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The effects of a proxy contest for control on a company are examined in this paper over a short, intermediate and long‐term post‐contest period of time. Major findings are as follows. First, compared to a non‐contest matchinggroup of firms, proxy contest for control firms as a whole are poor performers in the immediate post‐contest period. Successful contest firms, however, tend to improve performance whereas unsuccessful ones tend to deteriorate in the short‐term. Second, contest outcome does not appear to affect survivability over either the intermediate or long term. However, over the intermediate term, unsuccessful contest firms more often suffer losses and are acquired, and are less often involved in divestiture and expansion activities. Finally, in the long term, successful contest firms show a higher incidence of bank‐ruptcy and are more likely to engage in a name change.

The purpose of this paper is to investigate the influence of capital structure changes by target firms on the outcome and ex post performance of firms targeted by proxy contests.

The influence is examined by using predictions of control‐driven model developed by Harris and Raviv and signaling theory of debt in capital structure.

The results are consistent with the predictions of both control‐driven model and signaling theory. Significant differences are found between two groups of target firms – management victory targets and dissident victory targets. Specifically: management victory targets feature proxy contests that are accompanied by leverage increasing changes in target firms' capital structure; the same group also realizes better long‐run stock performance compared to dissident victory targets; and the long‐run abnormal stock performance of management victory targets is significantly positively related to the increases in leverage in the capital structure during proxy contest period.

This paper is the first to directly address the relationship between leverage change and the outcome and long‐run performance of proxy contest targets, thus confirming both the defensive and the signaling role of debt on firm's capital structure decision.

This paper reviews the theoretical and empirical contributions to the proxy contest literature. The theoretical work, to date, suggests that (1) the use of the proxy contest as a method of taking over a corporation depends on its cost relative to the tender offer; (2) the security voting structure and the debt/equity ratio influence the outcome of the proxy contest; and, (3) the value of a proxy contest can be estimated using the principles of option pricing theory. A review of empirical research indicates that (1) firms which are inefficiently managed are more likely to become the target of a proxy fight; (2) wealth gains accrue to shareholders of contested firms during the contest period; and, (3) incumbent management is more likely to succeed in a proxy fight but not necessarily ‘win’.

In reviewing proxy contests and tender offers of the past, the author concludes that the former has been inferior as a form of corporate conflict mechanism to the latter. However, he also underscores the important role that the proxy contest has played in the development of its competitor — the tender offer.

The study examines how blockholding, blockholding nationality and multiple blockholder structures (MBS) are related to agency cost in Nigeria.

Data sourced from the annual reports of 84 non-financial services firms listed on the Nigerian Stock Exchange (NSE) from January 1, 2008, to December 31, 2015, were analyzed using the hybrid model in Stata 15.

Blockholding showed a significant negative relationship with the expense ratio (ER) measure of agency cost at the between-firm level but not significantly related to asset utilization ratio (AUR). This result was driven more by foreign blockholding and concentration of control, which were negatively and significantly related to the ER. Concentration of control is negatively related to the AUR. Domestic blockholding and the number of blockholders were not significantly related to agency cost. Foreign-blockholder-firms had a significantly greater concentration of control (lesser contest for control) than domestic-blockholder-firms.

The findings suggest that foreign blockholding would be more effective in controlling agency costs in Nigeria. While the concentration of control (lesser contest for control) appears to be an efficient governance mechanism for reducing agency costs associated with expenses in Nigeria, it seems to exacerbate agency costs associated with asset utilization.

Previous researchers have not studied how foreign and domestic blockholding are related to agency cost. They also have not studied how MBS and the contest for control are related to agency cost and explain differences in the foreign/domestic blockholding-agency cost relationships in the Nigerian context.

This study investigates patterns of violence employed by insurgents killing civilians living in small ethnic enclaves located in Ninewa Province, Iraq from 2003 to 2009. The ethnic minorities in these communities include: (1) Yazidis in Sinjar District, (2) Chaldo-Assyrian Christians in the Ninewa Plains and, (3) the Turkmen enclave of Tal Afar. To date, there has been little investigation into violence directed toward small ethnic enclaves during civil war, though some have suggested that ethnic enclaves might insulate civilians from violence (Kaufmann, 1996). Using fatality data from the Iraq Body Count, this study compares the patterns of insurgent violence directed toward these enclave communities to co-ethnic and mixed-ethnic communities. The experiences of the enclaves were varied – some were largely insulated from attacks – but when attacked, the average number killed was greater and more indiscriminate as compared to communities with significant Arab populations. One possible explanation for these differences is that insurgents did not regard these citizens as being “convertible,” which caused them to employ violence in a more indiscriminate manner. When insurgents did act to secure control of enclave communities, they used indiscriminate forms of violence against civilians, as compared to more selective forms of violence employed when controlling co-ethnic communities.

