The Journal of Finance

Efficiency Gains in Unsuccessful Management Buyouts

Published: 6/1994,  Volume: 49,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1994.tb05155.x  |  Cited by: 35

ELI OFEK

This article uses a sample of 120 unsuccessful management buyouts (MBOs) to test whether operational improvements following successful MBOs are a result of organizational changes or private information. The findings are consistent with the organizational changes hypothesis. Firms with an unsuccessful MBO had no increase in operating performance following the buyout attempt. In addition, the cumulative abnormal stock return from before the attempted buyout until two years after the attempt is insignificantly different from 0 percent. I also find that management turnover following an unsuccessful MBO is significantly higher than normal.

Taking Stock: Equity‐Based Compensation and the Evolution of Managerial Ownership

Published: 6/2000,  Volume: 55,  Issue: 3  |  DOI: 10.1111/0022-1082.00250  |  Cited by: 451

Eli Ofek, David Yermack

We investigate the impact of stock‐based compensation on managerial ownership. We find that equity compensation succeeds in increasing incentives of lower‐ownership managers, but higher‐ownership managers negate much of its impact by selling previously owned shares. When executives exercise options to acquire stock, nearly all of the shares are sold. Our results illuminate dynamic aspects of managerial ownership arising from divergent goals of boards of directors, who use equity compensation for incentives, and managers, who respond by selling shares for diversification. The findings cast doubt on the frequent and important theoretical assumption that managers cannot hedge the risks of these awards.

DotCom Mania: The Rise and Fall of Internet Stock Prices

Published: 5/6/2003,  Volume: 58,  Issue: 3  |  DOI: 10.1111/1540-6261.00560  |  Cited by: 624

Eli Ofek, Matthew Richardson

Abstract This paper explores a model based on agents with heterogenous beliefs facing short sales restrictions, and its explanation for the rise, persistence, and eventual fall of Internet stock prices. First, we document substantial short sale restrictions for Internet stocks. Second, using data on Internet holdings and block trades, we show a link between heterogeneity and price effects for Internet stocks. Third, arguing that lockup expirations are a loosening of the short sale constraint, we document average, long‐run excess returns as low as −33 percent for Internet stocks postlockup. We link the Internet bubble burst to the unprecedented level of lockup expirations and insider selling.

Bustup Takeovers of Value‐Destroying Diversified Firms

Published: 9/1996,  Volume: 51,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1996.tb04066.x  |  Cited by: 147

PHILIP G. BERGER, ELI OFEK

We examine whether the value loss from diversification affects takeover and breakup probabilities. We estimate diversification's value effect by imputing stand‐alone values for individual business segments and find that firms with greater value losses are more likely to be taken over. Moreover, those acquired firms whose losses are greatest are most likely to be bought by LBO associations, which frequently break up their targets. For a subsample of large diversified targets: (1) higher value losses increase the extent of post‐takeover bustup; and (2) post‐takeover bustup generally results in divested divisions being operated as part of a focused, stand‐alone firm.

Managerial Entrenchment and Capital Structure Decisions

Published: 9/1997,  Volume: 52,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1997.tb01115.x  |  Cited by: 1169

PHILIP G. BERGER, ELI OFEK, DAVID L. YERMACK

We study associations between managerial entrenchment and firms' capital structures, with results generally suggesting that entrenched CEOs seek to avoid debt. In a cross‐sectional analysis, we find that leverage levels are lower when CEOs do not face pressure from either ownership and compensation incentives or active monitoring. In an analysis of leverage changes, we find that leverage increases in the aftermath of entrenchment‐reducing shocks to managerial security, including unsuccessful tender offers, involuntary CEO replacements, and the addition to the board of major stockholders.

