The Times Mirror Company, a NYSE-listed Fortune 500 firm controlled for 100 years by the Chandler family, hired an industry outsider as CEO in 1995 following an extended period of poor operating and stock price performance under non-family management. This change was apparently an unintended consequence of actions taken by old management to fund its capital expansion plans while satisfying the family's desire for dividends. Specifically, in 1994 old management agreed to (1) sell TM's cable business and reinvest most of the $1.3 billion proceeds in new technology, and (2) maintain the Chandlers’ dividends while radically cutting those to minority stockholders. While Wall Street reacted favorably to the cable sale, it punished TM's stock when it later learned about management's reinvestment plans. Shortly thereafter TM's board brought in a noted financial disciplinarian, who as CEO substantially increased stockholder value by terminating low return investments and distributing free cash flow. While pressure to pay dividends and monitoring by large block stockholders ultimately improved TM's performance, the path to this outcome was slow and circuitous, so that these disciplinary forces were weaker than theory typically implies.

Pacific Lumber was acquired in 1986 by MAXXAM, whose decision to double PL's harvest of old-growth redwoods precipitated 11 years of environmental protests. Intense media coverage blames the Drexel-financed takeover for threatening Headwaters Forest, the largest privately owned ancient redwood forest. This ‘Wall Street greed’ portrayal aroused such public outrage that the Clinton administration agreed to pay $380 million for Headwaters weeks before the 1996 election. We establish that the threat to Head-waters is not attributable to MAXXAM's junk bond-financed takeover. Government's response to dramatic crises encourages interest groups to use emotional appeals to influence resource allocation.

This paper studies managerial compensation, financial reporting, and dividend policies of the seven major domestic steel producers during requests for union concessions. Substantial layoffs, reported losses, and sacrifices by nonunion stakeholders buttressed managers' case for union concessions. From 1980 to 1988, sample firms reduced their work force by about 300,000 (almost two-thirds) and annual wage payments from 16.1 to 8.6 billion. Reported income is lower during union negotiations, controlling for cash flows, as is managerial pay, with average CEO salary plus bonus declining 18%. Dividend reductions and white-collar pay cuts are substantial, pervasive, and clustered during union negotiations.

Analysis of 60 proxy contests for seats on the boards of exchange-listed firms during 1978–1985 shows that three years after the contest less than one-fifth of the sample firms remain independent, publicly held corporations run by the same management team. Proxy contests are typically followed by managerial resignations, even when dissidents fail to obtain a majority of board seats, and are often followed by sale or liquidation of the firm. The average stockholder wealth gains associated with proxy contests are largely attributable to gains by companies in which dissident activity leads to sale or liquidation.

Managers of firms with dual classes of common stock can choose different quantities of votes for a given cash flow interest by choosing different quantities of the two securities. We study managerial stock holdings in 45 dual class firms and find that vote ownership per se is an important motivation for these holdings in that corporate officers and their families hold a median 56.9% of the votes and 24.0% of the common stock cash flows. We also find significant family involvement in many sample firms, and document four case studies in which explicit acquisition premiums were paid for superior voting shares.

This paper presents evidence that stockholder wealth declines on average when managers respond to attempted hostile takeovers with defensive changes in asset and ownership structure. The data also indicate that these corporate restructurings are typically quite large and that many are attempts by managers to create barriers specific to the hostile bidder and /or to consolidate a block of voting securities in the hands of management allies. The evidence suggests that defensive motives (whether beneficial or harmful) influence corporate asset and ownership structure.

Many large corporations have recently adopted antitakeover charter amendments which make the transfer of corporate control more difficult. This paper develops and tests competing theoretical explanations for the passage of these amendments. In one view, antitakeover provisions are adopted because incumbent management seeks job protection at stockholders' expense. The alternative hypothesis is that antitakeover provisions benefit stockholders, perhaps by extracting greater payment in exchange for corporate control. Although inconclusive, the evidence provides weak preliminary support for the hypothesis that antitakeover amendments are best explained as a device for managerial entrenchment.

Standstill agreements are voluntary contracts which limit a substantial stockholder's ownership interest in a corporation for a specified number of years. They are often accompanied by repurchase of the substantial stockholder's shares at a premium above the market price. Standstills and premium buybacks reduce competition for corporate control and provide differential treatment of large block stockholders. The analysis indicates a statistically significant negative average effect on non-participating stockholder wealth associated with standstill agreements. Negotiated premium repurchases are also associated with negative, but less significant, stockholder returns. The evidence is inconsistent with the hypothesis that these management actions are in the best interests of non-participating stockholders.

In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large junk bond holdings, and both had experienced ‘bank runs’. FCLIC's run followed regulators' televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC's statutory capital — with junk bonds, real estate, and mortgages marked to market — was far from lowest among major insurers with California policyholders. It becomes lowest if junk bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the junk bond market's 21% return in early 1991). Our findings suggest a regulatory bias against junk bonds in the political backlash against the 1980s.

In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in junk bonds. During the junk bond market turmoil of 1989–1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50–60% in 1991–1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the junk bond decline. Seizure of FE's subsidiaries was defensible, although FE would have become solvent within a year, given average junk bond market appreciation.