Aswath Damodaran, Kose John, Crocker H Liu
ABSTRACT
We study changes in organizational form in the real estate industry
based on a sample of 128 changes announced during the period from January
1, 1966 through December 31, 1989. The rich variety of organizational forms
of real estate firms with varying degrees of restrictiveness of the equity
contract provides the setting for our study. We examine whether these changes
are motivated primarily by the desire to increase stockholder wealth and
improve financial health or by managerial self interests. By looking at
the characteristics of firms moving from one organizational form to another,
the reasons provided by managers at the time of the organizational change,
the stock price reaction to the announcement of the changes are motivated
primarily by stockholder wealth maximization. While managerial interests
may also be served in the process, they do not appear to be at the expense
of the stockholders.
Damodaran: (212) 998-0340 adamodar@stern,nyu.edu
John: (212) 998-0337 kjohn@stern.nyu.edu
Liu: (212) 998-0353 cliu@stern.nyu.edu
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