6-9 - we estimate mainly a piecewise linear specification...

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we estimate mainly a piecewise linear specification which includes three linear tenns, for ownership in the 0% to 10% range, in the 10% to 35% range, and over 35%. For comparison purposes, we also estimate a linear and a quadratic specification (McConnell and Servaes, 1990).6 Our regressions include two sets of control variables. The first set comprises finn characteristics, i.e. return on assets (ROA; net profit divided by total assets), market-to
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book ratio (market value of equity divided by book value of equity), debt-to-assets ratio (long-term debt divided by total assets), annual sales growth, and the natural logarithm of the firm's deflated total assets. The market-to-book ratio is likely to capture the proportion of unrecorded intangible assets in addition to being a proxy for firm performance. Our second set of control variables includes proxies for corporate governance, i.e. CEO duality (dummy variable equal to one when the CEO is also Chairman of the board of directors), the natural logarithm of the number of directors on the board, the fraction of independent non-executive directors on the board, and the presence of an audit committee (dummy variable equal to one if such a committee exists). We recognize the possibility that unobserved exogenous firm characteristics may affect both executive compensation and ownership concentration. Therefore, following Himmelberg et al. (1999), we report regressions after estimating industry fixed effects and
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This note was uploaded on 07/30/2011 for the course FINANCE 101 taught by Professor Xxx during the Spring '11 term at HKU.

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6-9 - we estimate mainly a piecewise linear specification...

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