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The effect of changes in ownership structure on performance: Evidence from the thrift industry1We thank George Aragon, Ben Branch, Benjamin Esty (the referee), Mark Flannery, Alvin Harrell, Clifford G. Holderness, Edith Hotchkiss, Michael Jensen, Edward J. Kane, Donald May, Marcia Millon Cornett, Manju Puri, G. William Schwert (the editor), Henri Servaes, Robert Taggert, Hassan Tehranian, Thomas Vartanian, William Wilhelm, Julie Williams, and seminar participants at Boston University, the Federal Trade Commission in Washington, DC, Suffolk University, University of Massachusetts at Amherst, and Columbia University for helpful discussion of this study. Earlier versions of this paper were presented at the 1995 Annual Meetings of both the Western Finance Association and the Financial Management Association, and at the 1996 Annual Meeting of the American Finance Association.1

Rebel A. Cole; Hamid Mehran
Journal of Financial Economics 1998 50(3), 291-317
Restrictions on stock ownership may harm a company's performance, because restrictions prevent owners from choosing an optimal structure. We examine the stock-price performance and ownership structure of a sample of thrift institutions that converted from mutual to stock ownership. We find that after conversion and the expiration of ownership-structure restrictions, firm performance improves significantly, and the portions of the firm owned by managers and the firm's employee stock ownership plan increase. Changes in performance are positively associated with changes in ownership by managers, but negatively associated with changes in ownership by employee stock ownership plans.

CEO incentive plans and corporate liquidation policy1The authors would like to acknowledge the helpful comments of Annup Agrawal, Ravi Anshuman, Betty Strock Bagnani, Jeffrey Cohen, Rebel Cole, Dennis Hanno, Clifford Holderness, Gerald Holtz, Edith Hotchkiss, Kenneth Lehn, Gil Manzon, Morris McInnes, Anil Makhija, Krish Menon, Kevin Murphy (the referee), Laurie Pant, G. William Schwert (the editor), Billy Soo, Robert Taggart, Hassan Tehranian, Sheridan Titman, Paula Varson, Justin Wood, participants in the accounting workshop at Boston College, and John Schatzberg for providing a list of liquidating firms in his sample. An earlier version of this paper, `Executive stock options and ownership, taxes, and corporate liquidation policy,' was presented at the Financial Management Association Meetings in October 1991 and at the Association of Managerial Economists in January 1992.1

Hamid Mehran; George E. Nogler; Kenneth B. Schwartz
Journal of Financial Economics 1998 50(3), 319-349
To investigate CEOs' incentives to liquidate their firms, we examine the effects of insider ownership and compensation in stock options on 30 voluntary liquidation decisions by industrial firms in the period 1975–1986. We find that liquidation decisions are influenced by CEO incentive plans and increase shareholder value. Firms with more outside board members, smaller market-to-book ratios, and attempts by outsiders to gain control are more likely to be liquidated. Although few top executives of liquidating firms subsequently take comparable jobs, at least 41% of CEOs who downsize are made better off by liquidation.

Are Financial Markets Overly Optimistic about the Prospects of Firms That Issue Equity? Evidence from Voluntary versus Involuntary Equity Issuances by Banks

Marcia Millon Cornett; Hamid Mehran; Hassan Tehranian
Journal of Finance 1998 53(6), 2139-2159
This paper examines firm performance around announcements of common stock issues. We study the banking industry in which some stock issues are made voluntarily by managers, and other issues are involuntary. We find that banks that voluntarily issue common stock experience a significant drop in the matched adjusted operating performance following the issue, a significant drop in benchmark firms' adjusted stock prices following the issue, and systematically negative market reactions to post-issue quarterly earnings announcements. Banks that issue common stock involuntarily experience values for these measures that are not significantly different from those of the benchmark firm(s).

Are Financial Markets Overly Optimistic about the Prospects of Firms That Issue Equity? Evidence from Voluntary versus Involuntary Equity Issuances by Banks

Marcia Millon Cornett; Hamid Mehran; Hassan Tehranian
Journal of Finance 1998 53(6), 2139-2159
This paper examines firm performance around announcements of common stock issues. We study the banking industry in which some stock issues are made voluntarily by managers, and other issues are involuntary. We find that banks that voluntarily issue common stock experience a significant drop in the matched adjusted operating performance following the issue, a significant drop in benchmark firms' adjusted stock prices following the issue, and systematically negative market reactions to post‐issue quarterly earnings announcements. Banks that issue common stock involuntarily experience values for these measures that are not significantly different from those of the benchmark firm(s).