| Summary: | 碩士 === 東海大學 === 財務金融學系 === 99 === This study discusses the relationship between firm characteristics and response of capital deduction for losses during 2001-2009. We hope to realize the main reason about performance changing after capital deduction. In the part of capital decrease by cashes, we discuss the relationship between capital deduction by cashes and the agency problem of managers’ propensity to overinvest mitigating.
The empirical results are shown as follows. The operating performance exist some naturally difference between the companies reducing capital by cashes and reducing capital for losses. Companies with capital reduction by cashes have much better performance than those with capital reduction by loss. But if we focus on the changing in operating performance after capital reducing between companies with capital reduction by cashes and companies with capital reduction by losses. We find that there is no evidence shows the operating performance has improved for companies reducing capital by cashes. Focusing on companies with capital reduction by losses, we find that the operating performance is improved significantly and positively after reducing capital for losses.
We also find that firm size, debt ratio, and return of assets are the key factors to influence the response of corporate. In addition, we investigate the effect on operating performance from the reactions adopted by companies after capital deduction for losses. In empirical results, companies with capital reduction for losses will do some reactions that are layoff, premier management turnover, and SEO in the same year. They will restructure the debt, increase the short-term financing in the next year. Reactions mentioned above improve the operating performance significantly and positively.
Finally, we examine whether the agency problem between capital reduction by cashes and overinvestment, and discuss the agency problem of overinvestment will be solved through capital reduction by cashes. We find that the cash ratio is decreased after capital reducting by cashes and it will mitigate the agency problem of overinvestment by manager.
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