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.

An annual loss is essentially a necessary condition for dividend reductions in firms with established earnings and dividend records: 50.9 percent of 167 NYSE firms with losses during 1980-85 reduced dividends, versus 1.0 percent of 440 firms without losses. As hypothesized by Merton H. Miller and Franco Modigliani, dividend reductions depend on whether earnings include unusual items that are likely to temporarily depress income. Dividend reductions are more likely given greater current losses, less negative unusual items, and more persistent earnings difficulties. Dividend policy has information content in that knowledge that a firm has reduced dividends improves the ability of current earnings to predict future earnings.

This paper studies the dividend policy adjustments of 80 NYSE firms to protracted financial distress as evidenced by multiple losses during 1980–1985. Almost all sample firms reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent binding debt covenants, dividends are cut more often than omitted, suggesting that managerial reluctance is to the omission and not simply the reduction of dividends. Moreover, managers of firms with long dividend histories appear particularly reluctant to omit dividends. Finally, some dividend reductions seem strategically motivated, e.g., designed to enhance the firm's bargaining position with organized labor.

This paper studies the dividend policy adjustments of 80 NYSE firms to protracted financial distress as evidenced by multiple losses during 1980–1985. Almost all sample firms reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent binding debt covenants, dividends are cut more often than omitted, suggesting that managerial reluctance is to the omission and not simply the reduction of dividends. Moreover, managers of firms with long dividend histories appear particularly reluctant to omit dividends. Finally, some dividend reductions seem strategically motivated, e.g., designed to enhance the firm's bargaining position with organized labor.

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.