What motivates managers?: Evidence from organizational form changes
AbstractWe formulate several testable hypotheses on managerial motivation and test our hypotheses by using a sample of 128 organizational form changes in the real estate industry. We find that firms that switch to a more restrictive (tighter) organizational structure have increases in stock value, and have higher managerial ownership of stocks and options. Firms moving to a less restrictive (looser) structure have larger wealth effects when the degree of monitoring is higher. Distressed firms (with higher creditor monitoring) moving into a looser organizational form have higher wealth effects than healthy firms. In fact, these wealth effects are decreasing in the level of free cash flow to a looser organizational form have high wealth effects when accompanied by managerial replacement than otherwise.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Corporate Finance.
Volume (Year): 12 (2005)
Issue (Month): 1 (December)
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Web page: http://www.elsevier.com/locate/jcorpfin
Other versions of this item:
- Aswath Damodaran & Kose John & Crocker H. Liu, 1999. "What Motivates Managers? Evidence from Organizational Form Changes," New York University, Leonard N. Stern School Finance Department Working Paper Seires 99-079, New York University, Leonard N. Stern School of Business-.
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