Ex Ante Effects of Ex Post Managerial Ownership
This paper highlights the trade-off between the need to restructure a company and the need to provide managers with appropriate incentives to run it after the restructuring. In order to provide incentives, it is optimal to let managers acquire equity in the firm. However, the expectations to be able to buy shares in the future may create ex-ante incentives to delay restructuring. This effect is particularly important for events where managers can acquire a substantial number of shares, such as privatizations or MBOs. In equilibrium, the shares are not underpriced, but the delay in restructuring which took place in the period before reduces the value of the company. We report empirical evidence on MBOs and privatizations consistent with the model in this paper.
|Date of creation:||Sep 2006|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Bengt Holmstrom, 1999.
"Managerial Incentive Problems: A Dynamic Perspective,"
NBER Working Papers
6875, National Bureau of Economic Research, Inc.
- Holmstrom, Bengt, 1999. "Managerial Incentive Problems: A Dynamic Perspective," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 169-82, January.
- Djankov, Simeon & Murrell, Peter, 2002.
"Enterprise Restructuring in Transition: A Quantitative Survey,"
CEPR Discussion Papers
3319, C.E.P.R. Discussion Papers.
- Simeon Djankov & Peter Murrell, 2002. "Enterprise Restructuring in Transition: A Quantitative Survey," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 739-792, September.
- Murphy, Kevin J., 1999. "Executive compensation," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 38, pages 2485-2563 Elsevier.
- Shleifer, Andrei & Vishny, Robert W., 1986.
"Large Shareholders and Corporate Control,"
3606237, Harvard University Department of Economics.
- Perry, Susan E. & Williams, Thomas H., 1994. "Earnings management preceding management buyout offers," Journal of Accounting and Economics, Elsevier, vol. 18(2), pages 157-179, September.
- Mailath, George J, 1987. "Incentive Compatibility in Signaling Games with a Continuum of Types," Econometrica, Econometric Society, vol. 55(6), pages 1349-65, November.
- Lins, Karl & McConnell, John J. & Servaes, Henri, 2004. "Changes in Equity Ownership and Changes in the Market Value of the Firm," CEPR Discussion Papers 4411, C.E.P.R. Discussion Papers.
- Smith, Abbie J., 1990. "Corporate ownership structure and performance *1: The case of management buyouts," Journal of Financial Economics, Elsevier, vol. 27(1), pages 143-164, September.
- Lopez-de-Silanes, Florencio, 1997.
"Determinants of Privatization Prices,"
The Quarterly Journal of Economics,
MIT Press, vol. 112(4), pages 965-1025, November.
- Viral Acharya & Kose John & Rangarajan K. Sundaram, 1999.
"On the Optimality of Resetting Executive Stock Options,"
New York University, Leonard N. Stern School Finance Department Working Paper Seires
99-087, New York University, Leonard N. Stern School of Business-.
- Acharya, Viral V. & John, Kose & Sundaram, Rangarajan K., 2000. "On the optimality of resetting executive stock options," Journal of Financial Economics, Elsevier, vol. 57(1), pages 65-101, July.
- Stein, Jeremy C, 1989. "Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior," The Quarterly Journal of Economics, MIT Press, vol. 104(4), pages 655-69, November.
- Narayanan, M. P., 1996. "Form of Compensation and Managerial Decision Horizon," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(04), pages 467-491, December.
- 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.
- Claessens, Stijn & Djankov, Simeon, 2002. "Privatization benefits in Eastern Europe," Journal of Public Economics, Elsevier, vol. 83(3), pages 307-324, March.
- Goldman, Eitan & Slezak, Steve L., 2006. "An equilibrium model of incentive contracts in the presence of information manipulation," Journal of Financial Economics, Elsevier, vol. 80(3), pages 603-626, June.
- Muscarella, Chris J & Vetsuypens, Michael R, 1990. " Efficiency and Organizational Structure: A Study of Reverse LBOs," Journal of Finance, American Finance Association, vol. 45(5), pages 1389-1413, December.
- Jan Svejnar & Evzen Kocenda, 2002. "The Effects of Ownership Forms and Concentration on Firm Performance after Large-Scale Privatization," William Davidson Institute Working Papers Series 471, William Davidson Institute at the University of Michigan.
- Kaplan, Steven, 1989. "The effects of management buyouts on operating performance and value," Journal of Financial Economics, Elsevier, vol. 24(2), pages 217-254.
- Igor Filatotchev & Mike Wright & Michael Bleaney, 1999. "Privatization, insider control and managerial entrenchment in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 481-504, July.
- Brian Pinto & Marek Belka & Stefan Krajewski, 1993. "Transforming State Enterprises in Poland: Evidence on Adjustment by Manufacturing Firms," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 213-270.
- Nandini Gupta, 2005. "Partial Privatization and Firm Performance," Journal of Finance, American Finance Association, vol. 60(2), pages 987-1015, 04.
- Aboody, David & Kasznik, Ron, 2000. "CEO stock option awards and the timing of corporate voluntary disclosures," Journal of Accounting and Economics, Elsevier, vol. 29(1), pages 73-100, February.
- Grossman, Sanford J. & Perry, Motty, 1986. "Perfect sequential equilibrium," Journal of Economic Theory, Elsevier, vol. 39(1), pages 97-119, June.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Ofek, Eli, 1994. " Efficiency Gains in Unsuccessful Management Buyouts," Journal of Finance, American Finance Association, vol. 49(2), pages 637-54, June.
- Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 172-204, February.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:5821. 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: ()The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address
If references are entirely missing, you can add them using this form.