This chapter explores the advantages (for large investors) of directly owning productive assets, compared with indirect ownership through stock in corporations. Significant factors are agency costs and recent changes in the tax and regulatory environment. Recent corporate scandals have led to legislative and regulatory responses that significantly increase the monitoring costs and other burdens of becoming or remaining a public corporation. As a result, there has been a substantial increase in going-private transactions, particularly among smaller public companies. Acquisitions and minority equity positions that allow large corporations to join with smaller companies have also increased. The pressures to go private are not entirely new, however. This chapter, reflecting collaboration by professors of finance and business law, traces the legal concept that the corporation is an entity separate and apart from its owners, showing how the legal status of corporations hinders resolution of conflicts among the parties to the enterprise. Thus, there have long been fundamental flaws inherent in the corporation as the form of organization for certain activities. The current wave of Sarbanes–Oxley restructuring via private equity firms is part of a significant increase in direct ownership of major assets by institutional investors. Direct ownership prevents management expropriation of resources, and is preferable to corporate ownership whenever other alternatives for indemnification or liability limitation are available (such as insurance, limited partnerships, limited liability companies, etc.). Finally, the renewal of direct ownership is not a radical shift, but a return to long-established tradition in the organization of business activities.

The publication of the Turnbull guidance represented a radical redefinition of the nature of internal control as a feature of corporate governance in the UK, explicitly aligning internal control with risk management. This paper explores this change, using sociological perspectives on risk and its conceptualisation to frame the debate about internal control and risk management within the UK corporate governance arena – the most recent manifestation of an ongoing competition for the control of economic and social resources. The paper demonstrates that developments in corporate governance reporting requirements offer opportunities for the appropriation of risk and its management by groups wishing to advance their own interests. This is illustrated by a review of recent changes in internal audit.

This paper explores the advantages (for large investors) of directly owning productive assets, compared with indirect ownership through stock in corporations. Significant factors are agency costs and recent changes in the tax and regulatory environment. Recent corporate scandals have led to legislative and regulatory responses that significantly increase the monitoring costs and other burdens of becoming or remaining a public corporation. As a result, there has been a substantial increase in going-private transactions, particularly among smaller public companies. However, the pressures to go private are not entirely new. We trace the legal concept that the corporation is an entity separate and apart from its owners, showing how the legal status of corporations hinders resolution of conflicts among the parties to the enterprise. Thus, there have long been fundamental flaws inherent in the corporation as the form of organization for certain activities. Direct ownership of major assets by investors prevents future expropriation of resources, and is preferable to corporate ownership whenever other alternatives for indemnification or liability limitation are available (such as insurance, limited partnerships, limited liability companies, etc.). Finally, the renewal of direct ownership is not a radical shift, but a return to long-established tradition in the organization of business activities.

At three o'clock in the morning on September 10, 2001, Thierry Hautillac, a risk arbitrageur, learns of the final agreement between Pinault-Printemps-Redoute SA (“PPR”) and LVMH Moët Hennessy Louis Vuitton SA (“LVMH”). After a contest for control of Gucci lasting over two years, PPR has emerged as the winner. PPR and LVMH have agreed for PPR to buy about half of LVMH's stock in Gucci for $94 per share, for Gucci to pay an extraordinary dividend of $7 per share, and for PPR to give a two and a half year put option with a strike price of $101.50 to the public shareholders in Gucci. The primary task for the student in this case is to recommend a course of action for Hautillac: should he sell his 2% holding of Gucci shares when the market opens, continue to hold his shares, or buy more shares? The student must estimate the risky arbitrage returns from each of these choices. As a basis for this decision, the student must value the terms of payment and consider what the Gucci stock price will do upon the market's open. The student must determine the intrinsic value of Gucci using a DCF model as well as information on peer firms and transactions. The student must consider potential synergies between Gucci and PPR and between Gucci and LVMH. The student must assess the likelihood of a higher bid, using analysis of price changes at earlier events in the contest for clues.