The Value of Corporate Coinsurance to the Shareholders of Diversifying Firms : Evidence from Marginal Tax Rate

Hyeongsop Shim 한국재무학회 2013 한국재무학회 학술대회 Vol.2013 No.05

We test whether conglomerate mergers produce higher gains to shareholders due to corporate coinsurance than horizontal mergers by comparing the wealth change to shareholders around merger announcement. Conglomerate mergers show higher size-weighted average of bidder and target marginal tax rates than horizontal mergers. The higher marginal tax rates in conglomerate mergers provide extra returns to combined shareholders which vary from 0.23% to 0.46% according to model specification of coinsurance benefit to combined shareholders. We further investigate the change in financial leverage and cash holdings after merger completion to find the channel through which diversified firms make the most of higher marginal tax rates in comparison of specialized firms. The higher marginal tax rates help the consolidated firm to reduce cash holdings but do not have an impact on the leverage change after merger completion. Other coinsurance determinants such as sash flow correlation and volatility difference do not affect the change in subsequent change in both financial leverage and cash holdings. Our test results indicate that diversifying mergers of high bidder and target marginal tax rates enhance the stock value of both bidder and target firm around merger announcement and diversified firms realize this coinsurance benefit by reducing cash holdings rather than increasing financial leverage.

Heterogeneous Value Creation of Doctoral Independent Directors during Mergers and Acquisitions : Evidence from Target Shareholder Gains

Chaehyun Kim,Hyeongsop Shim 한국재무학회 2016 한국재무학회 학술대회 Vol.2016 No.05

Using manually collected biographical information on independent directors in target firms, we analyze the role of directors with doctoral degrees in mergers and acquisitions between 2005 and 2014. We first observe that doctoral independent directors serve on the boards of about 68% of target firms. We find that the market differently responds to the existence of doctoral independent directors with two distinct disciplines during the M&A announcements. While doctoral directors with business-related backgrounds are negatively associated with shareholder wealth, those with technology-related backgrounds tend to increase shareholder wealth. Interestingly, our empirical results show that doctoral independent directors with business-related degrees improve shareholder wealth in targets with higher advisory needs. We also find that low monitoring intensive targets, which have greater monitoring needs than high monitoring intensive targets, benefit only from independent directors with technology-related degrees. Overall, our findings imply that doctoral independent directors can provide better advisory and monitoring service when their expertise is relevant to the firm’s need.

Does Financial Synergy Provide a Rationale for Conglomerate Mergers?

Mooney, Tim,Shim, Hyeongsop Wiley Blackwell (Blackwell Publishing) 2015 Asia-Pacific Journal of Financial Studies Vol.44 No.4

What Causes Efficiency Gains in Management Buyouts?

HYUN LEE,HYEONGSOP SHIM 한국재무학회 2015 한국재무학회 학술대회 Vol.2015 No.05

Recent studies on leveraged buyouts document firm managers time the buyout to make the most of undervaluation or overvaluation of target firms while the literature on management buyouts (MBOs) in 1990s attributes the source of value enhancement to organizational change. This paper reexamines what better explains the reason of improved performance of MBOs during 1995 to 2012, adopting the methodology of Ofek (1994). We find that the organizational change through MBOs contributes to the enhancement of MBO performance, still consistent with Ofek (1994). In addition, the results also advocate the robustness of organizational change hypothesis regardless of the change in private equity (PE) industry and recent economic crisis.

경영자 참호효과가 경영자 매수형 피인수 기업의 재무적 성과에 미치는 영향

김채현 ( Chaehyun Kim ),심형섭 ( Hyeongsop Shim ) 한국재무관리학회 2020 財務管理硏究 Vol.37 No.1

본 연구는 1995년부터 2013년까지 미국에서 발생한 232개의 경영자매수 표본을 활용하여 이사회의 시차임기제가 경영자매수 전후 시점의 주주 부와 회사의 재무적 성과에 미치는 영향을 조사하였다. 실증분석 결과는 시차임기제를 도입한 기업이 경영자매수를 공시하는 경우 주가가 상승함을 나타낸다. 다음으로 경영자매수 후에 수반되는 영업성과 향상이 기업 구조의 개선에 의한 것인지 아니면 경영자의 사적 정보 유용에 따른 것인지를 조사하였다. 실증분석 결과는 이사회에 시차임기제를 도입한 회사는 그렇지 않은 회사에 비해 경영자매수를 공시하기 이전부터 이후까지 경영성과가 더 크게 향상됨을 보여준다. 이러한 결과는 경영자가 경영자매수를 시도할 때 기업의 미래 전망에 대한 사적인 정보를 유용한다는 가설을 지지한다. 또한 경영자들은 참호효과로 인해 사적인 정보를 유용하고 회사가 저평가 된 시기에 매수를 선택할 강한 유인을 가지게 됨을 시사한다. Using a sample of 232 U.S. management buyout (MBO) announcements between 1995 and 2013, we examine whether the presence of the classified board provision affects shareholder wealth and firm performance around MBOs. Evidence shows that classified board provision is positively associated with stock returns around the time of the announcements. We examine whether the operational enhancements following MBOs result from ensuing corporate governance enhancement or private information appropriation. Controlling for firm characteristics, we find that firms with classified board provision show more pronounced improvements in operating performance between the preand post-announcement period, which is consistent with the private information appropriation. These findings suggest that entrenched managers have strong incentives to use private information and exploit the undervaluation of their firms when making buyout decisions.

