Chapter 7--Acquisition and Restructuring Strategies
收购与重组(英文版)
– it is uncommon for a firm to develop new products internally to diversify its product lines
Increase diversification
Lower risk compared to developing new products
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Reasons for Making Acquisitions:
Increased Market Power
Factors increasing market power
Inadequate evaluation of target
Acquisitions
Managers overly focused on acquisitions
Large or extraordinary debt
Inability to achieve synergy
Too much diversification
Chapter 7
Acquisition and Restructuring Strategies
Michael A. Hitt R. Duane Ireland Robert E. Hoskisson
©2003 Southwestern Publishing Company
1
Strategic Inputs
firm’s capabilities and reduces its value
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学术英语（社科）Unit7原文及翻译.doc
Introduction: Understanding the Impact of New Media on Journalism 1Journalism is undergoing a fundamental transformation, perhaps the most fundamental since the rise of the penny press of the mid-nineteenth century. In the twilight of the twentieth century and the dawn of the twenty-first, there is emerging a new form of journalism whose distinguishing qualitiesinclude ubiquitous news, global information access, instantaneous reporting, interactivity, multimedia content, and extreme content customization. In many ways this represents a potentially better form of journalism because it can reengage an increasingly distrusting and alienated audience. At the same time, it presents many threats to the most cherished values and standards of journalism. Authenticity of content, source verification, accuracy, and truth are all suspect in a medium where anyone with a computer and a modem can become a global publisher.2Although the easy answer is to point to the Internet, the reasons for the transformation of journalism are neither simple nor one-dimensional. Rather, a set of economic, regulatory, and cultural forces, driven by technological change, are converging to bring about a massive shift in the nature of journalism at the millennium.3The growth of a global economic system, made up of regional economies, all interrelated (witness the volatility in the world‟s financial markets in August 1998, when drops in Asian and Russian markets triggered drops in European and U.S. markets) and increasingly controlled by multinational corporate behemoths, has rewritten the financial basis for journalism and the media in general. Deregulation, as outlined in the U.S. Telecommunications Act of 1996 and简介：了解新媒体对新闻的影响1新闻业正在发生根本性的变革，或许最根本的变革是十九世纪中叶的便士报的崛起。
International Diversification, Ownership Structure, Legal Origin, and Earnings Management
International Diversification,Ownership Structure,Legal Origin,and Earnings Management:Evidence from TaiwanC HEN-L UNG C HIN*Y U-J U C HEN**T SUN-J UI H SIEH***The primary objective of this study is to investigate the impact of corpo-rate internationalization on earnings management.We also explore themitigating roles of corporate ownership structure,as measured by diver-gence of controlling owner’s control and cash rights,and the proportionof firms that operate in common law countries on earnings management.Using a sample drawn from Taiwan,we find that greater corporateinternationalization is associated with a higher level of earnings man-agement,as proxied by discretionary accruals and the likelihood ofexactly meeting or just beating analyst forecast.Corporate internation-alization is measured by the ratio of foreign assets to total assets,foreign operational country scope,and the number of foreign investees,respectively.In addition,we find that companies can reduce the nega-tive effects of internationalization on earnings management by improv-ing their corporate ownership structures or investing in a higherproportion of common law countries where there is a better investorlegal protection environment and higher information transparency.1.IntroductionOver the past decade,a growing number of listed firms in developed and developing markets have substantially expanded their operations abroad.1Despite the prevalence of international diversification,there is surprisingly little evidence of its effect on earnings management.This paper explores the association between the extent of a firm’s international diversification and earnings *National Chengchi University**Providence University***Providence University1.For example,cross-border investments of U.S.firms have grown by more than700percent (World Trade Organization[2000]),and S&P500firms report that foreign sales account for more than24percent of total sales.In addition,of the ten largest panies listed on the NYSE, almost one-half of their revenues are generated from foreign operations(Meek and Thomas[2004]). In the case of Taiwan,the volume of international trade and foreign direct investment has approached 50percent of gross national product in recent years(Chang[2007]).233234JOURNAL OF ACCOUNTING,AUDITING&FINANCE management.Furthermore,we investigate whether an effective corporate owner-ship structure plays a critical role in mitigating earnings management induced by corporate internationalization.The ownership structure is measured as the diver-gence between the ultimate owner’s voting rights and cash flow rights.Finally, we examine whether the association between corporate internationalization and earnings management is reduced when companies operate in a higher proportion of countries with better legal protections to investors.The first question to be