THE COST OF CAPITAL AND INVESTMENT CRITERIA IN THE PUBLIC SECTOR

Published: 3/1970,  Volume: 25,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1970.tb00419.x  |  Cited by: 2

Eli Schwartz

A CONTRIBUTION TO THE THEORY OF CAPITAL BUDGETING—THE MULTI‐INVESTMENT CASE: A COMMENT

Published: 12/1964,  Volume: 19,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1964.tb02893.x  |  Cited by: 0

Eli Schwartz

THE MARKET FOR CORPORATE SECURITIES A PROGRESS REPORT

Published: 5/1957,  Volume: 12,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1957.tb04125.x  |  Cited by: 0

Eli Shapiro

SummaryAt the end of 1945 the corporate universe was characterized by a low level of capital assets relative to sales and a high degree of liquidity. The decade ending in 1955 was noteworthy for the high absolute level of investment in plant, equipment, and inventory. Corporations experienced no great financing difficulties in carrying out their expansion program; interest rates did not rise sharply during the period.The bulk of corporate investment was financed from internal sources of funds—retained profits and depreciation allowances—with internal sources more important in the first half of the ten‐year period. The relationship between internal and external financing was primarily dependent on cyclical variations in business activity. In periods of rising business activity short‐term borrowing and new security issues were utilized to supplement internal funds. In periods of declining economic activity long‐term financing through security issues was continued on a reduced scale and short‐term bank debt was reduced. Over the decade ending in 1955 there was an increasing trend toward long‐term securities issued to finance investment in plant, equipment, and inventories. All bonds outstanding for non‐financial corporations more than doubled from $23 billion at the end of 1945 to $54 billion at the end of 1955. There was some evidence to suggest that reduction in spreads between stock and bond yields encouraged stock financing in the latter years of the period.The most striking phenomenon in the long‐term debt market was the precipitous decline in the importance of individuals as holders of corporate bonds. In less than twenty years individuals' holdings of outstanding corporate bonds fell from two‐thirds to about one‐fifth. The largest holders of corporate bonds were life insurance companies who accounted for 50 per cent of all issues outstanding. Directly placed corporate securities—almost entirely bonds—accounted for about 40 per cent of gross security issues in the postwar decade. Life insurance companies held over 90 per cent of directly placed securities outstanding.In 1955 and particularly in 1956 growing tightness was evident in the capital market. The liquidity of corporations was worked down and the rate of increase in corporate internal sources of funds also fell. Capital outlays continued to rise. Accessibility to the capital market became critical to insure accomplishment of investment programs. Corporations entered the capital market on an enlarged scale at a time of continued high demands for funds from other sectors of the economy. The fall in liquidity of financial institutions plus the pursuit of a restrictive monetary policy by the central bank served to intensify the rise in yields and led to sharp increases in new financing costs and tightening of contract terms.

THEORY OF THE CAPITAL STRUCTURE OF THE FIRM*

Published: 3/1959,  Volume: 14,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1959.tb00483.x  |  Cited by: 17

Eli Schwartz

STUDIES IN THE DISTRIBUTION OF TAX BURDENS BY INCOME GROUPS: A CRITIQUE*

Published: 9/1956,  Volume: 11,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1956.tb00115.x  |  Cited by: 0

Eli Schwartz

DISCUSSION

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00516.x  |  Cited by: 14

Eli Schwartz

DISCUSSION

Published: 5/1969,  Volume: 24,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1969.tb01691.x  |  Cited by: 0

Eli Shapiro

THE POSTWAR MARKET FOR CORPORATE SECURITIES: 1946–55

Published: 5/1959,  Volume: 14,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1959.tb01581.x  |  Cited by: 1

Eli Shapiro

THE FEDERAL RESERVE SYSTEM';S “BILLS ONLY” POLICY*

Published: 3/1964,  Volume: 19,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1964.tb00757.x  |  Cited by: 0

William Eli Whitesell

DISCUSSION

Published: 5/1962,  Volume: 17,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1962.tb04271.x  |  Cited by: 0

John Lintner, Eli Shapiro

Discussion

Published: 5/1957,  Volume: 12,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1957.tb04137.x  |  Cited by: 0

Irwin Ffiend, Eli Shapiro

HOW TO INTEGRATE CORPORATE AND PERSONAL INCOME TAXATION

Published: 12/1972,  Volume: 27,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1972.tb03024.x  |  Cited by: 1

Eli Schwartz, J. Richard Aronson

DISCUSSION

Published: 5/1955,  Volume: 10,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1955.tb01273.x  |  Cited by: 0

George T. Conklin, Eli Shapiro

The Structure and Incentive Effects of Corporate Tax Liabilities

Published: 9/1985,  Volume: 40,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1985.tb02365.x  |  Cited by: 42

RICHARD C. GREEN, ELI TALMOR

This paper describes situations in which tax liabilities assume the form of a negative position in a call option. This structure motivates an examination of the investment decisions of taxed corporations in the presence of risk. It is shown that the structure of the tax liability creates an incentive to underinvest in more risky projects and an incentive for conglomerate merger. These effects are then evaluated in the presence of conflicts of interest between stockholders and bondholders, and under alternative assumptions about the tax code, and about the timing of investment and financing decisions.