Does Managerial Entrenchment Managerial Matter in Management Buyouts? Evidence from Classified Evidence Board Provision

Chaehyun Kim,Hyun Lee,Hyeongsop Shim 한국회계정보학회 2017 한국회계정보학회 학술대회발표집 Vol.2017 No.2

Using a sample of 232 U.S. management buyout (MBO) announcements between 1995 and 2013, we examine whether the presence of the classified board provision affects shareholder wealth and form performance around MBOs. Evidence shows that the existence of classified board provision is positively associated with stock returns around the time of the announcements. We examine whether the operational enhancements following MBOs result from the enhancement of corporate governance or the appropriation of private information. After controlling for firm characteristics and self-selection bias, we find that firms with the classified board provision show more pronounced improvements in operating performance in the period between the pre- and post-announcements, which is consistent with the private information hypothesis. Our logistic regression results suggest that the provision is positively associated with CEO turnover in the year following deal cancelations. These finding suggest that entrenched managers have strong incentives to use private information and exploit the undervaluation of their when they make buyout decisions.

Lobbying Activities and Mergers and Acquisitions

Daejin Kim,Tim Mooney,Hyeongsop Shim 한국재무학회 2015 한국재무학회 학술대회 Vol.2015 No.05

We examine corporate lobbying activity and mergers & acquisitions. If eective, rm lob- bying expenditures could in uence legislation and facilitate favorable regulatory treatment, which would be positively re ected in market reactions to merger announcements. However, average announcement returns for lobbying rms are lower than for non-lobbying rms. In addition, lobbying rms tend to have powerful CEOs that receive more cash compensation after a merger. CEO turnover is unaected by lobbying activity. These results suggest that corporate lobbying may be indicative of CEO entrenchment rather than a rm's attempt to maximize shareholder wealth.

Is Doing Good Good for Your Credit Rating? - A Trust-based Hypothesis and Global Evidence

Kiyoung Chang,Ying Li,Hyeongsop Shim 한국재무학회 2017 한국재무학회 학술대회 Vol.2017 No.05

Whether and how doing good (corporate social responsibility, CSR) makes business sense has been a source of constant debate. We suggest that trust underlies the mixed theory and empirical evidence of such debate. Doing good helps sustain a firm’s long-term credit rating by building trust, which alleviates stakeholder relationship uncertainties in incomplete contracts. Doing good is good for credit ratings when it is effective in building trust, when and where the marginal benefit of “earned trust” is high, and where societal trust is high and likely to mitigate moral hazard problems. Our results are robust to endogeneity and robustness tests.

Financial Analysis of SUNING.COM in China Based on the Harvard Analysis Framework

Liu, Huan,Jin, Shanyue,Shim, Hyeongsop 부산대학교 중국연구소 2021 Journal of China Studies Vol.24 No.3

The Influence of Stock Ownership Structure on the Effectiveness of Internal Control

Yingnan Li,Shanyue Jin,Hyeongsop Shim 한국무역연구원 2021 무역연구 Vol.17 No.3

Purpose Improving the effectiveness of internal control has become the key to ensure the healthy development of China’s listed companies and safeguard their interests. Corporate governance and ownership structure will affect the implementation of internal control of listed companies. This paper empirically tests the effects of ownership concentration, institutional ownership and executive ownership on the internal control of listed companies and their influencing mechanisms. Design/Methodology/Approach Based on the data of all A-shares in Shanghai and Shenzhen stock markets from 2015 to 2019, this paper builds a utility model based on the principal-agent theory, and uses SPSS22.0 software to conduct an empirical study. Findings We find that ownership centralization has a significant positive correlation with effectiveness of internal control, which can appropriately improve the degree of ownership concentration and internal control. There is a significant positive correlation between the institutional shareholding ratio and the executive shareholding ratio and internal control. The listed company can introduce diversified investment subjects to realize the diversified power balance mechanism. Moreover, through the improvement of a good holding ratio, to the greatest extent to meet the income between different shareholders, improve the corporate governance structure, and then improve the effectiveness of internal control. Research Implications Results show that there is no significant correlation between the degree of equity balance and the effectiveness of internal control. Different degrees of checks and balances have different positive effects on the effectiveness of internal control.