The Journal of Finance

Regulatory Incentives and the Thrift Crisis: Dividends, Mutual‐to‐Stock Conversions, and Financial Distress

Published: 9/1996,  Volume: 51,  Issue: 4  |  DOI: 10.1111/j.1540-6261.1996.tb04070.x  |  Cited by: 48

RANDALL S. KROSZNER, PHILIP E. STRAHAN

During the 1980s, insolvency of individual thrifts and the thrift deposit insurer created severe incentive problems. Lacking cash to close insolvent thrifts, regulators induced nearly $10 billion of private capital to flow into the industry through mutual‐to‐stock conversions. We test a theory of how regulators encouraged capital‐impaired mutual thrifts to convert by permitting them to pay dividends rather than rebuild capital. We estimate the costs of this policy and interpret the 1991 Federal Deposit Insurance Corporation Improvement Act as requiring regulators to impose restraints on depository institutions parallel to debt covenants that prevent capital distributions by nonfinancial firms experiencing distress.

Were the Good Old Days That Good? Changes in Managerial Stock Ownership Since the Great Depression

Published: 4/1999,  Volume: 54,  Issue: 2  |  DOI: 10.1111/0022-1082.00114  |  Cited by: 299

Clifford G. Holderness, Randall S. Kroszner, Dennis P. Sheehan

We document that ownership by officers and directors of publicly traded firms is on average higher today than earlier in the century. Managerial ownership has risen from 13 percent for the universe of exchange‐listed corporations in 1935, the earliest year for which such data exist, to 21 percent in 1995. We examine in detail the robustness of the increase and explore hypotheses to explain it. Higher managerial ownership has not substituted for alternative corporate governance mechanisms. Lower volatility and greater hedging opportunities associated with the development of financial markets appear to be important factors explaining the increase in managerial ownership.

Ex‐Date Stock Price Adjustment to Stock Dividends: A Note

Published: 3/1983,  Volume: 38,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1983.tb03640.x  |  Cited by: 22

J. RANDALL WOOLRIDGE

Dividend Changes and Security Prices

Published: 12/1983,  Volume: 38,  Issue: 5  |  DOI: 10.1111/j.1540-6261.1983.tb03844.x  |  Cited by: 101

J. RANDALL WOOLRIDGE

This paper analyzes the effect of unexpected dividend changes on the values of common stock, preferred stock, and bonds. Two potential effects are identified: a wealth transfer effect and a signalling effect. Previous studies have shown that positive (negative) dividend change announcements produce positive (negative) common stock price changes. Whereas these findings have been attributed to the signalling aspect of dividends, they are also consistent with the wealth transfer hypothesis. Based on the announcement day returns of common and preferred stock and bond holders, it is demonstrated that the primary factor influencing security returns in response to dividend changes is market signalling. A wealth transfer effect is not necessarily ruled out, but if it exists it is dominated by the signalling effect.

Banks and Corporate Control in Japan

Published: 2/1999,  Volume: 54,  Issue: 1  |  DOI: 10.1111/0022-1082.00106  |  Cited by: 449

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.

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

Published: 2/2004,  Volume: 59,  Issue: 1  |  DOI: 10.1111/j.1540-6261.2004.00627.x  |  Cited by: 710

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.

MEASURING THE RISK DIMENSION OF INVESTMENT PERFORMANCE

Published: 5/1970,  Volume: 25,  Issue: 2  |  DOI: 10.1111/j.1540-6261.1970.tb00670.x  |  Cited by: 0

Peter L. Bernstein, Randall S. Robinson

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

Published: 4/2000,  Volume: 55,  Issue: 2  |  DOI: 10.1111/0022-1082.00230  |  Cited by: 302

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.

Do Managerial Objectives Drive Bad Acquisitions?

Published: 3/1990,  Volume: 45,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1990.tb05079.x  |  Cited by: 1487

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.

Hedge Fund Activism, Corporate Governance, and Firm Performance

Published: 7/19/2008,  Volume: 63,  Issue: 4  |  DOI: 10.1111/j.1540-6261.2008.01373.x  |  Cited by: 1300

ALON BRAV, WEI JIANG, FRANK PARTNOY, RANDALL THOMAS

Using a large hand‐collected data set from 2001 to 2006, we find that activist hedge funds in the United States propose strategic, operational, and financial remedies and attain success or partial success in two‐thirds of the cases. Hedge funds seldom seek control and in most cases are nonconfrontational. The abnormal return around the announcement of activism is approximately 7%, with no reversal during the subsequent year. Target firms experience increases in payout, operating performance, and higher CEO turnover after activism. Our analysis provides important new evidence on the mechanisms and effects of informed shareholder monitoring.

MONETARY POLICY AND BANKING PROFITS

Published: 3/1976,  Volume: 31,  Issue: 1  |  DOI: 10.1111/j.1540-6261.1976.tb03199.x  |  Cited by: 1

Stuart I. Greenbaum, M. Ali Mukhtar, Randall C. Merris