Write Off Offering and Rent-Seeking: Evidence from Taiwan IT Industry
Date Issued
2008
Date
2008
Author(s)
Yeh, Hsung-Lung
Abstract
Abstracthe “Theory of the Firm” assumes that running a business only has the purpose of pursuing profit maximization. In the real business world, there are two ways for companies to pursue profit: to provide products or services in the general market and to offer stocks to raise capital in financial markets. The thesis is to research how companies gain profits from the financial market. Money gained from capital markets is just like products sold to earn profit. The only way for companies to gain money from capital market is to Seasoned Equity Offering. Seasoned Equity Offering allows companies to gain premiums over the stock’s par value. In economics, the premiums are called quasi-rents or rents. Rents are an additional income; “additional,” here, means that factor providers still have the will to provide services or products even without income. Meanwhile, there are some incentives to entice companies to use their resources to gain additional income. These kinds of actions are called rent-seeking.rom the study, we learned that the Taiwan IT industry raised approximately NTD 190 trillion from financial markets during the past 20 years. Over 13 thousand board members gained about NTD 11 trillion cumulatively, which amounts to about NTD 9 million per board member. Moreover, Seasoned Equity Offerings have also had beneficial effects on the overall economic development of Taiwan.e also observed that over 1.3 million employees gained over NTD 1.8 trillion, which amounts to about NTD 150 thousand per employee, from Seasoned Equity Offerings during the last 20 years. e provided hypotheses to test the relationships between board members and companies’ characteristics to understand the seeking rent behavior of the Taiwanese high-tech industry. We found that good-performing companies like to use Capitalization of Retained Earnings instead of Seasoned Equity Offerings to increase their capital. Similarly, board members also like to use Capitalization of Retained Earnings instead of Seasoned Equity Offerings to avoid taxes. e also built a regression model to study what factors impact companies’ seeking-rent behaviors and board members seeking-rent behaviors. We found that company seeking-rent behavior is affected by the holding rate of board members, EPS and the growth rate of the company. Board members’ seeking-rent behavior is affected by the holding rate of board members, EPS and the expense-rate of the R&D. eyword: Write Off offering, Rent-Seeking.
Subjects
Write Off offering
Rent-Seeking.
SDGs
Type
thesis
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