IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

A Re-examination of the Wealth Expropriation Hypothesis: The Case of Captive Finance Subsidiaries

  • Malitz, Ileen B
Registered author(s):

    This paper reexamines E. Han Kim, John J. McConnell, and P. Greenwood's (1977) study of captive finance subsidiaries. The author suggests that, as long as firms are concerned with reputation, shareholders will find it costly to engage in deliberate wealth expropriation and, thus, have no incentives to do so. Using a sample for fourteen firms with publicly-traded debt, she computes and tests the statistical significance of abnormal returns to shareholders, bondholders, and the firm when captives are incorporated. She finds that shareholders gain 14.9 percent, bondholders lose 2.3 percent, and firm value increases a significant 10.4 percent. The results are inconsistent with wealth expropriations and lend support to the importance of reputation to firms. Copyright 1989 by American Finance Association.

    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://links.jstor.org/sici?sici=0022-1082%28198909%2944%3A4%3C1039%3AAROTWE%3E2.0.CO%3B2-W&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

    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.

    Article provided by American Finance Association in its journal Journal of Finance.

    Volume (Year): 44 (1989)
    Issue (Month): 4 (September)
    Pages: 1039-47

    as
    in new window

    Handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:1039-47
    Contact details of provider: Web page: http://www.afajof.org/
    More information through EDIRC

    Order Information: Web: http://www.afajof.org/membership/join.asp

    No references listed on IDEAS
    You can help add them by filling out this form.

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

    When requesting a correction, please mention this item's handle: RePEc:bla:jfinan:v:44:y:1989:i:4:p:1039-47. 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: (Wiley-Blackwell Digital Licensing)

    or (Christopher F. Baum)

    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.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.