Private benefits and minority shareholder expropriation : empirical evidence from IPOs of German family-owned firms

Our study examines the existence and the nature of private benefits of control in Germany. We do this by analyzing initial public offerings of founding-family owned firms and tracking their fate up to ten years following the IPO. Our sample includes a uniquely rich data set of 105 IPOs of family-owned firms floated from 1970 to 1991 on German stock exchanges. We find that, first, even ten years after the IPO, family owners, in the cross section, continue to exercise considerable control. Second, we show that there exist substantial private benefits of control in these firms and - to our understanding for the first time - we empirically measure what the nature of these private benefits really is. We also show that the separation of cash flow rights and voting rights via the issuance of dual-class shares is used to create controlling shareholder structures in order to preserve these private benefits. Third, we find a puzzling and significant underperformance of dual-class share IPOs, which can be explained by ex ante unanticipated expropriation of minority shareholders due to poor investor protection in Germany. This Version: 4th draft, November 2001 This paper has been presented at the European Financial Management Association 2001 Meeting in Lugano, the CEPR Conference "The Firm and its Stakeholders" in Courmayeur, the Fall 2000 WAFA Conference in Washington, D.C., the European Economic Association 2000 Conference in Bozen, the ABN AMRO International Conference on IPOs in Amsterdam, the SIRIF Conference on Corporate Governance in Edinburgh, the Financial Center Seminar at the Tinbergen Institute Rotterdam, and the G-Forum on Entrepreneurship Research in Vienna. Klassifikation: G14, G32, G1

Executive compensation and the susceptibility of firms to hostile takeovers : An empirical investigation of the U.S. oil industry

We investigate the suggested substitutive relation between executive compensation and the disciplinary threat of takeover imposed by the market for corporate control. We complement other empirical studies on managerial compensation and corporate control mechanisms in three distinct ways. First, we concentrate on firms in the oil industry for which agency problems were especially severe in the 1980s. Due to the extensive generation of excess cash flow, product and factor market discipline was ineffective. Second, we obtain a unique data set drawn directly from proxy statements which accounts not only for salary and bonus but for the value of all stock-market based compensation held in the portfolio of a CEO. Our data set consists of 51 firms in the U.S. oil industry from 1977 to 1994. Third, we employ ex ante measures of the threat of takeover at the individual firm level which are superior to ex post measures like actual takeover occurrence or past incidence of takeovers in an industry. Results show that annual compensation and, to a much higher degree, stock-based managerial compensation increase after a firm becomes protected from a hostile takeover. However, clear-cut evidence that CEOs of protected firms receive higher compensation than those of firms considered susceptible to a takeover cannot be found

Multiscale likelihood analysis and complexity penalized estimation

We describe here a framework for a certain class of multiscale likelihood factorizations wherein, in analogy to a wavelet decomposition of an L^2 function, a given likelihood function has an alternative representation as a product of conditional densities reflecting information in both the data and the parameter vector localized in position and scale. The framework is developed as a set of sufficient conditions for the existence of such factorizations, formulated in analogy to those underlying a standard multiresolution analysis for wavelets, and hence can be viewed as a multiresolution analysis for likelihoods. We then consider the use of these factorizations in the task of nonparametric, complexity penalized likelihood estimation. We study the risk properties of certain thresholding and partitioning estimators, and demonstrate their adaptivity and near-optimality, in a minimax sense over a broad range of function spaces, based on squared Hellinger distance as a loss function. In particular, our results provide an illustration of how properties of classical wavelet-based estimators can be obtained in a single, unified framework that includes models for continuous, count and categorical data types

Frictions, behavioral biases and active portfolio management

The three chapters of this thesis contribute to the following research questions: (i) What is the role of agency frictions for the performance of mutual funds? (ii) What is the role of market frictions for the performance of hedge funds? (iii) Do hedge funds profit from the behavioral biases of other market participants? The first chapter of this thesis comprises the article "Are Star Funds really Shining? Cross-trading and Performance Shifting in Mutual Fund Families", which is joint work with my colleagues Tamara Nefedova and Gianpaolo Parise. This article exploits institutional trade level data to study cross-trading activity inside mutual fund families and to answer the question whether cross-trades are used to smooth or to shift performance inside the fund family. The second chapter comprises the solo-authored article "Beta Arbitrage and Hedge Fund Returns". This article finds that a factor capturing the returns of strategies exploiting the low beta anomaly, i.e. a betting-against-beta factor (BAB), has significant explanatory power in the time-series and cross-section of hedge fund returns. The third chapter comprises the solo-authored article " Behavioral Factors in Risk Arbitrage". In the context of takeovers, the article examines the trading behavior of investors around a salient reference point, the 52-week high, and its effect on asset prices. Using a large sample of institutional trade-level data the article documents a 50% increase in institutional investor exit at the announcement date for offer prices exceeding the 52-week high. The increased selling pressure leads to significant stock price underreaction and explains a large part of the returns in risk arbitrage

Ist der Ablauf der Lock-up-Frist bei Neuemissionen ein kursrelevantes Ereignis? : Eine empirische Analyse von Unternehmen des Neuen Marktes

