Financial Analysis and the Predictability of Important Economic Events

By Ahmed Riahi-Belkaoui | Go to book overview

9

The Prediction of Corporate Performance

INTRODUCTION1

The separation of ownership and control in the large corporation causes owners’ motivations to differ from those of managers. 2 The debate on the importance of stock ownership led to argument in one school of thought that the distribution of ownership has important implications for corporate efficiency and strategic development, 3 while in another, argument was for the irrelevancy of the distribution of ownership. 4

Empirical examination of the issue led to conflicting results that were attributed to data problems when attempting to construct meaningful measures of the distribution of stock ownership 5 and performance. 6 Here, we suggest that the effects of ownership structure on performance are best examined in the context of structural differences between firms, and develop and test a model that describes the influence of ownership structure and diversification strategy on performance.


THEORETICAL FRAMEWORK

Morck, Schleifer, and Vishny 7 (hereafter MSV) estimated the cross-sectional relationship between stock ownership by the board of directors and corporate performance in 1980 for a sample of 249 Fortune 500 firms. Two measures of corporate performance were used: Tobin’s Q and the ratio of net cash flows to the replacement cost of capital stock. Unlike Demsetz and Lehn 8 (hereafter DL), MSV relax the assumption of a linear relation between performance and stock ownership, and instead propose a nonmonotonic relationship. They test for different average performance (i.e., regression-model intercept) for each of the

-171-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this book

This book has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this book

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited page

Bookmark this page
Financial Analysis and the Predictability of Important Economic Events
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
/ 221

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.