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Equity Ownership and Performance pp 69–108Cite as

Model, Methodology and Data

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References

  1. See Demsetz/Lehn [1985], Jacquemin/De Ghellinck [1980], Kamerschen [1968], Kamerschen/Paul [1971], Larner [1966], Leech/Leahy [1991], McEachern [1975], Mehran [1995], Murali/Welch [1989], Pedersen/Thomsen [1999], Radice [1971], Round [1976], Stano [1976], Steer/Cable [1978], and Thonet/Poensgen [1979].

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  3. See Holderness et al. [1999], Hubbard/Palia [1995], Kole [1996], McConnell/Servaes [1990], Mørck et al. [1988], and Wruck [1989].

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  4. See Hubbard/Palia [1995], Mørck et al. [1988], Wruck [1989] and Holderness et al. [1999] with their 1935 sample.

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  5. Chen et al. [1993] and Cho [1998] change the threshold to 7% and 12% or 7% and 38% respectively.

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  6. See Mathiesen [2002, p. 33] and Kole [1995].

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  7. Examples for a squared variable are McConnell/Servaes [1990, 1995], and Short et al. [1994]. The third-degree polynomial is applied by Short/Keasey [1999, p. 86].

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  8. See Cho [1998, p. 111], Hermalin/Weisbach [1991, p. 107], Hubbard/Palia [1995, p. 788], Mørck et al. [1988, p. 298], and Wruck [1989, pp. 18–19].

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  9. Mørck et al. [1988] arrived at that turning points as a result of examining a variety of piecewise formulations. Their regression including the turning points of 5% and 25% provided the lowest sum of squared errors. Nevertheless, they note that the choice of 5% is motivated by the fact that this is the mandatory disclosure level of ownership interest (mandated by the SEC for their US sample) and also Herman [1981] presents a share of 5% as a non-negligible stake. The choice of the second turning point is motivated by the suggestion of Weston [1979] that directors’ ownership of 20%–30% prohibits a successful hostile takeover bid.

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  27. See Greene [1990, p. 632].

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  28. For a detailed comparison of the methods see Greene [1990, pp. 636–638]. See Zellner/Theil [1962] for a detailed explanation of the 3SLS method.

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  29. See Goldfeld/Quandt [1968, p. 118].

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  31. See Amemiya [1985, pp. 245–265]. In contrast, Hausman [1975] improved the instrumental variable approach. See Greene [1990, p. 630].

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  32. See Savvides [1998, p. 816]. It is an iterative method that minimizes a distance function of the form ε′[Σ−1H(H′H)−1H′] where ε is the (stacked) vector of residuals, Σ is a consistent estimate of the residual variance-covariance matrix, and H is the Kronecker product of an identity matrix of the order of the number of the equations and the matrix of instruments. Thus, the criterion for estimation is the sum of squared transformed residuals. For each observation, fitted residuals are formed as the fitted values from regression on instrumental variables. These are transformed by multiplying by the square root of the covariance matrix of the residuals. The contribution of the observation to the criterion is the sum of squared values of the transformed fitted residuals.

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  33. This limitation is quite common as many studies focus on one stock exchange, for example the New York Stock Exchange [McConnell/Servaes 1990], the Milan Stock Exchange [Zingales 1994] and the Stock Exchange of Singapore Main or Second Board [Mak/Li 2001].

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  34. 14 non-German companies were excluded in 2000 and 44 in 2003 respectively since national legal differences may bias the sample. The influence of a national effect was analyzed in several studies, for instance by Dyck/Zingales [2004], La Porta et al. [1997], and Pedersen/Thomsen [1999].

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  35. See Short/Keasey [1999, p. 88] with similar approach by Gugler et al. [2004].

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  36. See Hüls [1995, pp. 70–71] and Baetge et al. [1996].

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  37. See Mathiesen [2002, p. 37].

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  38. See La Porta et al. [1999, pp. 10–12]. For an example see Figure 2.2, p. 12.

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  39. A similar measure of the separation of ownership and control is used by Chapelle [2005].

