Corporate Financing Decisions When Investors Take the Path of Least Resistance PDF Download
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Author: Malcolm P. Baker
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
We explore the consequences for corporate financial policy that arise when investors exhibit inertial behavior. One implication of investor inertia is that, all else equal, a firm pursuing a strategy of equity-financed growth will prefer a stock-for-stock merger to greenfield investment financed with an SEO. With a merger, acquirer stock is placed in the hands of investors, who, because of inertia, do not resell it all on the open market. If there is downward-sloping demand for acquirer shares, this leads to less price pressure than an SEO, and cheaper equity financing as a result. We develop a simple model to illustrate this idea, and present supporting empirical evidence. Both individual and institutional investors tend to hang on to shares granted them in mergers, with this tendency being much stronger for individuals. Consistent with the model and with this cross-sectional pattern in inertia, acquirers targeting firms with high institutional ownership experience more negative announcement effects and greater announcement volume. Moreover, the results are strongest when the overlap in target and acquirer institutional ownership is low and when the demand curve for the acquirer's shares appears to be steep.
Author: Malcolm P. Baker
Publisher:
ISBN:
Category :
Languages : en
Pages : 51
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Book Description
We explore the consequences for corporate financial policy that arise when investors exhibit inertial behavior. One implication of investor inertia is that, all else equal, a firm pursuing a strategy of equity-financed growth will prefer a stock-for-stock merger to greenfield investment financed with an SEO. With a merger, acquirer stock is placed in the hands of investors, who, because of inertia, do not resell it all on the open market. If there is downward-sloping demand for acquirer shares, this leads to less price pressure than an SEO, and cheaper equity financing as a result. We develop a simple model to illustrate this idea, and present supporting empirical evidence. Both individual and institutional investors tend to hang on to shares granted them in mergers, with this tendency being much stronger for individuals. Consistent with the model and with this cross-sectional pattern in inertia, acquirers targeting firms with high institutional ownership experience more negative announcement effects and greater announcement volume. Moreover, the results are strongest when the overlap in target and acquirer institutional ownership is low and when the demand curve for the acquirer's shares appears to be steep.
Author: Malcolm P. Baker
Publisher:
ISBN:
Category :
Languages : en
Pages : 55
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Book Description
We argue that inertial behavior on the part of investors can have significant consequences for corporate financial policy. One implication of investor inertia is that it improves the terms for the acquiring firm in a stock-for-stock merger, because acquirer shares are placed in the hands of investors, who, independent of their beliefs, do not resell these shares on the open market. In the presence of a downward-sloping demand curve, this leads to a reduction in price pressure and, hence, to cheaper equity financing. We develop a simple model to illustrate this idea and present supporting empirical evidence.
Author: Malcolm Baker
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 68
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Book Description
"We explore the consequences for corporate financial policy that arise when investors exhibit inertial behavior. One implication of investor inertia is that, all else equal, a firm pursuing a strategy of equity-financed growth will prefer a stock-for-stock merger to greenfield investment financed with an SEO. With a merger, acquirer stock is placed in the hands of investors, who, because of inertia, do not resell it all on the open market. If there is downward-sloping demand for acquirer shares, this leads to less price pressure than an SEO, and cheaper equity financing as a result. We develop a simple model to illustrate this idea, and present supporting empirical evidence. Both individual and institutional investors tend to hang on to shares granted them in mergers, with this tendency being much stronger for individuals. Consistent with the model and with this cross-sectional pattern in inertia, acquirers targeting firms with high institutional ownership experience more negative announcement effects and greater announcement volume. Moreover, the results are strongest when the overlap in target and acquirer institutional ownership is low and when the demand curve for the acquirer's shares appears to be steep"--National Bureau of Economic Research web site.
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 0470569522
Category : Business & Economics
Languages : en
Pages : 516
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Book Description
A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.
