This research links together disparate literature on family and nonfamily firms, large and small firms, and risk for small firms. The literature is not coherent in one theme: whether family firms operate with greater risk relative to nonfamily firms. Yet the literature finds performance advantage to family firms without an explanation of why family firms on average generate better accounting returns and values relative to nonfamily firms other than for reduced agency costs translated into value. The first essay examines two measures of risk--debt ratio and idiosyncratic risk--of small publicly held family firms relative to nonfamily firms to investigate differences in financial risk between them. Using a unique hand-collected data set of small family and nonfamily firms, I analyze certain firm characteristics (family ownership, family member on the board, size, and dual class status) and find that family and nonfamily firms do not differ in their book-based debt ratios but do differ in their market-based debt ratios. Specifically, I find that family firms that tightly control voting rights through dual class status have higher debt ratios and hence have higher risk than nonfamily firms. Furthermore, I find a positive relation between idiosyncratic risk and family ownership, and I find as the percentage of family ownership increases idiosyncratic risk increases. The second essay utilizes the likelihood of incentive compensation presence and incentive compensation ratio of small publicly held family firms relative to nonfamily firms to investigate differences in CEO dividends and incentive compensation. The tools available for boards of directors to incentivize CEOs to act in accordance with diverse shareholder wishes, including risk-taking, investment selection, and the on-the-job consumption of resources, are stock options, stock grants, and cash bonuses. I argue that agency theory in practice is imperfect in incentive contracting. Specifically, CEO dividends and family ownership reduce the likelihood of the existence of an incentive compensation plan. I find in the presence of CEO dividends that family and nonfamily firms differ in their incentive compensation ratios and the likelihood of incentive compensation. In my sample, I find a significant negative relation between the CEO dividend income ratio and the incentive compensation ratio and between family ownership percentage and the incentive compensation ratio. Lastly, consistent with current literature, I find that growth opportunities positively influence both family and nonfamily firms' incentive compensation ratios.

京都大学 / 0048 / 新制・課程博士 / 博士(地域研究) / 甲第22674号 / 地博第276号 / 新制||地||105(附属図書館) / 京都大学大学院アジア・アフリカ地域研究研究科東南アジア地域研究専攻 / (主査)教授 三重野 文晴, 教授 高橋 基樹, 准教授 町北 朋洋 / 学位規則第4条第1項該当 / Doctor of Area Studies / Kyoto University / DGAM

This study examines the effects of 2007/8 financial crisis on capital structure determinants of Johannesburg Stock Exchange (JSE) listed companies in South Africa. Data extracted from INET BFA Expert database was analyzed using regression models on the correlation between the leverage and company size, growth, profitability, tangibility, liquidity, non-debt tax shield along with Ordinary Least Squares based on the sample of JSE listed companies for the period of 2004 to 2013. The study examined two industries namely, Real estate and Retail industry. The results show that size, tangibility, profitability and liquidity have significant impact on the capital structure before, during and after financial crisis. Growth results were inconsistent over the period under review, and non-debt tax shield was found to be statistically insignificant. The study also shows that the 2007/8 had statistical significance on the capital structure of the listed companies in South Africa.

This research project set out to determine whether there is a relationship between the observed leverage levels of South African companies, their profitability, earnings volatility and the probability of financial distress. The relevant body of knowledge against which to execute this research project is known as capital structure theory. Capital structure theory deals with the way in which firms finance themselves. It is concerned with the relationship between the structure of debt, equity and hybrid securities found on the right hand side of the firm’s balance sheet. It is believed that the 2007/8 global financial crisis offers researchers a unique opportunity to gain insight into how the observed leverage levels of firms and their earnings volatility interact to form their probability of financial distress. This area of research is of particular interest since it is commonly believed and frequently stated that South African firms are underleveraged and secondly because there is contrarian research beginning to be published indicating that firms with very little or no debt (commonly referred to as lazy balance sheets) are outperforming their more indebted peers and are being rewarded by investors for their prudence. Copyright / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

Includes bibliographical references / This paper investigates the impact of firm size and industry on the capital structure of listed South African firms. It uses data obtained from firms listed on the Johannesburg Stock Exchange and tests trade-off theory and pecking order theory for firms of various sizes, firms in different industries and also tests for differences between debt maturities. Multiple fixed effect models are used to firstly test for the main factors that impact capital structure and secondly to test which sources of capital are preferred to finance a change in assets. The analysis shows that firms of different sizes and firms that operate in different industries choose their capital structure in various ways. Larger firms are more highly geared debt more than small firms and smaller firms prefer to use internally generated funds. The two main capital structure theories, trade-off and pecking order, do not explain the difference in behaviour adequately. The paper also finds that similar factors impact both long-term and short-term debt.

