CORPORATE GOVERNANCE CHARACTERISTICS OF FIRMS THAT ISSUE PREFERRED STOCK

We examine three corporate governance characteristics of preferred stock issuers relative to non-issuers: managerial equity ownership, board size, and block shareholder ownership. We find that the preferred issuers have significantly lower managerial equity ownership than their controls. The finding is consistent with our expectation that the use of preferred stock and managerial equity ownership both serve to reduce agency costs and thus, preferred issuers tend to have little incentive to resort to higher managerial ownership to lessen agency costs. Significantly larger board size for preferred issuers is evident, but we find no difference in block shareholder ownership.