Essays on ownership structure and corporate *policies.
Item
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Title
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Essays on ownership structure and corporate *policies.
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Identifier
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AAI3024818
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identifier
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3024818
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Creator
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Moon, Doocheol.
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Contributor
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Adviser: Kishore Tandon
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Date
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2001
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Language
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English
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Publisher
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City University of New York.
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Subject
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Business Administration, Banking | Economics, Commerce-Business
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Abstract
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The first essay investigates the implications of the free cash flow hypothesis in corporate capital structure policy. It is hypothesized that associations between ownership structure and leverage vary with the extent of the overinvestment problem, which depends on growth opportunities and free cash flow. The results indicate that relations between ownership structure and leverage are stronger for low-growth firms and of the greatest significance for low-growth firms with large free cash flow. The results also suggest that firms with large free cash flow have higher levels of leverage, and firm size affects associations between ownership structure and leverage.;The second essay examines the effect of managerial ownership on the level and structure of firm investments. The results suggest that the presence of managerial risk aversion due to underdiversification affects the firm's investment policy. When capital expenditure and R&D expenditure are used as proxies for the level of firm investments, both firm investments first increase significantly as managerial ownership rises; however, levels of R&D expenditure decline as ownership increases further. The proportion of R&D expenditure to total firm investments, a measure of the firm's investment structure, first increases and then declines with managerial ownership. As their ownership rises, managers tend to spend less on R&D expenditure to decrease firm risk. Further tests to address the effect of the overinvestment problem on firm investments find that the subject of overinvestment may be capital expenditure and not R&D expenditure.;The third essay investigates the effect of growth opportunities on associations between managerial ownership and dividend payouts. It is hypothesized that substitutability between managerial ownership and dividend payouts is pronounced for low-growth firms. The results indicate that dividend payouts are negatively related with managerial ownership for low-growth firms, while there are no significant relations between dividend payouts and managerial ownership for highgrowth firms. The results also suggest that share repurchases, in addition to dividends, can control the overinvestment problem, and the disciplinary role of dividend payouts to restrain managerial expansionary tendencies is stronger for low-growth firms.
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Type
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dissertation
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Source
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PQT Legacy CUNY.xlsx
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degree
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Ph.D.
