The Journal of Finance

Defensive Changes in Corporate Payout Policy: Share Repurchases and Special Dividends

Published: 12/01/1990   |   DOI: 10.1111/j.1540-6261.1990.tb03722.x

DAVID J. DENIS

This paper examines defensive payouts announced in response to hostile corporate control activity. The evidence indicates that the announcement of defensive share repurchases is associated with an average negative impact on the share price of the target firm. In contrast, special dividend payments generally increase the wealth of target firm shareholders. Regardless of payout type, those firms remaining independent after the outcome of the corporate control contest experience an abnormal share price increase over the duration of the contest. Among these firms there are substantial post‐contest changes in capital, asset, and ownership structure and abnormally high rates of top management turnover.

Corporate Events, Trading Activity, and the Estimation of Systematic Risk: Evidence From Equity Offerings and Share Repurchases

Published: 12/01/1994   |   DOI: 10.1111/j.1540-6261.1994.tb04781.x

DAVID J. DENIS, GREGORY B. KADLEC

We investigate the relation between trading activity, the measurement of security returns, and the evolution of security prices by examining estimates of systematic risk surrounding equity offerings and share repurchases. In contrast to prior studies, we find no evidence of changes in systematic risk following either equity offerings or share repurchases after correcting for biases caused by infrequent trading and price adjustment delays. Moreover, changes in ordinary least squares beta estimates are significantly related to contemporaneous changes in trading activity. Our results have implications for studies interested in the properties of security returns, particularly those examining periods in which trading activity changes.

Do Initial Public Offering Firms Purchase Analyst Coverage with Underpricing?

Published: 11/27/2005   |   DOI: 10.1111/j.1540-6261.2004.00719.x

MICHAEL T. CLIFF, DAVID J. DENIS

We report that initial public offering (IPO) underpricing is positively related to analyst coverage by the lead underwriter and to the presence of an all‐star analyst on the research staff of the lead underwriter. These findings are robust to controls for other determinants of underpricing and to controls for the endogeneity of underpricing and analyst coverage. In addition, we find that the probability of switching underwriters between IPO and seasoned equity offering is negatively related to the unexpected amount of post‐IPO analyst coverage. These findings are consistent with the hypothesis that underpricing is, in part, compensation for expected post‐IPO analyst coverage from highly ranked analysts.

Performance Changes Following Top Management Dismissals

Published: 09/01/1995   |   DOI: 10.1111/j.1540-6261.1995.tb04049.x

DAVID J. DENIS, DIANE K. DENIS

We document that forced resignations of top managers are preceded by large and significant declines in operating performance and followed by large improvements in performance. However, forced resignations are rare and are due more often to external factors (e.g., blockholder pressure, takeover attempts, etc.) than to normal board monitoring. Following the management change, these firms significantly downsize their operations and are subject to a high rate of corporate control activity. Normal retirements are followed by small increases in operating income and are also subject to a slightly higher than normal incidence of postturnover corporate control activity.

Agency Problems, Equity Ownership, and Corporate Diversification

Published: 04/18/2012   |   DOI: 10.1111/j.1540-6261.1997.tb03811.x

DAVID J. DENIS, DIANE K. DENIS, ATULYA SARIN

We provide evidence on the agency cost explanation for corporate diversification. We find that the level of diversification is negatively related to managerial equity ownership and to the equity ownership of outside blockholders. In addition, we report that decreases in diversification are associated with external corporate control threats, financial distress, and management turnover. These findings suggest that agency problems are responsible for firms maintaining value‐reducing diversification strategies and that the recent trend toward increased corporate focus is attributable to market disciplinary forces.

Global Diversification, Industrial Diversification, and Firm Value

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00485

David J. Denis, Diane K. Denis, Keven Yost

Using a sample of 44,288 firm‐ears between 1984 and 1997, we document an increase in the extent of global diversification over time. This trend does not reflect a substitution of global for industrial diversification. We also find that global diversification results in average valuation discounts of approximately the same magnitude as those for industrial diversification. Analysis of the changes in excess value associated with changes in diversification reveals that increases in global diversification reduce excess value, while reductions in global diversification increase excess value. These findings support the view that the costs of global diversification outweigh the benefits.