The Journal of Finance

Determinants of Secondary Market Prices for Developing Country Syndicated Loans

Published: 12/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb03726.x

EKKEHART BOEHMER, WILLIAM L. MEGGINSON

This paper presents our investigation of the factors that determine secondary market prices of developing country syndicated loans. Trading volume in this market has almost doubled yearly from 1985 to 1988 while average market prices declined from 73% to 41% of par value during the same period. We find that loan values depend on a country's solvency rather than its liquidity and show that a country's adoption of a debt conversion program significantly decreases its loans' market prices. Furthermore, the debt moratoria by Brazil and Peru, as well as the developing‐country‐specific provisions made by U.S. banks, impact loan prices negatively.

The Financial and Operating Performance of Privatized Firms during the 1990s

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00150

Juliet D'souza, William L. Megginson

This study compares the pre‐ and postprivatization financial and operating performance of 85 companies from 28 industrialized countries that were privatized through public share offerings for the period from 1990 through 1996. We document significant increases in profitability, output, operating efficiency, and dividend payments—and significant decreases in leverage ratios—for our full sample of firms after privatization, and for most subsamples examined. Capital expenditures increase significantly in absolute terms, but not relative to sales. Employment declines, but insignificantly. Combined with results from two previous, directly comparable studies, these findings strongly suggest that privatization yields significant performance improvements.

Venture Capitalist Certification in Initial Public Offerings

Published: 07/01/1991   |   DOI: 10.1111/j.1540-6261.1991.tb03770.x

WILLIAM L. MEGGINSON, KATHLEEN A. WEISS

This paper provides support for the certification role of venture capitalists in initial public offerings. Consistent with the certification hypothesis, a comparison of venture capital backed IPOs with a control sample of nonventure capital backed IPOs from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads. In effect, the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm. In addition, we document that venture capitalists retain a significant portion of their holdings in the firm after the IPO.

The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers

Published: 01/17/2012   |   DOI: 10.1111/j.1540-6261.2011.01711.x

CHITRU S. FERNANDO, ANTHONY D. MAY, WILLIAM L. MEGGINSON

We examine the long‐standing question of whether firms derive value from investment bank relationships by studying how the Lehman collapse affected industrial firms that received underwriting, advisory, analyst, and market‐making services from Lehman. Equity underwriting clients experienced an abnormal return of around −5%, on average, in the 7 days surrounding Lehman's bankruptcy, amounting to $23 billion in aggregate risk‐adjusted losses. Losses were especially severe for companies that had stronger and broader security underwriting relationships with Lehman or were smaller, younger, and more financially constrained. Other client groups were not adversely affected.

The Effect of Taxes on the Relative Valuation of Dividends and Capital Gains: Evidence from Dual‐Class British Investment Trusts

Published: 03/01/1991   |   DOI: 10.1111/j.1540-6261.1991.tb03756.x

JAMES S. ANG, DAVID W. BLACKWELL, WILLIAM L. MEGGINSON

We provide evidence that taxes affect equity valuation by studying British investment trusts having otherwise identical classes of cash‐ and stock‐dividend‐paying shares outstanding. We study 1969–1982, a period in which there were two dramatic changes in tax policy. We find that stock‐dividend shares, which are convertible into cash‐dividend shares, sell at premiums when the tax system favors capital gains and at discounts when the tax advantage of capital gains is reduced. After the 1975 elimination of the tax advantage to stock‐dividend shares, we observe that investors convert virtually all stock‐dividend shares into cash‐dividend shares.

The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis

Published: 06/01/1994   |   DOI: 10.1111/j.1540-6261.1994.tb05147.x

WILLIAM L. MEGGINSON, ROBERT C. NASH, MATTHIAS RANDENBORGH

This study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.

The Choice of Private Versus Public Capital Markets: Evidence from Privatizations

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00718.x

WILLIAM L. MEGGINSON, ROBERT C. NASH, JEFFRY M. NETTER, ANNETTE B. POULSEN

We examine the impact of political, institutional, and economic factors on the choice between selling a state‐owned enterprise in the public capital market through a share issue privatization (SIP) and selling it in the private capital market in an asset sale. SIPs are more likely in less developed capital markets, for more profitable state‐owned enterprises, and where there are more protections of minority shareholders. Asset sales are more likely when there is less state control of the economy and when the firm is smaller. Our results suggest the importance of privatization activities in developing the equity markets of privatizing countries.