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Author: Sergei Polevikov
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
This paper develops a model that analyzes the impact of manager-stockholder conflicts and control challenge threats on leverage, firm value and debt restructuring frequency in a contingent claims framework. This is the first theoretical study to merge several lines of research - market for corporate control, manager-shareholder conflict, dynamic capital structure, and the effect of compensation policy on managerial decisions - in one framework. This richness of the model allows to reconcile some of the on-going controversy in the corporate finance literature regarding the leverage-profitability relationship - namely, empirical support for the pecking order theory (e.g. Fama and French, 2002), and theoretical appeal of the trade-off theory (e.g. Jensen, 1986). Another implication of this paper is that control change threats are relatively ineffective for high free cash flow firms, in which case shareholders need to resort to compensation policy.
Author: Sergei Polevikov
Publisher:
ISBN:
Category :
Languages : en
Pages : 48
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Book Description
This paper develops a model that analyzes the impact of manager-stockholder conflicts and control challenge threats on leverage, firm value and debt restructuring frequency in a contingent claims framework. This is the first theoretical study to merge several lines of research - market for corporate control, manager-shareholder conflict, dynamic capital structure, and the effect of compensation policy on managerial decisions - in one framework. This richness of the model allows to reconcile some of the on-going controversy in the corporate finance literature regarding the leverage-profitability relationship - namely, empirical support for the pecking order theory (e.g. Fama and French, 2002), and theoretical appeal of the trade-off theory (e.g. Jensen, 1986). Another implication of this paper is that control change threats are relatively ineffective for high free cash flow firms, in which case shareholders need to resort to compensation policy.
Author: Paul D. Childs
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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Book Description
In a dynamic continuous-time model, we examine the impact of a manager-shareholder conflict over the choice of investment risk on firm value and optimal capital structure. The manager's optimal investment risk policy is substantially different from the policy that maximizes equity or total firm value. The resulting agency costs of equity are many times larger than the agency costs of debt. Among a number of important implications, we find that managerial risk-aversion decreases the agency costs of equity. We also find that when equityholders have control rights over financing decisions, optimal leverage may increase relative to optimal leverage when investment risk is chosen to maximize total firm value. Additionally, greater managerial equity compensation may exacerbate the manager-stockholder conflict over investment policy, and in spite of higher agency costs of equity, may increase optimal leverage. Finally, we find that an increase in risk encourages the manager to pursue a more conservative investment strategy, which increases the agency costs of equity. Managerial risk-aversion, however, acts to mitigate this effect of risk on the agency costs of equity.
Author: Erwan Morellec
Publisher:
ISBN:
Category :
Languages : en
Pages : 33
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Book Description
This paper analyzes the impact of managerial discretion and corporate control mechanisms on leverage and firm value within a contingent claims model where the manager derives perquisites from investment. Optimal capital structure reflects both the tax adavantage of debt less bankruptcy costs and the agency costs of managerial discretion. Actual capital structure reflects the trade-off made by the manager between his empire-building desires and the need to ensure sufficient efficiency to prevent control challenges. The model shows that manager-shareholder conflicts can explain the low debt levels observed in practice. It also examines the impact of these conflicts on the cross-sectional variation in capital structures.
Author: Claire A. Hill
Publisher: Edward Elgar Publishing
ISBN: 1784711489
Category : Business & Economics
Languages : en
Pages : 497
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Book Description
Global in scope and written by leading scholars in the field, the Research Handbook on Mergers and Acquisitions is a modern-day survey of the state of M&A. Its chapters explore the history of mergers and acquisitions and also consider the theory behind the structure of modern transaction documentation. The book also address other key M&A issues, such as takeover defenses; judges and practitioners' perspectives on litigation; the appraisal remedy and other aspects of Federal and state law, as well as M&A considerations in the structure of start-ups. This Handbook will be an invaluable resource for scholars, practitioners, judges and legislators.
Author: David Hillier
Publisher: McGraw Hill
ISBN: 0077141350
Category : Business & Economics
Languages : en
Pages : 881
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Book Description
The second European edition of Financial Markets and Corporate Strategy provides comprehensive coverage of financial markets and corporate finance, brought to life by real world examples, cases and insights. Placed in a truly international context, this new and updated edition takes an academic and practical view-point to guide students through the challenges of studying and practicing finance. Aimed specifically at an international audience, this edition boasts hundreds of references to new and relevant non-US research papers from top finance journals. Whilst retaining the well respected structure of the successful US text, Professor David Hillier has also made a number of additions which include: Fully updated research, data and examples in every chapter. Coverage of the global financial crisis, the impact it made on the financial markets and the lessons being learnt by the finance industry. A stronger emphasis on corporate governance and agency theory. Updates on accounting standards, bankruptcy laws, tax rules and tax systems.
Author: George M. Constantinides
Publisher: Elsevier
ISBN: 0080495079
Category : Business & Economics
Languages : en
Pages : 654
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Book Description
Volume 1A covers corporate finance: how businesses allocate capital - the capital budgeting decision - and how they obtain capital - the financing decision. Though managers play no independent role in the work of Miller and Modigliani, major contributions in finance since then have shown that managers maximize their own objectives. To understand the firm's decisions, it is therefore necessary to understand the forces that lead managers to maximize the wealth of shareholders.
Author: Ilya A. Strebulaev
Publisher: Now Pub
ISBN: 9781601985804
Category : Business & Economics
Languages : en
Pages : 174
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Book Description
The goals of this monograph are to explain the models and techniques and make it more accessible, introduce the main strands of this literature, and explain how dynamic models can be taken to the data and estimated, providing a guide to 3 methodologies: generalized method of moments, simulated method of moments, and maximum simulated likelihood.
Author: Gordon Donaldson
Publisher: Beard Books
ISBN: 9781587980343
Category : Business & Economics
Languages : en
Pages : 316
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Book Description
Author: P.K. Jain
Publisher: Springer Science & Business Media
ISBN: 8132209907
Category : Business & Economics
Languages : en
Pages : 426
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Book Description
Financial management practices are likely to have a marked effect on the financial performance of a corporate enterprise. Therefore, sound financial decisions/practices can contribute towards meeting the desired objective of having profitable operations. This subject assumes paramount significance in view of the present dynamic and turbulent business environment, which has produced more intense competition and smaller profit margins across the world. In this context, the financial management practices of the corporates in India, a country with a vast potential for economic growth, can offer valuable insights. The present study explores whether there has been a major change in the financial performance (measured in terms of profitability) and financial policies/decisions of the sample companies over a fixed period (2000-2001 to 2010-2011), with a special focus on pre and post-recession analysis. It delves deeper into current research areas such as zero working capital, real options in capital budgeting, pecking order in capital structures, and clause 49 as reflected in the financial management decisions of sample companies, and provides a broader perspective by identifying trends (if any) in certain aspects of financial decision-making over the past two decades. A comprehensive study, covering all the major aspects of financial management practices, also contains an inter-sectoral study (among the sample companies) and develops an index of professionalism in financial management based on the practices of the sample companies. The book is primarily targeted at teachers/students of finance, management, commerce, accounting and related professional disciplines/fields. Practitioners/professionals will find it an invaluable text that helps guide them to better decision-making.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 422
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Book Description
