earticle

영어

As a test of the agency theory, this paper examines the relationship between the size of the private benefits of the new blockholder and the likelihood of future litigation or earnings management. Using a sample of 391 US firms whose blocks of shares are traded over 1987-2002, we find that the incidence of securities litigation against the new blockholder or the new management team is positively related to the size of block premium at the time of the block trade. Our findings are consistent with the agency theory which suggests that controlling stakeholders are more likely to engage in corporate misconduct in the presence of greater private benefits.