Advanced Search
MyIDEAS: Login

Demutualization: Determinants and consequences of the mutual holding company choice

Contents:

Author Info

  • Carow, Kenneth A.
  • Cox, Steven R.
  • Roden, Dianne M.
Registered author(s):

    Abstract

    We investigate the determinants and consequences of the mutual holding company (MHC) structure that allows mutual thrifts to issue stock to outside shareholders while maintaining the mutual form. Capital constrained firms with greater profit opportunities are more likely to choose a full demutualization; demonstrating that the MHC choice can be used to control for over- and under-investment costs. During periods of greater regulatory constraints, MHC firms have lower offer-day returns than full demutualizations. MHC firms are also less likely to be acquired, as the MHC structure provides protection from the market for corporate control. Demonstrating a clear preference by minority shareholders for the elimination of the MHC structure, the announcement of a second-stage conversion generates a 12% return.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.sciencedirect.com/science/article/B6VCY-4VPV5F2-3/2/c712defab612d616fcf120ad80570fdc
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 33 (2009)
    Issue (Month): 8 (August)
    Pages: 1454-1463

    as in new window
    Handle: RePEc:eee:jbfina:v:33:y:2009:i:8:p:1454-1463

    Contact details of provider:
    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Mutual holding company Thrifts Event study IPO Conversion;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Masulis, Ronald W., 1987. "Changes in ownership structure : Conversions of mutual savings and loans to stock charter," Journal of Financial Economics, Elsevier, vol. 18(1), pages 29-59, March.
    2. Henock Louis, 2004. "The Cost of Using Bank Mergers as Defensive Mechanisms against Takeover Threats," The Journal of Business, University of Chicago Press, vol. 77(2), pages 295-310, April.
    3. King, Michael R. & Santor, Eric, 2008. "Family values: Ownership structure, performance and capital structure of Canadian firms," Journal of Banking & Finance, Elsevier, vol. 32(11), pages 2423-2432, November.
    4. Kevin Davis, 2001. "Credit Union Governance and Survival of the Cooperative Form," Journal of Financial Services Research, Springer, vol. 19(2), pages 197-210, April.
    5. William Lang & Choon-Geol Moon & Loretta Mester & Joseph Hughes & Michael Pagano, 2001. "Do Bankers Sacrifice Value to Build Empires? Managerial Incentives, Industry Consolidation, and Financial Performance," Departmental Working Papers 200117, Rutgers University, Department of Economics.
    6. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    7. Carow, Kenneth A. & Cox, Steven R. & Roden, Dianne M., 2004. "Mutual holding companies: Evidence of conflicts of interest through disparate dividends," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 277-298, February.
    8. Brau, James C. & Li, Mingsheng & Shi, Jing, 2007. "Do secondary shares in the IPO process have a negative effect on aftermarket performance?," Journal of Banking & Finance, Elsevier, vol. 31(9), pages 2612-2631, September.
    9. Marco Pagano & Fabio Panetta & Luigi Zingales, 1995. "Why Do Companies Go Public? An Empirical Analysis," NBER Working Papers 5367, National Bureau of Economic Research, Inc.
    10. Mantecon, Tomas & Poon, Percy, 2009. "An analysis of the liquidity benefits provided by secondary markets," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 335-346, February.
    11. Masulis, Ronald W. & Korwar, Ashok N., 1986. "Seasoned equity offerings : An empirical investigation," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 91-118.
    12. Ingolf Dittmann & Niels Ulbricht, 2008. "Timing and Wealth Effects of German Dual Class Stock Unifications," European Financial Management, European Financial Management Association, vol. 14(1), pages 163-196.
    13. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    14. Armen A. Alchian, 1950. "Uncertainty, Evolution, and Economic Theory," Journal of Political Economy, University of Chicago Press, vol. 58, pages 211.
    15. Lease, Ronald C. & McConnell, John J. & Mikkelson, Wayne H., 1983. "The market value of control in publicly-traded corporations," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 439-471, April.
    16. Cronqvist, Henrik & Nilsson, Mattias, 2003. "Agency Costs of Controlling Minority Shareholders," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(04), pages 695-719, December.
    17. Cox, Steven R. & Roden, Dianne M., 2002. "The source of value of voting rights and related dividend promises," Journal of Corporate Finance, Elsevier, vol. 8(4), pages 337-351, October.
    18. Megginson, William L, 1990. "Restricted Voting Stock, Acquisition Premiums, and the Market Value of Corporate Control," The Financial Review, Eastern Finance Association, vol. 25(2), pages 175-98, May.
    19. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January.
    20. Wu, Congsheng & Kwok, Chuck C.Y., 2007. "Long-run performance of global versus domestic initial public offerings," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 609-627, March.
    21. White, R. W. & Lusztig, P. A., 1980. "The Price Effects of Rights Offerings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 15(01), pages 25-40, March.
    22. Loderer, Claudio F. & Sheehan, Dennis P. & Kadlec, Gregory B., 1991. "The pricing of equity offerings," Journal of Financial Economics, Elsevier, vol. 29(1), pages 35-57, March.
    23. Mola, Simona & Loughran, Tim, 2004. "Discounting and Clustering in Seasoned Equity Offering Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 39(01), pages 1-23, March.
    24. Zingales, Luigi, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, MIT Press, vol. 110(4), pages 1047-73, November.
    25. Mantecon, Tomas, 2008. "An analysis of the implications of uncertainty and agency problems on the wealth effects to acquirers of private firms," Journal of Banking & Finance, Elsevier, vol. 32(5), pages 892-905, May.
    26. B[oslash]hren, [Oslash]yvind & Eckbo, B. Espen & Michalsen, Dag, 1997. "Why underwrite rights offerings? Some new evidence," Journal of Financial Economics, Elsevier, vol. 46(2), pages 223-261, November.
    27. Kenneth A. Carow & Steven R. Cox & Dianne M. Roden, 2007. "The Role of Insider Influence in Mutual-to-Stock Conversions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(6), pages 1285-1304, 09.
    28. Eckbo, B. Espen & Masulis, Ronald W., 1992. "Adverse selection and the rights offer paradox," Journal of Financial Economics, Elsevier, vol. 32(3), pages 293-332, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:33:y:2009:i:8:p:1454-1463. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.