Strategic considerations, the pecking order hypothesis and market reactions to equity financing
Article Abstract:
A model has been developed to explain corporate financing behaviour. It challenges S.C. Myers and N.J. Majluf's theory that company's first use earnings, then debt and finally equity to satisfy capital needs and that equity issue is a market signal of overvaluation. However, the Pecking Order Hypothesis does not always reflect corporate finance behaviour. Empirical evidence suggests undervalued companies with available cash may sometimes issue equity. Therefore not all equity issues signal overvaluation.
Publication Name: Journal of Financial and Quantitative Analysis
Subject: Business
ISSN: 0022-1090
Year: 1993
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Optimality of spin-offs and allocation of debt
Article Abstract:
An analysis of spin-off optimality is presented. A model describing a firm with outstanding risky debt is presented and analyzed. It is shown that such debt raises the agency costs of underinvestments. These costs are then buffered by debt-related tax shields. Parent company debts which optimally allocate them between post-spin-off firms minimize agency costs whileraising tax shield values.
Publication Name: Journal of Financial and Quantitative Analysis
Subject: Business
ISSN: 0022-1090
Year: 1993
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The role of personal taxes in corporate decisions: an emperical analysis of share repurchases and dividends
Article Abstract:
A model showing the correlation of stock repurchases, dividends, and taxation on the decisions of corporate managers on cash disbursement is presented. Stock repurchases are more likely when dividend yields are low and with small capital gains and losses. The Tax Reform Act of 1986 is influential, also.
Publication Name: Journal of Financial and Quantitative Analysis
Subject: Business
ISSN: 0022-1090
Year: 1999
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