and causing companies to indulge in reckless, sociopathic, and irresponsible behaviors. And she looks at new models of corporate purpose that better serve the needs of investors, corporations, and society. “A must-read for managers, directors, and policymakers interested in getting America back in the business of creating real value for the long term.” —Constance E. Bagley, professor, Yale School of Management; president, Academy of Legal Studies in Business; and author of Managers and the Legal Environment and Winning Legally “A compelling call for radically changing the way business is done... The Shareholder Value Myth powerfully demonstrates both the dangers of the shareholder value rule and the falseness of its alleged legal necessity.” —Joel Bakan, professor, The University of British Columbia, and author of the book and film The Corporation “Lynn Stout has a keen mind, a sharp pen, and an unbending sense of fearlessness. Her book is a must-read for anyone interested in understanding the root causes of the current financial calamity.” —Jack Willoughby, senior editor, Barron’s “Lynn Stout offers a new vision of good corporate governance that serves investors, firms, and the American economy.” —Judy Samuelson, executive director, Business and Society Program, The Aspen Institute