This thesis explores three important topics spanning international asset pricing, empirical capital structure, U.S. politics, and corporate law: relationship-specific investment (RSI), contracting environment and financial performance; RSI, contracting environment and the choice of capital structure; and political value and SEC enforcement actions. Firms that engage in long-term bilateral relationships with their buyers or suppliers are usually required to make relationship-specific investments. We examine how the values of these long-term specific investments are affected by the quality of governmental contract enforcement. We find that firms in relationship-specific industries have higher valuations, measured by Tobin’s Q, when their countries of origin are able to strongly enforce contractual agreements. Our finding is robust to a variety of empirical specifications and regression methods. We also show that as legal quality improves, firms with relationship-specific investments exhibit lower operating performance, presumably due to risk or in order to motivate further investments from their stakeholders. Further analysis of the cross-section of stock returns supports a risk-based explanation. Firms in long-term bilateral relationships with their customers or suppliers are required to make relationship-specific investments in the form of physical equipment, human resources, specific production sites, or brand names. These dedicated assets are usually tied to a particular use or relationship and cannot be redeployed if the firm is liquidated. In the absence of legal enforcement, firms are required to limit their use of debt financing and, consequently, signal a reduced default risk to encourage investment by their contracting parties. Using a sample of 143,278 firm-year observations, and measures of industry-level relationship-specificity and the quality of legal enforcement across 57 countries, we find strong evidence that good quality contract enforcement mitigates the negative association between relationship-specificity and debt financing. The Securities and Exchange Commission (SEC) plays a central role in investigating potential violations of securities laws and initiating enforcement actions in the United States. We examine the association between political culture and political connections and the penalties imposed at the end of SEC enforcement actions. Our analysis is based on two key ideas. First, the political culture of a firm indicates its ethical boundaries and explains the propensity of misconduct across different domains, such as securities laws. Second, political connections signal a firm’s willingness to challenge SEC’s enforcement decisions. We find that the individual defendants associated with Republican firms are less likely to receive a bar or suspension penalty. This finding supports the notion that Republican managers are less likely to commit securities fraud since the Republican ideology stresses market discipline. Moreover, in line with prior research, our results show that political connections and firm size, as a proxy for bargaining power, also reduce penalties imposed in SEC enforcement actions. / Thesis / Doctor of Philosophy (PhD)

In research, there has been conflicting theory and evidence about the relation between creditor rights and corporate leverage. On the one hand, the supply-side view states that stronger creditor rights lead to an increased supply of credit and hence, corporate leverage increases. On the other hand, the demand-side view shows that in response to better protected creditors, managers choose to follow low-risk strategies and reduce leverage. The goal of this thesis is to develop a better understanding of the relation between creditor rights and corporate leverage. This work contributes to this stream of literature by using a large sample including 508,376 firm-years from 46,481 unique firms located in 55 countries from 1980 to 2017. The results of this thesis show that demand-side forces dominate supply-side forces as stronger creditor rights lead to a reduction of corporate leverage. Moreover, a crises variable is added as a moderator to investigate how firms change their response to creditor rights during crises. However, the results for this interaction are insignificant and hence, firms do not seem to adopt their leverage levels in response to creditor rights during crises compared to normal times.

