Information content of financial leverage; an empirical study: a comment
Article Abstract:
The study tests the appropriateness of four theories, irrelevance, maximum debt, optimal financial leverage and the pecking order theory, in analyzing share price reaction of securities towards the announcement of security issuances. However, fundamental errors in the design of the tests and methodologies used prevent the formation of valid conclusions. The errors in the tests and how they affected the results of the study are discussed.
Publication Name: Journal of Business Finance and Accounting
Subject: Business
ISSN: 0306-686X
Year: 1995
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The Modigliani-Miller Leverage Equation Considered in a Product Market Context
Article Abstract:
Business firms do not maximize their debt-to-capital ratio as implied in the Modigliani-Miller equation. A profit-maximizing firm in a competitive industry is examined to determine the effect of the market. Competitive pressures cause the positive effects of profit to erode. Leverage-related imperfections in the capital market cause a firm to choose smaller leverage ratios.
Publication Name: Journal of Financial and Quantitative Analysis
Subject: Business
ISSN: 0022-1090
Year: 1983
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Product risk, asymmetric information and trade credit
Article Abstract:
A study investigates trade credit. Payment terms and credit options vary widely across industry. Sellers may offer credit terms or cash discounts for early settlement. However, risk is implicit in early settlement. Credit allows for easy rejection of inferior goods and thus acts as a product warranty. The study develops a model for evaluating commercial practice.
Publication Name: Journal of Financial and Quantitative Analysis
Subject: Business
ISSN: 0022-1090
Year: 1993
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