Managerial decision making and capital structure
Article Abstract:
A study is made on the effect of leverage on project selection or managerial decision making. Three sets of data on key decisions relative to the leverage position of the company are analyzed. The first data set involves large mergers that occurred from 1962-82. The second data set is about 389 different types of acquisitions between 1982-86. The third includes 173 acquisitions during 1978-90 for companies that implemented major hikes in their capital structure during the aforementioned period. Based on the first two data sets, a positive relation exists between the price reaction to the acquiring firm at project disclosure and its predisclosure leverage status. The third data set, on the other hand, indicates a negative stock price performance of the firm's acquisitions prior to restructuring and a positive performance after restructuring.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1993
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Commodity futures prices: some evidence on forecast power, premiums, and the theory of storage
Article Abstract:
Two models of commodity futures prices are analyzed, and evidence to support each model is examined. The first model is based on the theory of storage, explaining the change in commodity prices over time in relation to interest rate changes, costs associated with warehousing the commodity, and convenience yields. The second model of commodity futures prices breaks these prices down into two groups: expected premiums and forecasts of mature prices at spot. The applicability of each model to 21 types of commodities (precious metals, animal products and harvested products) is discussed.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1987
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Sealed bids, sunk costs, and the process of competition
Article Abstract:
A competition model is presented which offers an alternative to the traditional business assumption that raising marginal costs can make up for sunk costs (the cost of preparing a bid). The model shows that, even with strong competition, buyers can offer to pay lower amounts for assets than the buyers believe they are worth. The anticipated profit of the buyer winning the contract will be equal to the total of the competitors' sunk costs. Through use of the model, forecasts concerning marketing strategies and pricing policies in certain retailing situations are presented.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1984
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