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  40. Already Thonet/Poensgen [1979] use only the largest shareholder, also do Becht [1999], Becht/Röell [1999], Edwards/Nibler [2000], Edwards/Weichenrieder [2004], and Franks/Mayer [2001].

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  41. See Cubbin/Leech [1983, pp. 354–356], Leech [2001], and Boubaker [2003].

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  42. Edwards/ Weichenrieder [2004] also use a dummy variable, whereas Cubbin/Leech [1983] implement the share sizes of other shareholders within their measure.

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  43. This change was also made by Gugler et al. [2004, p. 18].

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  44. This practice modifies outliers by making them no more extreme than the most extreme data that is believed to be relevant or accurately measured. This method is for example applied by Demsetz/Villalonga [2001].

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  45. See Agrawal/Knoeber [1996], Bathala [1996], Bøhren/Ødegaard [2003], Chen/Ho [2000], Crutchley/Hansen [1989], Cui/Mak [2002], Demsetz/Villalonga [2001], Edwards/Weichenrieder [2004], Gugler et al. [2004], Himmelberg et al. [1999], Leech/Leahy [1991], Loderer/Martin [1997], Mak/Li [2001], McConnell/Muscarella [1985], McConnell/Servaes [1995], Mørck et al. [1988], Pedersen/Thomsen [1999], Short/Keasey [1999], Weber/Dudney [2003], and Witte [1981].

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  46. See Cui/Mak [2002], Himmelberg et al. [1999], Leech/Leahy [1991], and Mak/Li [2001].

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  47. Mathiesen [2002] applies a rule cutting values below € 100,000.

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  48. This relation is empirically supported by Bathala [1996], Bergström/Rydqvist [1990a], Crutchley/Hansen [1989], Demsetz/Lehn [1985], and Pedersen/Thomsen [1999].

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  49. See Bathala [1996, p. 133], Demsetz/Lehn [1985], Edwards/Weichenrieder [2004, p. 156], and Fama/Jensen [1983a].

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  50. See Bathala [1996, p. 133] and Crutchley/Hansen [1989, p. 41].

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  51. See Himmelberg et al. [1999, p. 364].

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  52. See Agrawal/Knoeber [1996, p. 383].

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  53. See Himmelberg et al. [1999, p. 364].

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  54. See Gugler et al. [2003b, p. 5].

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  55. See Jensen/Ruback [1983, p. 23], Gugler et al. [2003b, p. 6], and Pedersen/Thomsen [1998, pp. 391].

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  56. See Agrawal/Knoeber [1996], Agrawal/Nagarajan [1990], Anderson/Reeb [2003], Bathala/Moon [1994], Bøhren/Ødegaard [2003], Boubaker [2003], Brailsford et al. [2002], Brau [2002], Chen/Ho [2000], Cho [1998], Chowdhury/Geringer [2001], Crutchley/Hansen [1989], Cui/Mak [2002], Edwards/Weichenrieder [2004], Gedajlovic [1993], Gedajlovic/Shapiro [2002], Jensen et al. [1992], Jensen/Meckling [1976], Jensen/Warner [1988], Kim/Sorensen [1986], Leech/Leahy [1991], Leland/Pyle [1977], Lins [2003], Mathiesen [2002], McConnell/Servaes [1995], Monsen et al. [1968], Mørck et al. [1988], Prowse [1990], Schulze et al. [2003], Short/Keasey [1999], Short et al. [2002a], and Zhang [1998].

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  57. If applying the rule by Mathiesen [2002] (95%), no cases are detected.

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  58. See Bøhren/Ødegaard [2003, p. 5], Edwards/Weichenrieder [2004, p. 156], and Jensen [1986, p. 323].

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  59. See Jensen/Meckling [1976, p. 340].

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  60. See Bathala [1996, p. 131], Jensen/Meckling [1976, pp. 339–340], and Kim/Sorensen [1986, p. 141].

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  61. See Kim/Sorensen [1986, pp. 140–141].