Some firms allow their CEO to hold the position of Chair of the Board of Directors while other firms choose to split those two positions between two different individuals. This dissertation first examines whether agency control mechanisms, agency problems, and other firm characteristics are related to the observed choice of one or two individuals in the two positions. The empirical research is based on the hypothesis that having the positions split between two individuals is a means of controlling agency problems when used in concert with (either as a substitute for or as a complement to) other mechanisms for controlling agency problems. Firms are thus viewed as evaluating the costs and benefits of split positions as well as of other agency control mechanisms. They choose the most cost effective means of addressing the problems they face. If split positions are more cost effective, then the firm should choose to split positions other things equal. The very high predictive power of the estimated logistic model confirms the hypothesis that the probability of choosing split positions is related to control mechanisms and agency problems as well as to size and other factors. Some agency control mechanisms perform as complementary agency control mechanisms and some as substitutes for split positions. The results suggest that firms with higher agency costs of debt and equity are more likely to have chosen to split positions. The results are thus consistent with the view of the choice of split positions as a means of managing agency problems in concert with other mechanisms in an integrative decision framework. The second part of the dissertation examines the linkage between the CEO-Chair choice and the performance of the company (as measured by returns or operating efficiency). Shareholder activists argue that poor performance results when the CEO serves simultaneously as the Chair of the Board of Directors, so called "CEO duality." This dissertation examines whether firms that split these positions experience higher accounting performance than firms that do not split the positions. Several hypotheses are tested regarding the effects on firms with split positions. The empirical model indicates that firms that have split positions exhibit, on average, no lower or higher performance than other firms after integrating into the model industry effects, the role of other agency control mechanisms, the size of agency problems, and other firm characteristics. This is consistent with an irrelevance hypothesis as well as with the possibility that firms choose their policies optimally once other factors are accounted for. However, the firms with split positions do exhibit a different relationship between information asymmetry and performance as well as between other agency control mechanisms and performance. The use of agency control mechanisms, for example as measured by the proportion of the firm held by institutional investors, have a greater effect on performance for non-split than for split firms. Overall the results support the notion that firm and management characteristics (such as the level of agency problems, information asymmetry, ownership structure, and the existence of other agency control mechanisms) influence the choice to split positions and influence the role and effectiveness of split positions. The vast majority of firms' choice can be predicted by using such characteristics in an integrated model of the decision. The results imply that the benefits of split positions may be firm specific, that split positions are only appropriate for some firms, and that a net benefit will not be captured by all firms that simply enact a policy of split positions independent of their fundamental characteristics. / Ph. D.

A central question in corporate finance has been about the optimal balance between both debt and equity financing when trying to determine the optimal capital structure of a new or existing firm. In this thesis, I investigate how the capital structure of the parent and carve-out company evolve following the carve-out itself. This investigation is a direct extension of Dittmar's (2004) work and contributes to the literature on the choice of a carve-out or spin-off. This leverage choice may be influenced by the parent corporation's need for cash, either to finance growth opportunities, to distribute cash to shareholders, or to repay debt (Michaely & Shaw, 1995). Using a sample of 102 subsidiaries that have completed a carve-out between the years of 1985 and 2001 , I find that carve-outs do not have higher debt levels than spinoffs as reported in Dittmar's (2004) study. I also find that the parent firms ' leverage does not decrease as predicted. Leverage actually increases during the three years following the carve-out. I have also found that cash constraints, collateral value, and the parent firms ' pre-debt level are positively related to leverage choice while the parent firms' precarve- out cash constraint is negatively correlated. However, there is no significance between leverage and firm size, growth opportunities, or profitability.

Since the publication of Modigliani and Millers original theorem on capital structure, researchers have tried to find explanations to firms’ capital structure decision. The literature has been rather ambiguous, and the two main fields of thought is the predictions of the trade-off theory and the pecking order theory. Previous research finds empirical evidence supporting both theories, which is why the subject is an interesting field for further research. The literature on capital structure in a Swedish context is limited and could therefore benefit from further research in a time plagued by the adverse economic setting which is due to the covid pandemic. That is why this study’s aim were to examine the potential effects the pandemic had on firms’ capital structure decision. The study tests the effects on firms’ total leverage ratio as well as the effects on different debt maturities by including long- and short-term leverage ratios. Due to the characteristics of the pandemic the study aims to show the industry specific effects as well. We adopted a positivistic research paradigm when conducting this quantitative study with a deductive research approach. When collecting data, Refinitiv Eikon provided us with a population of 914 publicly traded Swedish firms. Due to data drop off the final sample that was used in the statistical analysis amounted to 450 firms, which were deemed to be sufficient to provide generalizable results for the population.  This study was unsuccessful in proving that the pandemic had any significant effect on public Swedish firms’ capital structure in any of the leverage ratios. We can however prove that the pandemic had a significant effect on individual industry’s capital structure. This thesis can also provide evidence that Swedish firms to some extent follow the pecking order theory. Our results suggest that firms deleverage as they grow, which is in line with said theory. On industry level we find proof for both the trade-off theory and pecking order theory, indicating that certain industries are affected differently depending on specific characteristics of their operations. We find evidence of both theories when assessing the profitability of firms. These ambiguous results could motivate further research on the subject in a Swedish context.