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Managerial Opportunism (managerial + opportunism)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	100%

Selected Abstracts

Managerial Opportunism and Capital Structure Adjustments: Equity,for,debt Swap and Convertible Debt

INTERNATIONAL REVIEW OF FINANCE, Issue 1 2002
Nobuyuki IsagawaArticle first published online: 16 MAY 200
This paper shows how capital structure adjustments through an equity,for,debt swap and convertible debt can resolve the inefficiency caused by managerial opportunism. We consider a situation in which a corporate manager's investment decision is affected by the firm's debt level. Although both an equity,for,debt swap and convertible debt can induce the self,interested manager to undertake only value,increasing projects through capital structure adjustments, there exists a significant difference between these two financial instruments. An equity,for,debt swap, which requires the agreement of both shareholders and debt holders, can change a firm's debt level only prior to the manager's investment decision. On the other hand, convertible debt, which gives debt holders a unilateral right to convert, can change a firm's debt level even after the manager's investment decision. [source]

Managerial Opportunism during Corporate Litigation

THE JOURNAL OF FINANCE, Issue 4 2005
BRUCE HASLEM
ABSTRACT Using a large sample of litigation events involving publicly listed defendants, we document a surprising fact. The resolution of litigation through a court's decision dominates settlement of litigation from the shareholders' point of view, even when the firm loses. We develop a model using agency costs within the firm to explain why the market views settlement as a negative outcome on average and find empirical evidence supporting the implications of the model. Specifically, firms with weak corporate governance settle litigation more quickly, and the market reacts more negatively to settlements involving firms with higher agency costs. [source]

Managerial Opportunism and Capital Structure Adjustments: Equity,for,debt Swap and Convertible Debt

Debt Covenants and Accounting Conservatism

JOURNAL OF ACCOUNTING RESEARCH, Issue 1 2010
VALERI V. NIKOLAEV
ABSTRACT Using a sample of over 5,000 debt issues, I test whether firms with more extensive use of covenants in their public debt contracts exhibit timelier recognition of economic losses in accounting earnings. Covenants govern the transfer of decision-making and control rights from shareholders to bondholders when a company approaches financial distress and thereby limit managers' abilities to expropriate bondholder wealth. Covenants are expected to constrain managerial opportunism, however, only if the accounting system recognizes economic losses in earnings in a timely fashion. Thus, the demand for timely loss recognition should increase with a contract's reliance on covenants. Consistent with this conjecture, I find evidence that reliance on covenants in public debt contracts is positively associated with the degree of timely loss recognition. I also find evidence that the presence of prior private debt mitigates this relationship. [source]

Shareholder access to manager-biased courts and the monitoring/litigation trade-off

THE RAND JOURNAL OF ECONOMICS, Issue 2 2010
Sergey Stepanov
Facilitating access to courts for outside shareholders is often viewed as a remedy against managerial opportunism. My model shows that, when courts are biased toward managers, reducing the barriers to shareholder suits can lower efficiency because it can lead to either excessive litigation or excessive monitoring of managers by shareholders. The latter effect implies that easy shareholder litigation may lead to a greater use of substitute mechanisms of corporate governance rather than more reliance on the judiciary. I also show that easy shareholder access to manager-biased courts leads to the formation of more, rather than less, concentrated ownership structures. [source]