Managerial Style, Managerial Expenses and Firm Value

Posted: 25 Aug 1998

See all articles by Dennis R. Capozza

Dennis R. Capozza

Ross School of Business, University of Michigan

Paul J. Seguin

University of Minnesota - Twin Cities - Carlson School of Management

Abstract

A firm can be viewed as a portfolio of projects arising from capital budgeting decisions. How these projects are bundled, i.e. managerial style, affects administrative costs and firm value. We analyze the effect of style on firm value using a panel data set of 75 publicly-traded REITs over eight years. We partition general and administrative (G&A) expenses into that portion attributable to management "style" and a residual component. The style component is significantly related to the focus, size and debt of the firm. Though both components are significantly negatively related to market value, style-related components have a five-fold greater impact. We conclude that reorganizing into larger, more focused, less levered trusts would result in substantial value-added.

JEL Classification: L1, G31, J33, L85

Suggested Citation

Capozza, Dennis R. and Seguin, Paul J., Managerial Style, Managerial Expenses and Firm Value. Available at SSRN: https://ssrn.com/abstract=6560

Dennis R. Capozza

Ross School of Business, University of Michigan ( email )

701 Tappan Street
Ann Arbor, MI MI 48109
United States
734 995 7271 (Phone)
734 629-0635 (Fax)

Paul J. Seguin (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
(612) 626-7861 (Phone)

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