Defensive changes in corporate payout policy: share repurchases and special dividends
Article Abstract:
This paper examines defensive payouts announced in responses to hostile corporate control activity. The evidence indicates that the announcement of defensive share repurchases is associated with an average negative impact on the share price of the target firm. In contrast, special dividend payments generally increase the wealth of target firm shareholders. Regardless of payout type, those firms remaining independent after the outcome of the corporate control contest experience an abnormal share price increase over the duration of the contest. Among these firms there are substantial post-contest changes in capital, asset, and ownership structure and abnormally high rates of top management turnover. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1990
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Perquisites, risk, and capital structure
Article Abstract:
In a corporate agency problem, perquisites and risk interact to produce novel, complex comparative statics. For example, even if additional debt induces risk-neutral insiders to increase risk, they never seek to increase the market value of their stock; instead, insiders decrease the present value of their subsequent, conditionally optimal perquisites. Also, the firm's optimal capital structure includes a risky bond with an agreement to remove insiders whenever the bond defaults. However, the optimal sharing rule between corporate claimants cannot be supported solely by standard securities such as bonds, stocks, options, and their hybrids. (Reprinted by permission of the publisher.)
Publication Name: Journal of Finance
Subject: Business
ISSN: 0022-1082
Year: 1987
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