publication . Article . 2012

Management Ownership and Risk-Shifting Investment*

Nobuyuki Teshima;
Open Access
  • Published: 01 Jan 2012 Journal: The Japanese Accounting Review, volume 2, issue December, pages 75-85
Abstract
This study analyzes the relationship between management ownership and its risk-shifting incentive. We first present a simple model showing that the risk-shifting incentive of management of financially distressed firms increases as the management ownership of the firm increases. Empirically, we test the hypothesis that under the former Japanese Corporate Reorganization Law, firms with higher management ownership are more likely to use legal rather than private reorganization. Since the reorganization process under the law virtually eliminates the possibility of risk-shifting investment, creditors are more likely to prefer the legal process to private process, whe...
Subjects
free text keywords: Management Ownership; Risk Shifting; Debt Restructuring; Reorganization; Bankruptcy, jel:G32, jel:G33, jel:G34
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