addressed in this paper is whether corporate interna-tional diversification results in a higher degree of earnings management.First, while domestic earnings refers to a single country,foreign earnings encompasses countries from around the world differing drastically in terms of economic condi-tions,political stability,competitive forces,growth opportunities,governmental regulations,and so on(Thomas[2000]).With increased geographic dispersion of firm assets,corporate international diversification thus increases organizational complexity,and in turn increases information asymmetry between managers and investors.Managers may exploit these discretions to make self-maximizing deci-sion,which decreases firm value.For example,Hope and Thomas(2008)show that when information asymmetries induced by international diversification increase,managers are more likely to engage in foreign empire building.To mask the adverse effect of these suboptimal decisions arising from their discre-tion on firm performance,managers have the incentive to engage in aggressive earnings management.Second,expansion into international markets increases the complexity of information processing for investors(Thomas[1999];Callen,Hope, and Segal[2005])and analysts(Duru and Reeb[2002];Tihanyi and Thomas [2005];Herrmann,Hope,and Thomas[2008]).2These results,in conjunction with the findings that managers tend to engage in a higher level of earnings management as information asymmetry increases(e.g.,Dye[1988];Beatty and Harris[1999]; Richardson[2000]),lead to our expectation that managers exploit this additional level of information asymmetry to engage in earnings management.Next,we explore the association between ownership structures of multina-tional firms and earnings management.The primary agency problem in most countries outside the United States is reflected in the conflict of interest between controlling owners and minority owners(La Porta,Lopez-de-Silanes,and Shleifer[1999];Haw,Hu,Hwang,and Wu[2004];Francis,Schipper,and Vin-cent[2005]),and the former generally possess control rights in excess of cash flow rights via stock pyramids and cross-ownership structures.When control divergence increases,the controlling owner’s ability and incentive to expropri-ate minority investors increases also.3Insiders(such as controlling owners or2.For example,Duru and Reeb(2002)document that greater corporate international diversifi-cation is associated with less accurate analyst forecasts.3.Claessens,Djankov,and Lang(2000,84)cite La Porta,Lopez-de-Silanes,and Shleifer’s (1999)statement that,in East Asia,corporate control can be achieved while holding much less than an absolute majority of the stock.In that area,the probability that a single controlling owner holds less than20percent of the stock is very high.This held true in80percent of the cases,across the four East Asian countries.Claessens,Djankov,and Lang(2000)report that the average voting rights held by controlling shareholders in Taiwan is about18.96percent,while the average cash flow rights held by controlling shareholders in Taiwan is about15.98percent.managers)have incentives to conceal private control benefits from outsiders because,if these benefits are detected,outsiders will take disciplinary actions against them (Shleifer and Vishny [1997];Leuz,Nanda,and Wysocki [2003]).Therefore,controlling owners and managers tend to manage earnings in an attempt to mask true firm’s performance and to conceal their private control benefits from outsiders (Leuz,Nanda,and Wysocki [2003];Haw et al.[2004]),particularly in the context of internationalization.In this paper,we hypothesize that an effective corporate ownership structure,as measured by the divergence between controlling owners’cash flow rights and voting rights,plays a critical role in mitigating earnings management induced by corporate internationalization.We further examine whether the degree of earnings management decreases when companies invest in a higher proportion of common law countries.Prior studies (e.g.,La Porta,Lopez-de-Silanes,Shleifer,and Vishny [1997,2000])show that the common law countries (e.g.,the United States and the United Kingdom)offer the best investor protection,while the French-based code law countries offer the least protection.Better law protection limits insiders’ability to acquire private control benefits and reduces their incentives to mask a firm’s performance and manage earnings (Leuz,Nanda,and Wysocki [2003]).Further-more,in market-oriented common law countries,the base of shareholders typi-cally is larger and more diverse,and information asymmetry is more efficiently resolved through public disclosure.Hence,there is a larger demand for account-ing quality (Ball,Kothari,and Robin [2000];Ball,Robin,and Wu [2003]).Therefore,we expect that the pervasiveness of earnings management declines when companies invest in a higher proportion of common law countries.The motivations for using Taiwanese firms’data stem from the following four reasons.First,internationalization may become an indispensable strategy for a firm’s growth in the emerging countries.Taiwan is characterized by a heavy reliance on exports,smaller stock markets,higher ownership concentrations,weaker investor protections,and lower disclosure requirements.Therefore,the effect of internationalization on earnings management in Taiwanese firms should be more pronounced,providing a stronger test of our hypotheses.Second,the relationship between ownership structure and financial report-ing has not been studied in a concentrated ownership context like that in Taiwan,the dominant context outside the United States.In East Asian corpora-tions,the high concentration of ownership nullifies the principal-agent problem between owners and managers as well as the related role of accounting-based managerial contracts.It is interesting to see how the ownership structure of a multinational firm interacts with the extent of earnings management using Taiwanese data.Third,prior literature focuses primarily on the effects of legal protection on a company’s earnings quality and investigates how the legal protection in differ-ent regimes affects a firm’s earnings quality.Unlike prior studies,the current pa-per explores how the earnings quality of a multinational firm is affected by a proportion of foreign investees with better legal protection environment (i.e.,common law countries).We believe that using Taiwanese firms is appropriate to 235INTERNATIONAL DIVERSIFICATION,OWNERSHIP STRUCTURE236JOURNAL OF ACCOUNTING,AUDITING&FINANCE examine whether foreign legal systems have an impact on firms’earnings management.4Finally,the Generally Accepted Accounting Principles(GAAP)in Taiwan are similar to those in the United States.In particular,Taiwan’s segment disclosure rule, Taiwan’s Statement of Financial Accounting Standards No.20,Disclosure of Seg-ment Financial Information(hereafter TSFAS20),is almost identical to U.S.State-ment of Financial Accounting Standards No.131(SFAS131)5and International Accounting Standards No.14(IAS14).Thus,although not many countries require segment disclosures,our findings suggest the importance of these disclosures.Our evidence supports the prediction that in the context of an emerging mar-ket,such as the Taiwanese market,the pervasiveness of earnings management increases in aggressive internationalization.However,such earnings management behavior effects can be mitigated through specific mechanisms.These mecha-nisms include improving ownership structures of multinational firms or investing more heavily in common law countries.This paper contributes to several streams of literature.First,our study con-tributes to literature on the association between internationalization and earnings management.Unlike prior studies(e.g.,Bodnar and Weintrop[1997];Bodnar, Hwang,and Weintrop[2003])that focus on countries of Anglo-Saxon cultural derivation,we use Taiwan’s data and find that corporate internationalization exacerbates earnings management in the context of the code law system.Due to the fact that Taiwan’s GAAP for segment reporting is similar to the USFAS131 and IAS14,and that the nature of corporate ownership structures differs between Taiwan and the Anglo-Saxon countries examined in Bodnar and Weintrop(1997) and Bodnar,Hwang,and Weintrop(2003),our findings provide further under-standing of the impact of corporate ownership structure on earnings management outside the United States and other Anglo-Saxon countries.64.With regard to the legal protection environment of Taiwanese firms engaging in internation-alization,in our sample,some50percent of investees were in common law countries,with the re-mainder in civil law countries.See the median of LAW in Table2.5.TSFAS20requires firms to identify their reportable segments;disclose operating perform-ance based on geographic area,industry classifications,and sales to critical customers and exports overseas classifications.Furthermore,additional reporting of both income statement and balance sheet data are required.This includes information on foreign investee revenue,sales to external customers, and intersegment sales or transfers when these equal or exceed10percent of the combined revenue of all reportable operating segments.These requirements are similar to those of SFAS131.However, SFAS131allows firms not to disclose earnings for nonoperating segments.According to Herrmann and Thomas(2000),only16percent of the companies in their sample continue to disclose geographic earnings after implementation of SFAS131.In addition,the Taiwan Stock Exchange Corporation stipulates that the publicly listed firms must disclose information about their overseas investments through the Market Observation Post System.The information to be disclosed includes the amount invested,foreign investee locations,and the profit or loss from these investments.6.Recent developments in the United States highlight the importance of understanding the quality of financial reporting using IFRS standards(e.g.,Reason[2005];Cook and Taub[2007]; Johnson[2007]).These developments include recent moves by the U.S.Securities and Exchange Commission to allow foreign-private issuers to use IAS as the reporting scheme rather than requiring the use of U.S.GAAPs;joint standard development activities under way by the FASB and the IASB; and suggestions that even U.S.-based issuers may be required to abandon GAAP in favor of IFRS.Second,we contribute to the literature on internationalization and corporate ownership structure by exploring and documenting the effects of the controlling owner’s control divergence of a multinational firm on earnings management.The fundamental agency in most countries stems from the conflict of interest between controlling owner and minority.The results,in combination with the fact that multinational firms possess a higher level of information asymmetry,allow man-agers to engage in a higher degree of earnings management.Hence,it is impor-tant to understand the influence of corporate ownership structure,as measured by control divergence,on earnings management by multinational firms.Obviously,investing corporate assets overseas partially removes them from the domestic court system and judicial processes.Therefore,our third contribution is to exam-ine the effects of the legal regime governing investor protection in the investee companies on earnings management.Prior literature on internationalization im-plicitly assumes that the effects of expansion outside the home country are the same regardless of the countries into which firms expand (e.g.,Duru and Reeb[2002]).However,corporate internationalization may have a differential impact on the degree of earnings management across legal protection regimes within which foreign investees operate.Hence,a combination of better corporate owner-ship structures and foreign legal regimes that protect the investor may mitigate earnings management behavior.Furthermore,this study contributes to the literature on the effectiveness of regulation in providing information valuable to investors.Regulation issues exist both within and across national boundaries,consistent with increasing levels of economic globalization of economic activities and investments.In that regard,there is an increasing emphasis on harmonization of accounting standards,with pressure growing for convergence between International Financial Reporting Standards (IFRS)and U.S.GAAPs.Our findings imply that segment disclosure seems to have great value to investors in understanding foreign operation and seems to decrease information asymmetry between managers and investors,as well as to further reduce earnings management.The rest of this paper is organized as follows.Section 2presents the hypoth-eses we test.Section 3describes our data,sample selection procedure,and research designs.Section 4presents the empirical results and some additional tests.Section 5presents our conclusions.2.HypothesesIt is well documented that expansion into international markets increases the overall organizational complexity and in turn the complexity of information proc-essing for investors (Thomas [1999];Callen,Hope,and Segal [2005])and analysts (Duru and Reeb [2002];Tihanyi and Thomas [2005];Herrmann,Hope,and Thomas [2008]).International expansion typically leads to an increase in overall organizational complexity and in turn hampers the firm’s information 237INTERNATIONAL DIVERSIFICATION,OWNERSHIP STRUCTURE238JOURNAL OF ACCOUNTING,AUDITING&FINANCE environment.As mentioned above,in contrast to domestic earnings,foreign earn-ings encompasses countries from around the world differing drastically in terms of economic conditions,competitive forces,political stability,growth opportuni-ties,governmental regulations,and so on(Thomas[2000]).Thus,with increased geographic dispersion of firm assets,it is presumably more difficult for investors or even analysts to carefully scrutinize the firm’s earnings reports and make accurate assessment of foreign operations.For example,Thomas(1999)shows that investors underestimate the persistence of foreign earnings.Thomas posits that one possible explanation for the existence of market mispricing is that it is difficult for investors to understand fully the origin of firms’foreign earnings (Thomas[1999,265]).7Similarly,Duru and Reeb(2002)and Tihanyi and Thomas(2005)further find that international diversification leads to less accurate analyst earnings forecasts.Thus,the degree of information asymmetry increases with the extent of corporate international diversification.Analytical models(e.g.,Dye[1988];Trueman and Titman[1988])indicate that the level of earnings management increases as information asymmetry increases.In addition,empirical studies(e.g.,Schipper[1989];Warfield,Wild,and Wild[1995];Beatty and Harris[1999];Richardson[2000])further provide support-ing evidence that managers may exploit the informational asymmetry and engage in a higher degree of earnings management.For example,Schipper(1989)and Warfield,Wild,and Wild(1995)argue that when shareholders have insufficient resources,incentives,or access to relevant information to monitor manager’s actions,earnings management can also occur.Thus,we expect that managers of multinational firms may engage in a higher degree of earnings management,by exploiting this additional level of information asymmetry,than otherwise would be the case if listed firms were not internationally diversified.With increased geographic dispersion of firm assets,corporate international diversification leads to not only an increase in overall organizational complexity, but also an increase in managers’discretion over operating decision.Kogut (1983)argues that expansion into international markets increases firms’opera-tional flexibility and allows firms to change value by exploiting the increased uncertainty of the international environment.For example,global manufacturing gives managers additional opportunities to exercise discretion by shifting produc-tion to lower-or higher-cost locations.Bodnar,Tang,and Weintrop(1999)note that operating in multiple geographic locations creates additional options.Thus, corporate internationalization increases the possibility for managers to enjoy more discretion.Under this circumstance,it is presumably apparent that managers may exploit these discretions to make self-maximizing decision,which decreases firm value.For example,Hope and Thomas(2008)show that managers are more7.Khurana,Pereira,and Raman(2003)find that analysts fail to fully incorporate the higher persistence of foreign earnings.They argue that their findings help explain the market mispricing documented by Thomas(2000).likely to engage in foreign ‘‘empire building’’when information asymmetries induced by international diversification increase.Stulz (1990)also documents that increased information asymmetry between managers and investors,arising from international diversification,is likely to lead to overinvestment and misallo-cation of resources.To mask the adverse effect of their discretion and suboptimal decision on firm performance,managers of multinational firms may have strong incentives to engage in aggressive earnings management.The preceding arguments thus suggest a positive association between the firm’s international diversification and the extent of earnings management.These discussions and predictions lead to the first testable hypothesis:H 1:Greater corporate internationalization is associated with a higher degreeof earnings management.Widely dispersed ownership is not the most common form of ownership struc-ture in listed firms around the world.Despite some concentration of ownership in the United States,an even higher ownership concentration exits in other developed and developing countries (La Porta,Lopez-de-Silanes,and Shleifer [1999];Haw et al.[2004];Francis,Schipper,and Vincent [2005]).The fundamental agency problem for listed firms in these countries stems from the conflict of interest between minority shareholders and controlling owners.The latter typically exercise control power in excess of their cash flow rights via stock pyramids and cross-ownership structures.Because a smaller fraction of the firm’s cash flow rights rela-tive to voting rights fails to align controlling owner incentive with those of minor-ity shareholders,controlling owners thus possess incentives and the ability to extract private control benefits (expropriation of the firm’s assets and opportunities,and outright theft)that are not shared by minority shareholders in proportion to the shares owned.Extracting private control benefits,if detected,is likely to invite external intervention by minority shareholders,analysts,stock exchanges,or regu-lators (Haw et al.[2004]).The desire to avoid external monitoring and loss of rep-utation induces insiders to mask or conceal their private control benefits by managing reported earnings (Leuz,Nanda,and Wysocki [2003];Haw et al.[2004]).Haw et al.(2004)also document that earnings management increases as the control divergence of the controlling shareholders increases.In the context of multinational firms,where additional organizational com-plexity and a greater degree of information asymmetry exists between managers and investors,managers might have greater discretion over opportunistic behav-iors.In this paper,we thus hypothesize that a decrease in the degree of diver-gence between the controlling owner’s voting rights and cash flow rights mitigates the effects of international diversification on earnings management.Hence,we propose the second hypothesis as follows:H 2:The association between earnings management and corporate internation-alization is less pronounced when the control divergence of controlling owners decreases.239INTERNATIONAL DIVERSIFICATION,OWNERSHIP STRUCTURE240JOURNAL OF ACCOUNTING,AUDITING&FINANCE An important difference between common law(e.g.,United States)and code law countries(e.g.,Germany)is the manner of resolving information asymmetry between managers and potential users of accounting information.In market-oriented common law countries,the base of shareholders typically is larger and more diverse,and information asymmetry is more efficiently resolved through public disclosure.The demand for high-quality financial disclosure is enforced in a market system,so there is also a higher frequency and expected cost of share-holder litigation(Ball,Kothari,and Robin[2000];Ball,Robin,and Wu[2003]). On the other hand,in planning-oriented code law countries,information asymme-try is more likely to be resolved by‘‘insider’’communication with stakeholder representatives,so demand is lower for high-quality public financial reporting and disclosure(Ball,Kothari,and Robin[2000];Ball,Robin,and Wu[2003]). Consequently,it is well documented that common law countries typically have stronger protection for outside investors(both shareholders and creditors)(i.e., La Porta et al.[2000])8and better accounting quality(La Porta et al.[1998]) than code law countries.9Prior studies show that strong shareholder protection in the marketplace should attenuate management opportunism(Jensen and Mecking[1976];Holmstrom [1979])and in turn reduce their incentives to mask private control benefits by manipulating earnings(Jensen and Mecking[1976];Hung[2001];Leuz,Nanda, and Wysocki[2003]).Stated differently,managers are less likely to behave oppor-tunistically and manipulate earnings in common law countries with strong protec-tion than in code law countries with weak protection.For example,there are many mechanisms for oppressed shareholders to make legal claims against directors in the United States,while there are few such mechanisms in Germany(La Porta et al. [1998]).U.S.managers who materially misstate earnings generally face shareholders’class-action suits and securities regulators’investigations,but German managers rarely face such consequences.As a consequence,U.S.managers are less likely to exhibit such behavior,compared with German managers,due to the higher cost of opportunistic behavior(La Porta et al.[1998];Hung[2001]).Recent research on the effect of legal origin system on earnings quality gen-erally lends support to the above arguments.For example,Hung(2001)finds that the use of accrual accounting negatively affects the value relevance of financial statements in civil law countries with weak shareholder protection.This negative effect,however,does not exist in common law countries.Haw et al.(2004) Porta et al.(1997)also examined legal rules associated with protection of corporate shareholders and the quality of their enforcement in forty-nine countries.In addition,compared with common law countries,civil law countries have the weakest investor protections and the least devel-oped capital markets.9.For example,strict,well-enforced laws that protect minority investors are more a feature of countries with common law traditions than those with civil law traditions.9Well-functioning legal and judicial systems limit insiders’private control benefits by making wealth expropriation legally riskier and more expensive(La Porta et al.[2000]),and shareholder litigation is a mechanism to enforce high-quality financial reporting in common law countries(Ball,Kothari,and Robin[2000]).indicate that earnings management influenced by control divergence is limited more in common law countries than in code law countries.10The stream of literature on cross-listing further shows that cross-listing in common law countries provides a credible commitment to higher-quality disclo-sure.For example,a U.S.cross-listing typically improves transparency by impos-ing disclosure requirements on firms that are more stringent than the disclosure requirements they face in their home country (e.g.,Coffee [1999,2002];Lang,Lins,and Miller [2003]).11As a consequence,firms listing on a U.S.exchange accept the consequence of being subject to an additional layer of monitoring by a variety of U.S.market intermediaries.12A firm’s willingness to be listed in markets with higher transparencies may be considered a signal to investors that the controlling owners will be less willing to exploit the minority owners’inter-ests (Doidge,Karolyi,and Stulz [2004]).In the same vein,companies with greater investments in common law countries are taking actions that render them less capable of exploiting minority investors and in turn are more likely to pro-vide accounting reporting of higher quality.In this paper,we expect,in the context of internationally diversified corpora-tions,that pervasiveness of earnings management declines when companies invest in a higher proportion of common law countries.Unlike the preceding research (Ball,Kothari,and Robin [2000];Leuz,Nanda,and Wysocki [2003];Haw et al.[2004]Leuz,Nanda,and Wysocki ),13where the focus is exclusively on the association between a firm’s financial reporting quality and the legal protection of its home country,this study further examines,in the context of corporate international diversification,the association between the earnings10.In addition to managers’behavior,the legal origin system also has an effect on analysts’forecast behavior.Analysts play an increasingly important role of monitoring managers’behavior in capital markets.Khanna,Palepu,and Chang (2000)and Hope (2003)indicate that in common law countries stronger enforcement of accounting standards and higher quality of accounting are associ-ated with higher analysts earnings forecast accuracy (Hope [2003]).11.For example,cross-listing subjects them to enforcement actions initiated by the U.S.Secur-ities and Exchange Commission,to class action lawsuits filed in the U.S.court,and to scrutiny from U.S.media and analysts.Furthermore,if they raise funds in the United States,these firms are sub-jected to monitoring by underwriters.12.The extant evidence documents that firms listed in countries with better investor protection or transparency (e.g.,United States)experience positive abnormal returns (Foerster and Karolyi[1999]),that they subsequently raise more capital after listing (Lins,Strickland,and Zenner [2005]),that their cost of capital is lower (Hail and Leuz [2004]),that estimates of private benefits of control are lower (Doidge,Karolyi,and Stulz,[2004]),and that firms are valued more highly (Doidge,Karolyi,and Stulz [2004]).13.Haw et al.(2004)found that there was less apparent earnings management by firms when the controlling owner had more voting than cash flow rights in countries where the legal code pro-vided more protection to investors than in countries where the legal code did not so protect the investors.Leuz,Nanda,and Wysocki (2003)found that earnings management was higher in countries where the legal system provided minority owners with fewer rights than in countries where the legal system provided minority owners with greater rights.This finding is consistent with Chin,Kleinman,Lee,and Lin (2006)in the context of the Taiwanese market.Finally,Ball,Kothari,and Robin (2000)reported that less timely and less conservative earnings reports tended to be issued in so-called civil law countries (called code countries by Ball,Kothari,and Robin [2000])than in common law countries.241INTERNATIONAL DIVERSIFICATION,OWNERSHIP STRUCTURE。
公司理财罗斯英文原书第九版第十七篇
$50
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17-9
Selfish Strategy 3: Milking the Property
Liquidating dividends
Suppose our firm paid out a $200 dividend to the shareholders. This leaves the firm insolvent, with nothing for the bondholders, but plenty for the former shareholders.
Define the costs associated with bankruptcy Understand the theoria firm carries
Tradeoff Signaling Agency Cost Pecking Order
Such tactics often violate bond indentures.
Increase perquisites to shareholders and/or management
17-10
17.3 Can Costs of Debt Be Reduced?
Protective Covenants Debt Consolidation:
17.3 Can Costs of Debt Be Reduced?
17.4 Integration of Tax Effects and Financial Distress Costs
17.5 Signaling
17.6 Shirking, Perquisites, and Bad Investments: A Note on Agency Cost of Equity
会计学原理英文课件 (7)
7-14
LO 2
Principles of Internal Control Activities
Question
The principles of internal control do not include:
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Internal Control
Question
Internal control is used in a business to enhance the accuracy and reliability of its accounting records and to:
a. safeguard its assets.
7-11
LO 2
Principles of Internal Control Activities
PHYSICAL CONTROLS
Illustration 7-2 Physical controls
7-12
LO 2
Principles of Internal Control Activities
b. prevent fraud.
c. produce correct financial statements.
d. deter employee dishonesty.
7-6
LO 1
Internal Control
Five Primary Components:
商业银行
19-14
Other Characteristics of the Target Firm to Examine
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McGraw-Hill/Irwin Bank Management and Financial Services, 7/e
• Mergers as a Device for Reducing • Mergers as a Device for Maximizing Competition • Management’s Welfare • Other Motives
The Most Important Goal of Any Merger Should Be to Increase the Market Value of the Surviving Firm.
Ownership structure and corporate performance【外文翻译】
外文翻译原文Ownership structure and corporate performanceMaterial Source:rlocatereconbaseAuthor :Harold Demsetz,Belen VillalongaAbstractThis paper investigates the relation between the ownership structure and the performance of corporations if ownership is made multi-dimensional and also is treated as an endogenous variable. To our knowledge, no prior study has treated the corporate control problem this way. We find no statistically significant relation between ownership structure and firm performance. This finding is consistent with the view that diffuse ownership, while it may exacerbate some agency problems, lso yields compensating advantages that generally offset such problems. Consequently, for data that reflect market-mediated ownership structures, no systematic relation between ownership structure and firm performance is to be expected. 2001 Elsevier Science B.V. All rights reserved.1.IntroductionThe connection between ownership structure and performance has been the subject of an important and ongoing debate in the corporate finance literature. The debate goes back to the Berle and Means(1932). thesis, which suggests that an inverse correlation should be observed between the diffuseness of shareholdings and firm performance. Their view has been challenged by Demsetz (1983),who argues that the ownership structure of a corporation should be thought of as an endogenous outcome of decisions that reflect the influence of shareholders and of trading on the market for shares. When owners of a privately held company decide to sell shares, and when shareholders of a publicly held corporation agree to a new secondary distribution, they are, in effect, deciding to alter the ownership structure of their firms and, with high probability, to make that structure more diffuse. Subsequent trading of shares will reflect the desire of potential and existing owners to change their ownership stakes in the firm. In the case of a corporate takeover, those who would be owners have a direct and dominating influence onthe firm’s ownership structure. In these ways, a firm’s ownership structure reflects decisions made by those who own or who would own shares. The ownership structure that emerges, whether concentrated or diffuse, ought to be influenced by the profit-maximizing interests of shareholders ,so that, as a result, there should be no systematic relation between variations in ownership structure and variations in firm performance.The empirical studies about the relation between both variables seem to have yielded conflicting results. Demsetz and Lehn (1985) provide evidence of the endogeneity of a firm’s ownership structure argued for by Demsetz (1983) and also assess the validity of the Berle and Means thesis: A linear regression of an accounting measure of profit rate on the fraction of shares owned by the five largest shareholding interests ?and on a set of control variables., in which ownership structure is treated as an endogenous variable, gives no evidence of a relation between profit rate and ownership concentration. Morck et al.?1988. ignore the endogeneity issue altogether and re-examine the relation between corporate ownership structure and performance. Like Demsetz and Lehn (1985), they find no significant relation in the linear regressions they estimate using Tobin’s Q and accounting profit rate as alternative measures of performance. However, they also estimate a piecewise linear regression of Tobin’s Q on insider ownership, and this does provide evidence of a non-monotonic relation. The estimated piecewise regression is positive for management holdings of shares between 0%and 5%of outstanding shares, negative for management holdings between 5%and 25%,and positive once more for management holdings greater than 25%.Other articles have followed the Morck et al.(1988)study. Included among these are McConnell and Servaes (1990),Hermalin and Weisbach (1988), Lodererand Martin(1997),Cho (1998),Himmelberg et al.