Capital structure and firm response to poor performance

Article Abstract:

A study of 358 companies undergoing short-term financial problems suggests that operational and financial responses are more likely to be undertaken by companies which are highly-leveraged, than by companies which are less leveraged. Selection criteria for the sample was based on a year of very poor performance following a year when the company performed normally. An operational response is less likely when management holds a large proportion of the company's equity. In these circumstances, value-maximizing action may be hindered, while in contrast, debt may help a company to maintain its value, through imposing discipline.

Management consulting services, Business, Finance, Reports, Management research

---

Leverage, investment, and firm growth

Article Abstract:

The relationship of leverage, investments and economic growth is examined. Focus is given on the effects of high leverage on growth opportunities. It is postulated that the adverse relationship between leverage and growth applies not only to the main business of diversified firms but also to its supporting businesses. It is concluded that the existence of high leverage limits growth because it decreases the available capital needed to take advantage of such opportunities.

Research, Investments, Economic development, Liquidity (Finance), Leverage (Finance), Leverage

---

Diversification's effect on firm value

Article Abstract:

A study of a representative sample of diversified firms for the period 1986-1991 shows that diversification has both value-reducing and value-enhancing effects with the former appearing to more significant. By computing the individual values of various segments of the diversified firm, a 13%-15% average value loss is obtained. This value reduction is observed to be less when the segments belong to closely related industries. Tax benefits somehow mitigate the value loss.

Diversification in industry, Industrial diversification

Similar abstracts:

• Abstracts: Financial returns and efficiency as seen by an artificial technical analyst. On the solution of the linear rational expectations model with multiple lags
• Abstracts: NYSE vs NASDAQ returns: market microstructure or the poor performance of initial public offerings? Positive information from equity issue announcements
• Abstracts: Stable coalition structures with a unidimensional set of alternatives. Mixed equilibria are unstable in games of strategic complements
• Abstracts: Aid and trade relationships in East Asia. East Asian economic performance: miracle or just a pleasant surprise?
• Abstracts: Open-end mutual funds and capital-gains taxes. Closed-end fund premia and returns: implications for financial market equilibrium

This website is not affiliated with document authors or copyright owners. This page is provided for informational purposes only. Unintentional errors are possible.