Ja, der Ablauf der Lock-up-Frist ist ein kursrelevantes Ereignis. Wir untersuchen Kursreaktionen auf das Ende der Lock-up-Frist bei 142 Unternehmen des Neuen Marktes. Da der Ablauf der Sperrfrist bereits zum Zeitpunkt des Börsengangs bekannt ist, erwarten wir bei einem (semi-)informationseffizienten Kapitalmarkt durchschnittlich keine Kursreaktion. Im Rahmen einer Ereignisstudie zeigen wir aber, dass sich am Ende der Sperrfrist signifikant negative Überrenditen ergeben. Durch eine differenzierte Analyse stellen wir fest, dass firmenspezifische Faktoren (Volatilität, Performance, Free Float) die Kursreaktionen am Ende der Lock-up-Periode beeinflussen. Die Befunde unserer Untersuchung belegen die Notwendigkeit klarer Regeln für mehr Transparenz nach dem Börsengang. Bedeutsam sind die vorliegenden Ergebnisse vor allem vor dem Hintergrund der aktuellen Diskussion um eine Erweiterung der insiderrechtlichen Meldepflichen im Rahmen des 4. Finanzmarktförderungsgesetzes. This paper explores the materiality of expirations of lock-up provisions that prevent insiders from selling their shares after the initial public offering (IPO). We examine 172 lock-up agreements of 142 IPOs floated on Germany’s New Market. Since the date of the lock-up expiration is common knowledge at the IPO, we would not expect to find abnormal returns surrounding the event day, assuming that markets are informationally efficient. However, using an event-study methodology we detect statistically significant negative abnormal returns and a twenty-five percent increase in trading volume surrounding lock-up expiration. The negative abnormal returns are larger for firms with high volatility, superior performance after the IPO, and low free float. The results of our study raise important regulatory issues with respect to disclosure rules of firms going public. We argue that insiders should be legally required to disclose their sell transactions in order to protect new and less informed shareholders.This paper explores the materiality of expirations of lock-up provisions that prevent insiders from selling their shares after the initial public offering (IPO). We examine 172 lock-up agreements of 142 IPOs floated on Germany’s New Market. Since the date of the lock-up expiration is common knowledge at the IPO, we would not expect to find abnormal returns surrounding the event day, assuming that markets are informationally efficient. However, using an event-study methodology we detect statistically significant negative abnormal returns and a twenty-five percent increase in trading volume surrounding lock-up expiration. The negative abnormal returns are larger for firms with high volatility, superior performance after the IPO, and low free float. The results of our study raise important regulatory issues with respect to disclosure rules of firms going public. We argue that insiders should be legally required to disclose their sell transactions in order to protect new and less informed shareholders

Publizitätspflichten börsennotierter Aktiengesellschaften im Spannungsfeld zwischen Regelberichterstattung und Ad-hoc-Publizität : Überlegungen zu einer gesetzeskonformen und kapitalmarktorientierten Umsetzung

Auch sechs Jahre nach Einführung der Vorschriften zur Ad-hoc-Publizität nach § 15 WpHG besteht bei den Unternehmen weiterhin große Unsicherheit bezüglich ihrer ordnungsmäßigen Umsetzung. Dies gilt insbesondere für die Behandlung von ad-hoc-meldepflichtigen Sachverhalten, die sich aus der Regelberichterstattung ergeben. Der vorliegende Beitrag entwickelt hierzu Lösungsansätze im Sinne einer kapitalmarktorientierten Unternehmenspublizität.Even six years after the introduction of the ad-hoc-disclosure rules (section 15 of the German securities law) regulating the immediate release of material information, there is still considerable uncertainty among German companies as to how to meet the legal requirements. This uncertainty is especially severe with respect to material information resulting from earnings changes in the context of annual and quarterly reporting. This paper develops an approach for providing a capital-market-oriented corporate disclosure system

Konzerneinfluss und Entkopplung vom Marktrisiko — Eine empirische Analyse der Betafaktoren bei faktischen und Vertragskonzernen

Zusammenfassung: Im vorliegenden Beitrag werden die Betafaktoren beherrschter Unternehmen bei faktischen und Vertragskonzern-Verhältnissen bis hin zum Squeeze-Out untersucht. Die Ergebnisse zeigen signifikant abnehmende Betafaktoren über verschiedene Konzernstufen. Bei Vertragskonzernen mit Beherrschungs- und Gewinnabführungsvertrag und Squeeze-Out-Unternehmen sinken die Betafaktoren der beherrschten Unternehmen auf Werte nahe Null. Die Ergebnisse sind ein Beleg für einen Marktrisiko-Entkopplungseffekt bei Unternehmen, die einem Konzerneinfluss unterliegen. Die Aktien von Minderheitsaktionären beherrschter Unternehmen haben somit im Durchschnitt eine niedrigere Risikoklasse als Aktien von Unternehmen im Streubesitz. Für die Betaschätzung zur Bewertung von Unternehmen mit einem geringen Streubesitzanteil empfehlen wir deshalb, spezielle Regressionsverfahren für unregelmäßig gehandelte Aktien (z.B. Trade-to-Trade-Verfahren) der Verwendung von Peer-Group-Betas vorzuziehe

Urban and Community Forests of the North Central West Region

This report details how land cover and urbanization vary within the states of Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota by community (incorporated and census designated places), county subdivision, and county. Specifically this report provides critical urban and community forestry information for each state including human population characteristics and trends, changes in urban and community lands, tree canopy and impervious surface cover characteristics, distribution of land-cover classes, a relative comparison of urban and community forests among local government types, determination of priority areas for tree planting, and a summary of urban tree benefits. Report information can improve the understanding, management, and planning of urban and community forests