À繫¿¬±¸ Á¦ ±Ç È£ (2019³â 5¿ù)
Asian Review of Financial Research, Vol., No..
pp.1143~1185
pp.1143~1185
Does diversification of share classes increase firm value?
Sojung Kim Korea University Business School
Sunwoo Hwang UNC Kenan-Flagler Business School
Woochan Kim Professor of Finance, Korea University Business School; Research Associate, European
Firms can issue stocks classified in many ways, including in terms of voting rights, dividend rights, redemption rights, and conversion rights. This study investigates the desirability of giving firms greater freedom to choose their share classes. Using the 2011 Commercial Act amendment that significantly relaxed regulation over share classes in Korea, we study the motivation behind and effect of adopting two newly emergent classes: preferred stocks convertible to voting stocks at the discretion of management and preferred stocks redeemable at the discretion of investors. We find that firms adopt the former for managerial entrenchment purposes and destroy firm value by doing so, while firms adopt the latter in times of financial distress but fail to arrest the decline in firm value by doing so.
Sojung Kim
Sunwoo Hwang
Woochan Kim
Firms can issue stocks classified in many ways, including in terms of voting rights, dividend rights, redemption rights, and conversion rights. This study investigates the desirability of giving firms greater freedom to choose their share classes. Using the 2011 Commercial Act amendment that significantly relaxed regulation over share classes in Korea, we study the motivation behind and effect of adopting two newly emergent classes: preferred stocks convertible to voting stocks at the discretion of management and preferred stocks redeemable at the discretion of investors. We find that firms adopt the former for managerial entrenchment purposes and destroy firm value by doing so, while firms adopt the latter in times of financial distress but fail to arrest the decline in firm value by doing so.
[ 07327 ] 67-8, Yeouinaru-ro, Yeongdeungpo-gu, Seoul, Korea TEL. +82-2-2003-9921 FAX. +82-2-2003-9979 E-mail. office@korfin.org COPYRIGHT(C) SINCE 1987 KOREAN FINANCE ASSOCIATION. All rights reserved.