The Role of Managerial Incentive and Corporate Governance in Asset Restructuring

Download or read book The Role of Managerial Incentive and Corporate Governance in Asset Restructuring written by Chinmoy Ghosh and published by . This book was released on 2016 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the effect of corporate governance on equity carve-out decisions during the period of 1990 to 2014. Consistent with the notion that managerial incentives drive corporate decisions, we find that firms where the CEO and management have larger stock ownership are more likely to carve-out their subsidiaries. Larger firms with prior poor performance are also more likely to carve-out their divisions. Among equity carve-out parents, larger firms with higher profitability, higher managerial ownership and CEO incentive-based compensation tend to retain higher portions of their subsidiaries. We finally demonstrate that for wealth-enhancing strategic decisions such as equity carve-outs CEO tenure and classified board are negatively related to value, while outsider dominated boards are perceived positively by the investors. Our results offer new insights on the role of managerial incentive and corporate governance in asset restructuring.