ECONOMETRICS OF CORPORATE GOVERNANCE STUDIES BHAGAT S., JEFFERIS H. Bankowa.pl

Econometrics of Corporate Governance Studies

A vast theoretical and empirical literature in corporate finance considers the interrelationships of corporate governance, takeovers, management turnover, corporate performance, corporate capital structure, and corporate ownership structure. Most of the studies look at two variables at a time. In this book Sanjai Bhagat and Richard Jefferis argue that from an econometric viewpoint, the proper way to study the relationship between any two of these variables is to set up a system of simultaneous equations that specifies the relationships among the six variables. The specification and estimation of such a system of simultaneous equations, however, is nontrivial.

The authors illustrate their argument with a discussion of the impact of corporate anti-takeover measures on takeovers and managerial job-tenure. During the past two decades, an overwhelming majority of publicly held U.S. corporations have adopted anti-takeover measures. The authors show that, contrary to expectation, defense measures are ineffective in preventing takeovers and the frequency of CEO departures is unrelated to takeover defenses. At firms with poison pill defenses, however, there is a statistically significant relationship between management turnover and company performance.

'Much of the empirical work on corporate governance suffers from endogeneity problems that confound the interpretation of the results. I applaud Bhagat and Jefferis's efforts to address this problem head-on using modern econometric techniques." James A. Brickley, (Sleason Professor of Business Admmistratiofl, William Simon: Graduate School of Business,; University ofRochester

"Bhagat and Jefferis's new book provides researchers and market participants with an important set of insights into how the elements of our corporate governance system interact to influence firm performance. The book presents a careful, detailed, and ultimately successful set of analyses of the complex web of principal-agent relationships that comprise a company's corporate governance environment." Tim Opter, Director, Investment Banking, .Credit "Suisse First ''Boston

"This is a terrific, superbly crafted book a financial detective story in the classic mode. The careful exposition keeps you turning the pages and led me to a com-fortable grasp of the key issues in a slippery area of Inquiry. I enjoyed the book: very much." James; D, Beck, Rifst Vice President, Salomon Smith Barney

114 pages

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