The Journal of Finance

DISCUSSION

Published: 07/01/1984   |   DOI: 10.1111/j.1540-6261.1984.tb03679.x

RONALD W. MASULIS

The Impact of Capital Structure Change on Firm Value: Some Estimates

Published: 03/01/1983   |   DOI: 10.1111/j.1540-6261.1983.tb03629.x

RONALD W. MASULIS

This study develops a model based on current corporate finance theories which explains stock returns associated with the announcement of issuer exchange offers. The major independent variables are changes in leverage multiplied by senior security claims outstanding and changes in debt tax shields. Parameter estimates are statistically significant and consistent in sign and relative magnitude with model predictions. Overall, 55 percent of the variance in stock announcement period returns is explained. The evidence is consistent with tax‐based theories of optimal capital structure, a positive debt level information effect, and leverage‐induced wealth transfers across security classes.

Stock Repurchase by Tender Offer: An Analysis of the Causes of Common Stock Price Changes

Published: 05/01/1980   |   DOI: 10.1111/j.1540-6261.1980.tb02159.x

RONALD W. MASULIS

Leverage and Dividend Irrelevancy Under Corporate and Personal Taxation

Published: 05/01/1980   |   DOI: 10.1111/j.1540-6261.1980.tb02176.x

HARRY DeANGELO, RONALD W. MASULIS

Are All Inside Directors the Same? Evidence from the External Directorship Market

Published: 05/23/2011   |   DOI: 10.1111/j.1540-6261.2011.01653.x

RONALD W. MASULIS, SHAWN MOBBS

Agency theory and optimal contracting theory posit opposing roles and shareholder wealth effects for corporate inside directors. We evaluate these theories using the market for outside directorships to differentiate among inside directors. Firms with inside directors holding outside directorships have better operating performance and market‐to‐book ratios, especially when monitoring is more difficult. These firms make better acquisition decisions, have greater cash holdings, and overstate earnings less often. Announcements of outside board appointments improve shareholder wealth, while departure announcements reduce it, consistent with these inside directors improving board performance and outside directorships being an important source of inside director incentives.

The Choice of Payment Method in European Mergers and Acquisitions

Published: 05/03/2005   |   DOI: 10.1111/j.1540-6261.2005.00764.x

MARA FACCIO, RONALD W. MASULIS

We study merger and acquisition (M&A) payment choices of European bidders for publicly and privately held targets in the 1997–2000 period. Europe is an ideal venue for studying the importance of corporate governance in making M&A payment choices, given the large number of closely held firms and the wide range of capital markets, institutional settings, laws, and regulations. The tradeoff between corporate governance concerns and debt financing constraints is found to have a large bearing on the bidder's payment choice. Consistent with earlier evidence, we find that several deal and target characteristics significantly affect the method of payment choice.

Agency Problems at Dual‐Class Companies

Published: 07/16/2009   |   DOI: 10.1111/j.1540-6261.2009.01477.x

RONALD W. MASULIS, CONG WANG, FEI XIE

Using a sample of U.S. dual‐class companies, we examine how divergence between insider voting and cash flow rights affects managerial extraction of private benefits of control. We find that as this divergence widens, corporate cash holdings are worth less to outside shareholders, CEOs receive higher compensation, managers make shareholder value‐destroying acquisitions more often, and capital expenditures contribute less to shareholder value. These findings support the agency hypothesis that managers with greater excess control rights over cash flow rights are more prone to pursue private benefits at shareholders’ expense, and help explain why firm value is decreasing in insider excess control rights.

Corporate Governance and Acquirer Returns

Published: 08/14/2007   |   DOI: 10.1111/j.1540-6261.2007.01259.x

RONALD W. MASULIS, CONG WANG, FEI XIE

We examine whether corporate governance mechanisms, especially the market for corporate control, affect the profitability of firm acquisitions. We find that acquirers with more antitakeover provisions experience significantly lower announcement‐period abnormal stock returns. This supports the hypothesis that managers at firms protected by more antitakeover provisions are less subject to the disciplinary power of the market for corporate control and thus are more likely to indulge in empire‐building acquisitions that destroy shareholder value. We also find that acquirers operating in more competitive industries or separating the positions of CEO and chairman of the board experience higher abnormal announcement returns.

Political Connections and Corporate Bailouts

Published: 01/11/2007   |   DOI: 10.1111/j.1540-6261.2006.01000.x

MARA FACCIO, RONALD W. MASULIS, JOHN J. McCONNELL

We analyze the likelihood of government bailouts of 450 politically connected firms from 35 countries during 1997–2002. Politically connected firms are significantly more likely to be bailed out than similar nonconnected firms. Additionally, politically connected firms are disproportionately more likely to be bailed out when the International Monetary Fund or the World Bank provides financial assistance to the firm's home government. Further, among bailed‐out firms, those that are politically connected exhibit significantly worse financial performance than their nonconnected peers at the time of and following the bailout. This evidence suggests that, at least in some countries, political connections influence the allocation of capital through the mechanism of financial assistance when connected companies confront economic distress.

An Investigation of Market Microstructure Impacts on Event Study Returns

Published: 09/01/1991   |   DOI: 10.1111/j.1540-6261.1991.tb04629.x

RONALD C. LEASE, RONALD W. MASULIS, JOHN R. PAGE

We investigate the importance of bid‐ask spread‐induced biases on event date returns as exemplified by seasoned equity offerings by NYSE listed firms. We document significant negative return biases on the offering day which explain a large portion of the negative event date return documented in the literature. Buy‐sell order flow imbalance is prominent around the offering and induces a relatively large spread bias. If order imbalances are suspected, the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias.