UBC Theses and Dissertations
Three Essays in Finance Zhang, Feng
This dissertation contains three studies. Chapter 2 investigates interactions between antitakeover provisions and managerial ownership, two corporate governance mechanisms. Antitakeover provisions weaken the incentive effect of managerial ownership and magnify its entrenchment effect, and thus will decrease the effect of managerial ownership on firm value. I show that the value effect of managerial ownership crucially depends on the strength of antitakeover provisions. For firms with weak antitakeover provisions, managerial ownership enhances firm value, unless managers have very high ownership. For firms with strong antitakeover provisions, however, increasing managerial ownership always destroys firm value. Also, managerial ownership significantly decreases with the strength of antitakeover provisions. These findings support the hypotheses that antitakeover provisions decrease the value effect of managerial ownership and affect managers' compensation contract. Chapter 3 proposes a model to investigate the role of information precision in IPO pricing. The model shows that more precise information will exert more influence on the offer price. In strong support of the model, I find that the proportion of the industry return during the waiting period that is incorporated into the offer price increases with a proxy for precision of the industry return as a measure of the change in the IPO firm's value during the waiting period. This study enhances our understanding of the partial adjustment phenomenon: noisy information will be partially incorporated into the offer price. Chapter 4 shows that young male CEOs appear to be combative: they are four percent more likely to be acquisitive and, having initiated an acquisition, they are over 20 percent more likely to withdraw an offer. Furthermore, a young target male CEO is two percent more likely to force a bidder to resort to a tender offer. We argue that this combative nature is a result of testosterone levels that are higher in young males. Testosterone is a hormone associated with male dominance seeking. The acts of attempting or resisting an acquisition can be viewed as striving to achieve dominance. We argue that the evidence reported in this paper is consistent with the presence of a significant hormone effect in M&As.
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