This paper examines the relation between the market reaction to primary seasoned equity offerings and alternative measures of the profitability of the issuing firm's growth opportunities. While the sample offerings display a positive relation between announcement period prediction errors and several ex ante measures of growth opportunities, this relation is not monotonic and appears to be driven by a small subset of younger, higher growth firms, whose announcement effects are insignificantly different from zero. For the remainder of the sample firms, there is no relation between the estimated profitability of new investment and the market reaction to announced equity offerings. Moreover, announcement effects are nonpositive regardless of how profitable investment opportunities are expected to be. These findings collectively suggest that investment opportunities play, at best, a minor role in explaining the cross-sectional distribution of equity offering announcement effects.

This paper compares the leveraged recapitalization of Kroger Co. with the leveraged buyout of Safeway Stores. While both transactions dramatically increased leverage, Safeway's also altered managerial ownership, board composition, and executive compensation, while Kroger's did not. My analysis suggests that these differences in organizational form lead to large differences in post-HLT restructuring actions and value creation. I conclude that the improved incentive structure and increased monitoring provided by the LBO specialist at Safeway lead managers to generate cash in a more productive manner than the organizational structure employed by Kroger.

By virtue of their ownership position, majority owner-managers appear to be less constrained than managers of firms with more diffuse ownership structures. Despite this, there is no evidence that majority-owned firms perform poorly and there is evidence that majority ownership is surviving as an organizational form. This implies that either these firms substitute other organizational constraints on managerial behavior or that majority control is efficient for some firms. Our analysis uncovers no evidence that majority owner-managers are constrained by other organizational mechanisms. We find that the choice of majority ownership is related to owner-specific rather than firm-specific characteristics. Approximately 80% of the sample majority-owned firms are either characterized by family involvement or are managed by the founder of the firm. Once this family/founder involvement in managing the firm diminishes, the firm is significantly less likely to be majority-controlled.

David J. Denis, Diane K. Denis, Atulya Sarin, The Information Content of Dividend Changes: Cash Flow Signaling, Overinvestment, and Dividend Clienteles, The Journal of Financial and Quantitative Analysis, Vol. 29, No. 4 (Dec., 1994), pp. 567-587

The authors investigate the relation between trading activity, the measurement of security returns, and the evolution of security prices by examining estimates of systematic risk surrounding equity offerings and share repurchases. In contrast to prior studies, they find no evidence of changes in systematic risk following either equity offerings or share repurchases after correcting for biases caused by infrequent trading and price adjustment delays. Moreover, changes in ordinary least squares beta estimates are significantly related to contemporaneous changes in trading activity. The authors' results have implications for studies interested in the properties of security returns, particularly those examining periods in which trading activity changes.

ABSTRACT We investigate the relation between trading activity, the measurement of security returns, and the evolution of security prices by examining estimates of systematic risk surrounding equity offerings and share repurchases. In contrast to prior studies, we find no evidence of changes in systematic risk following either equity offerings or share repurchases after correcting for biases caused by infrequent trading and price adjustment delays. Moreover, changes in ordinary least squares beta estimates are significantly related to contemporaneous changes in trading activity. Our results have implications for studies interested in the properties of security returns, particularly those examining periods in which trading activity changes.