（1999）,and Holderness et al.（1999）. Summary descriptions of these studies are provided in Appendix A. All rely chiefly on Tobin’s Q as a measure of firm performance, although a few also examine accounting profit rate, and all emphasize managerial shareholdings as a measure of ownership structure.Differences abound across these studies, in measurements and sample used, in estimating technique applied, in whether and how they account for the endogeneity of ownership structure, and in results obtained.Fig.1 shows the results of all the studies of firm performance and ownership structure that followedDemsetz and Lehn（1985）.We do not judge here which of these articles offer（s）. the most reliable guide.However,Fig.1 suggests that these studies, viewed in totality, do not give strong evidence by which to reject the belief that firmperformance and managerial equity ownership are unrelated.In Section 2,we analyze the conceptual issues surrounding each of the three main aspects that seem to explain the differences in results observed across studies: The measurements of firm performance, the measure of ownership structure used, and whether or not the endogeneity of ownership structure is taken into account in the estimation of the effect of ownership on performance. Our analysis suggests that none of the studies we examine treat ownership structure appropriately. It should be modeled not only as an endogenous variable but also, simultaneously, as an amalgam of shareholdings owned by persons with different interests. In particular, the fractions of shares owned by outside shareholders and by management should be measured separately. To our knowledge, no study to date incorporates both these aspects of ownership structure.3 Hence, a restudy of the ownership–performance relation seems needed.Our restudy fills this gap. It models ownership structure as an endogenous variable and it examines two dimensions of this structure likely to represent conflicting interests, the fraction of shares owned by management and the fraction of shares owned by the five largest shareholding interests. For the 223 firm sample examined here , the evidence supports the belief that ownership structure is endogenous but not the belief that ownership structure affects firm performance.These findings are consistent with the view that ownership structures, whether diffuse or concentrated, that maximize shareholder expected returns are those that emerge from the interplay of market forces.The following section discusses some of the conceptual issues that arise from an attempt to determine whether there is a relation between ownership structure and firm performance. Section 3 describes the data and variables we use in our empirical analysis. Section 4 reports and discusses our findings. Section 5 concludes.2.Conceptual issues in estimating the ownership–performance relation2.1.Firm performanceThe Demsetz and Lehn study used accounting profit rate to measure firm performance. All of the studies that followed used Tobin’s Q. There are two important respects in which these two measures differ. One is in time perspective, backward-looking for accounting profit rate and forward-looking for Q. In attempting to assess the effect of ownership structure on firm performance, is it more sensible to look at an estimate of what management has accomplished or atan estimate of what management will accomplish? The second difference is in who is actually measuring performance. For the accounting profit rate, this is the accountant constrained by standards set by his profession. For Q, this is primarily the community of investors constrained by their acumen, optimism, or pessimism. The proclivity of economists, most of whom have a better understanding of market constraints than of accounting constraints, is to favor Q. But caution is needed here. Accounting profit rate is not affected by the psychology of investors, and it only partially involves estimates of future events, mainly in the valuations it places on goodwill and depreciation. Tobin’s Q, however ,is buffeted by investor psychology pertaining to forecasts of a multitude of world events that include the outcomes of present business strategies.译文Ownership structure and corporate performance资料来源：rlocatereconbase作者：Harold Demsetz,Belen Villalonga摘要本文考察了当股权被视为内部变量由多层面组合时股权和企业业绩的关系。
Universal Hypothesis SLA
8. Similar grammatical categories (for example, noun, verb) are found in all languages. . 9. There are semantic universals, such as "male" or "female," "animate" or "human," found in every language in the world. . 10. Every language has a way of referring to past time, forming questions, issuing commands, and so on. .
de Valenzuela, 1998, pp. 125-6)
1. Wherever humans exist, language exists.
2. There are no "primitive" languages -- all languages are equally complex and equally capable of expressing any idea in the universe. The vocabulary of any language can be expanded to include new words for new concepts.
5. All human languages utilize a finite set of discrete(不连续的) sounds (or gestures) that are combined to form meaningful elements or words, which themselves form an infinite set of possible sentences. . 6. All grammars contain rules for the formation of words and sentences of a similar kind. . 7. Every spoken language includes discrete sound segments like p, n, or a, which can be defined by a finite set of sound properties or features. Every spoken language has a class of vowels and a class of consonants.