The Journal of Finance

Banks and Corporate Control in Japan

Published: 05/06/2003   |   DOI: 10.1111/0022-1082.00106

Randall Morck, Masao Nakamura

Using a large sample of Japanese firm level data, we find that Japanese banks act primarily in the short term interests of creditors when dealing with firms outside bank groups. Corporate control mechanisms other than bank oversight appear necessary in these firms. When dealing with firms in bank groups, banks may act in the broader interests of a range of stakeholders, including shareholders. However, our findings are also consistent with banks “propping up” troubled bank group firms. We conclude that bank oversight need not lead to value maximizing corporate governance.

Do Managerial Objectives Drive Bad Acquisitions?

Published: 03/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb05079.x

RANDALL MORCK, ANDREI SHLEIFER, ROBERT W. VISHNY

In a sample of 326 US acquisitions between 1975 and 1987, three types of acquisitions have systematically lower and predominantly negative announcement period returns to bidding firms. The returns to bidding shareholders are lower when their firm diversifies, when it buys a rapidly growing target, and when its managers performed poorly before the acquisition. These results suggest that managerial objectives may drive acquisitions that reduce bidding firms' values.

Demand Curves for Stocks Do Slope Down: New Evidence from an Index Weights Adjustment

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00230

Aditya Kaul, Vikas Mehrotra, Randall Morck

Weights in the Toronto Stock Exchange 300 index are determined by the market values of the included stocks' public floats. In November 1996, the exchange implemented a previously announced revision of its definition of the public float. This revision, which increased the floats and the index weights of 31 stocks, conveyed no information and had no effect on the legal duties of shareholders. Affected stocks experienced statistically significant excess returns of 2.3 percent during the event week, and no price reversal occurred as trading volume returned to normal levels. These findings support downward sloping demand curves for stocks.

Value‐Enhancing Capital Budgeting and Firm‐specific Stock Return Variation

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00627.x

Art Durnev, Randall Morck, Bernard Yeung

We document a robust cross‐sectional positive association across industries between a measure of the economic efficiency of corporate investment and the magnitude of firm‐specific variation in stock returns. This finding is interesting for two reasons, neither of which is a priori obvious. First, it adds further support to the view that firm‐specific return variation gauges the extent to which information about the firm is quickly and accurately reflected in share prices. Second, it can be interpreted as evidence that more informative stock prices facilitate more efficient corporate investment.