Firm Valuation, Earnings Expectations, and the Exchange‐Rate Exposure Effect

Published: 12/1994,  Volume: 49,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1994.tb04780.x  |  Cited by: 319

ELI BARTOV, GORDON M. BODNAR

Consistent with previous research, we fail to find a significant correlation between the abnormal returns of our sample firms with international activities and changes in the dollar. We investigate the possibility that this failure is due to mispricing. Lagged changes in the dollar are a significant variable in explaining current abnormal returns of our sample firms, suggesting that mispricing does occur. A simple trading strategy based upon these results generates significant abnormal returns. Corroborating evidence from returns around earnings announcements as well as errors in analysts' forecasts of earnings is also provided.

SOME SURROGATE EVIDENCE IN SUPPORT OF THE CONCEPT OF OPTIMAL FINANCIAL STRUCTUREY*

Published: 3/1967,  Volume: 22,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1967.tb01650.x  |  Cited by: 8

Eli Schwartz, J. Richard Aronson

PATTERNS OF BUSINESS FINANCING: SOME COMMENTS

Published: 12/1965,  Volume: 20,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1965.tb02939.x  |  Cited by: 0

Eli Shapiro, William L. White

AN ESTIMATE OF BANK‐ADMINISTERED PERSONAL TRUST FUNDS*

Published: 3/1959,  Volume: 14,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1959.tb00482.x  |  Cited by: 0

Raymond W. Goldsmith, Eli Shapiro

A COMMENT ON INVESTMENT DECISIONS, REPETITIVE GAMES, AND THE UNEQUAL DISTRIBUTION OF WEALTH

Published: 9/1978,  Volume: 33,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1978.tb02059.x  |  Cited by: 2

Eli Schwartz, James A. Greenleaf

SOME SUGGESTED CHANGES IN THE CORPORATE TAX STRUCTURE

Published: 12/1950,  Volume: 5,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1950.tb03804.x  |  Cited by: 4

Eli Schwartz, Roger C. Van Tassel

Price Formation and Liquidity in the U.S. Treasury Market: The Response to Public Information

Published: 10/1999,  Volume: 54,  Issue: 5  |  DOI: 10.1111/0022-1082.00172  |  Cited by: 560

Michael J. Fleming, Eli M. Remolona

The arrival of public information in the U.S. Treasury market sets off a two‐stage adjustment process for prices, trading volume, and bid‐ask spreads. In a brief first stage, the release of a major macroeconomic announcement induces a sharp and nearly instantaneous price change with a reduction in trading volume, demonstrating that price reactions to public information do not require trading. The spread widens dramatically at announcement, evidently driven by inventory control concerns. In a prolonged second stage, trading volume surges, price volatility persists, and spreads remain moderately wide as investors trade to reconcile residual differences in their private views.

The Effect of Volatility Changes on the Level of Stock Prices and Subsequent Expected Returns

Published: 7/1991,  Volume: 46,  Issue: 3  |  DOI: 10.1111/j.1540-6261.1991.tb03774.x  |  Cited by: 128

ROBERT A. HAUGEN, ELI TALMOR, WALTER N. TOROUS

This paper estimates volatility changes in daily returns to the Dow Jones Industrial Average over the sample period 1897 through 1988. This allows a direct investigation of the reaction of the level of stock prices and subsequent expected returns to these estimated changes in volatility. We provide empirical evidence consistent with relatively large and systematic revisions in stock prices and subsequent expected returns to volatility changes. However, there appears to be an asymmetry in the market's reaction to volatility increases as opposed to volatility decreases. A majority of our volatility changes cannot be associated with the release of significant economic information.