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  62. See Bathala [1996, p. 131].

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  63. See Edwards/Weichenrieder [2004, pp. 155–156].

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  64. See Bathala [1996, p. 130], Gugler et al. [2003b, p. 7], and Jensen/Meckling [1976, pp. 334–337].

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  65. See Bathala [1996, p. 131], Byrd et al. [1998, p. 23], Edwards/Weichenrieder [2004, p. 156], Harris/Raviv [1991, p. 300], Jensen [1986, p. 323], and Kim/Sorensen [1986, pp. 140–141].

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  66. As far as firms can choose, they prefer internal over equity financing and equity over debt financing. See Myers/Majluf [1984] and Myers [1984].

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  67. Also included by Aggarwal/Samwick [2003], Amihud et al. [1990], Bathala [1996], Bøhren/Ødegaard [2003], Carney/Gedajlovic [2002], Chan et al. [1990], Cho [1998], Chowdhury/Geringer [2001], Demsetz/Lehn [1985], Farinha [2003], Fee [2002], Gugler et al. [2004], Hill/Snell [1989], Himmelberg et al. [1999], Jarrell/Poulsen [1988], Lang et al. [1991], Mathiesen [2002], McConnell/Muscarella [1985], Shin/Kim [2002], and Zhang [1998].

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  68. See Himmelberg et al. [1999, p. 365].

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  69. See Carney/Gedajlovic [2002, pp. 129–130] and Pedersen/Thomsen [1998, p. 392]. Similar results of a positive relation for Asian companies were found by Fukuyama [1995], Redding [1990, 1994], and Yoshihara [1988]. However, Hill [1995] and Redding [1994] originate this relation partly from the effect of weak appropriability regimes upon investment decisions.

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  70. See Himmelberg et al. [1999, p. 365].

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  71. See Bøhren/Ødegaard [2003, p. 11], Cho [1998, pp. 104–105], Chowdhury/Geringer [2001, p. 279], Demsetz/Lehn [1985, p. 1164], Hill/Snell [1989, p. 32], and Mathiesen [2002, 159]. Chan et al. [1990] and McConnell/Muscarella [1985] prove the positive effect by an increase in market value for announcements of increasing capital expenditures and decrease for reduction in capital expenditures.

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  72. Used by Agrawal/Nagarajan [1990], Carney/Gedajlovic [2002], Cho [1998], Cleary [2000], Lang et al. [1991], and Mathiesen [2002].

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  73. See Jensen [1988, p. 29 and p. 31].

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  74. See Agrawal/Nagarajan [1990, p. 1326] and Carney/Gedajlovic [2002, p. 132].

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  75. See Cleary [2000, pp. 221–222].

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  76. See Carney/Gedajlovic [2002], Cui/Mak [2002], and Himmelberg et al. [1999].

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  77. See Cui/Mak [2002, p. 323] and Himmelberg et al. [1999, p. 364].

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  78. See Carney/Gedajlovic [2002, p. 131].

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  79. See Cui/Mak [2002, p. 323].

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  80. See Bøhren/Ødegaard [2003], Edwards/Weichenrieder [2004], and Mathiesen [2002]. Other studies use the volatility. See Aggarwal/Samwick [2003], Agrawal/Knoeber [1996], Bathala [1996], Bathala/Moon [1994], Bøhren/Ødegaard [2003], Chang [2003], Cho [1998], Crutchley/Hansen [1989], Demsetz/Lehn [1985], Demsetz/Villalonga [2001], Himmelberg et al. [1999], Leech/Leahy [1991], Loderer/Martin [1997], Mak/Li [2001], and Pedersen/Thomsen [1999]. However, the volatility is not only used as risk proxy but also to control the noisiness of stock.

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  81. See Bathala [1996, p. 132], Pedersen/Thomsen [1998, p. 392], Pedersen/Thomsen [1999, p. 369], Mathiesen [2002, p. 164], Bøhren/Ødegaard [2003, pp. 10–11], Edwards/Weichenrieder [2004, p. 156].