Author: Bjørn Espen Eckbo
Publisher: Elsevier
ISBN: 0080559565
Category : Business & Economics
Languages : en
Pages : 1137
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Book Description
This two-volume set summarizes recent research on corporate decision-making. The first volume covers measurement and theoretical subjects as well as sources of capital, including banks, public offerings, and private investors. In the second volume, contributors focus on the ways corporations are structured and the practices through which they can be bought and sold. Thus, its major subjects include dividends, capital structure, financial distress, takeovers, restructurings, and managerial incentives. Takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues Discusses everything from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior Contributors are leading empirical researchers that remain active in their respective areas of expertise Writing style makes the chapters accessible to industry practitioners
Author: Bjørn Espen Eckbo
Publisher: Elsevier
ISBN: 0080488919
Category : Business & Economics
Languages : en
Pages : 559
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Book Description
Judging by the sheer number of papers reviewed in this Handbook, the empirical analysis of firms’ financing and investment decisions—empirical corporate finance—has become a dominant field in financial economics. The growing interest in everything “corporate is fueled by a healthy combination of fundamental theoretical developments and recent widespread access to large transactional data bases. A less scientific—but nevertheless important—source of inspiration is a growing awareness of the important social implications of corporate behavior and governance. This Handbook takes stock of the main empirical findings to date across an unprecedented spectrum of corporate finance issues, ranging from econometric methodology, to raising capital and capital structure choice, and to managerial incentives and corporate investment behavior. The surveys are written by leading empirical researchers that remain active in their respective areas of interest. With few exceptions, the writing style makes the chapters accessible to industry practitioners. For doctoral students and seasoned academics, the surveys offer dense roadmaps into the empirical research landscape and provide suggestions for future work. *The Handbooks in Finance series offers a broad group of outstanding volumes in various areas of finance *Each individual volume in the series should present an accurate self-contained survey of a sub-field of finance *The series is international in scope with contributions from field leaders the world over
Author: George M. Constantinides
Publisher: Newnes
ISBN: 0444535950
Category : Business & Economics
Languages : en
Pages : 859
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Book Description
In the 11 articles in this first of two parts, top scholars summarize and analyze recent scholarship in corporate finance. Covering subjects from corporate taxes to behavioral corporate finance and econometric issues, their articles reveal how specializations resonate with each other and indicate likely directions for future research. By including both established and emerging topics, Volume 2 will have the same long shelf life and high citations that characterize Volume 1 (2003). Presents coherent summaries of major finance fields, marking important advances and revisions Describes the best corporate finance research created about the 2008 financial crises Exposes readers to a wide range of subjects described and analyzed by the best scholars
Author: H. Kent Baker
Publisher: John Wiley & Sons
ISBN: 0470769688
Category : Business & Economics
Languages : en
Pages : 1184
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Book Description
A definitive guide to the growing field of behavioral finance This reliable resource provides a comprehensive view of behavioral finance and its psychological foundations, as well as its applications to finance. Comprising contributed chapters written by distinguished authors from some of the most influential firms and universities in the world, Behavioral Finance provides a synthesis of the most essential elements of this discipline, including psychological concepts and behavioral biases, the behavioral aspects of asset pricing, asset allocation, and market prices, as well as investor behavior, corporate managerial behavior, and social influences. Uses a structured approach to put behavioral finance in perspective Relies on recent research findings to provide guidance through the maze of theories and concepts Discusses the impact of sub-optimal financial decisions on the efficiency of capital markets, personal wealth, and the performance of corporations Behavioral finance has quickly become part of mainstream finance. If you need to gain a better understanding of this topic, look no further than this book.
Author: Dennis C. Mueller
Publisher: Oxford University Press
ISBN: 0199942595
Category : Political Science
Languages : en
Pages : 574
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Book Description
The financial crisis that began in 2008 and its lingering aftermath have caused many intellectuals and politicians to question the virtues of capitalist systems. The 19 original essays in this Handbook, written by leading scholars from Asia, North America, and Europe, analyze both the strengths and weaknesses of capitalist systems. The volume opens with essays on the historical and legal origins of capitalism. These are followed by chapters describing the nature, institutions, and advantages of capitalism: entrepreneurship, innovation, property rights, contracts, capital markets, and the modern corporation. The next set of chapters discusses the problems that can arise in capitalist systems including monopoly, principal agent problems, financial bubbles, excessive managerial compensation, and empire building through wealth-destroying mergers. Two subsequent essays examine in detail the properties of the "Asian model" of capitalism as exemplified by Japan and South Korea, and capitalist systems where ownership and control are largely separated as in the United States and United Kingdom. The handbook concludes with an essay on capitalism in the 21st century by Nobel Prize winner Edmund Phelps.
Author: George M. Constantinides
Publisher: Newnes
ISBN: 0444594655
Category : Business & Economics
Languages : en
Pages : 1732
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Book Description
This two-volume set of 23 articles authoritatively describes recent scholarship in corporate finance and asset pricing. Volume 1 concentrates on corporate finance, encompassing topics such as financial innovation and securitization, dynamic security design, and family firms. Volume 2 focuses on asset pricing with articles on market liquidity, credit derivatives, and asset pricing theory, among others. Both volumes present scholarship about the 2008 financial crisis in contexts that highlight both continuity and divergence in research. For those who seek insightful perspectives and important details, they demonstrate how corporate finance studies have interpreted recent events and incorporated their lessons. Covers core and newly-developing fields Explains how the 2008 financial crises affected theoretical and empirical research Exposes readers to a wide range of subjects described and analyzed by the best scholars