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  82. See Bathala [1996], Bergström/Rydqvist [1990a], Chang [2003], Cho [1998], Cui/Mak [2002], Demsetz/Lehn [1985], Himmelberg et al. [1999], Leech/Leahy [1991], Mak/Li [2001].

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  83. The formula for the costs of equity is Ri = Rf + βi (RM − Rf), with Ri as the expected return, Rf as risk-free rate of return and the risk premium (RM − Rf). See Elton/Gruber [1995, p. 298–302]. For further information on the Capital Asset Pricing Model see Elton/Gruber [1995, pp. 294–404].

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  84. Further studies are Cubbin/Leech [1986], Cui/Mak [2002], Edwards/Weichenrieder [2004], McConnell/Servaes [1995], McEachern [1978], Nickell et al. [1997], Radice [1971], Schulze et al. [2003], Short/Keasey [1999], and Upton et al. [2003].

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  85. See Bathala [1996, p. 132] and Pedersen/Thomsen [1998, p. 392].

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  86. See Pedersen/Thomsen [1998, p. 392].

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  87. See Gugler et al. [2003b, p. 7]. For studies of the influence of career prospectives on managerial ownership and behavior see Gibbons/Murphy [1992]; for prestige effects see Jensen [1986] and Stulz [1990].

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  88. See Edwards/Weichenrieder [2004, p. 156].

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  89. See Aggarwal/Samwick [2003], Amihud/Lev [1999], Anderson [2000], Bathala [1996], Carney/Gedajlovic [2002], Carter et al. [2003], Chen/Ho [2000], Denis et al. [1997, 1999], Fox/Hamilton [1994], Hill/Snell [1989], Hyland/Diltz [2002], Jensen/Murphy [1990], Lane et al. [1998, 1999], Leech/Leahy [1991], Mak/Li [2001], McEachern/Romeo [1978], and Zhang [1998].

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  90. See Aggarwal/Samwick [2003, p. 74].

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  91. See Bertrand/Mullainathan [2001] and Jensen/Murphy [1990].

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  92. See Gibbons/Murphy [1992].

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  93. See Jensen [1986] and Stulz [1990].

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  94. See Shleifer/Vishny [1989].

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  95. See Amihud/Lev [1999, p. 1063], Bathala [1996, p. 131], and Crutchley/Hansen [1989, pp. 40–41].

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  96. See Aggarwal/Samwick [2003, p. 93 and p. 111], Berger/Ofek [1995], Comment/Jarrell [1995], Denis et al. [1997, p. 135], Lang/Stulz [1994], Liebeskind/Opler [1994], and Servaes [1996]. For the effects of risk on performance see Chapter 4.4.4.

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  97. See Chang [2003], Chen/Ho [2000], Mak/Li [2001], and Weber/Dudney [2003]. Other studies as Chang [2003], Leech/Leahy [1991], and Müller [1972] use the years passed since emission.

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  98. See Demsetz/Lehn [1985, p. 1161], Holderness et al. [1999, p. 461], Lenz [1981, p. 142], and Pedersen/Thomsen [1998, p. 392]. Further studies including industry dummies are Bøhren/Ødegaard [2003], Chen/Ho [2000], Cho [1998], Cleary [2000], Demsetz/Villalonga [2001], Elston et al. [2002], Fee [2002], Gugler et al. [2003b], Mørck et al. [1988], Pedersen/Thomsen [1998], and Steer/Cable [1978].

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  99. See Aggarwal/Samwick [2003], Ang/Cole [2000], Bøhren/Ødegaard [2003], Elston et al. [2002], Hermalin/Weisbach [1991], Himmelberg et al. [1999], Lehmann/Weigand [2000], Nickell et al. [1997], Palia/Lichtenberg [1999], and Short/Keasey [1999].

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(2007). Model, Methodology and Data. In: Equity Ownership and Performance. Contributions to Economics. Physica-Verlag HD. https://doi.org/10.1007/978-3-7908-1934-2_4

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