Online from: 1975
Subject Area: Accounting and Finance
Options: To add Favourites and Table of Contents Alerts please take a Emerald profile
|Title:||Capital structure and outcome of proxy contest targets: An empirical study|
|Author(s):||Ning Gao, (Finance, Business Economics and Legal Studies Department, Hagan School of Business, Iona College, New Rochelle, New York, USA), Jason Everett Brooks, (McCabe, Weisberg & Conway PC, New Rochelle, New York, USA)|
|Citation:||Ning Gao, Jason Everett Brooks, (2010) "Capital structure and outcome of proxy contest targets: An empirical study", Managerial Finance, Vol. 36 Iss: 4, pp.294 - 321|
|Keywords:||Capital structure, Debts, Gearing, Stock returns, Take-overs|
|Article type:||Research paper|
|DOI:||10.1108/03074351011027510 (Permanent URL)|
|Publisher:||Emerald Group Publishing Limited|
|Acknowledgements:||JEL classification – G32, G34, G38|
Purpose – The purpose of this paper is to investigate the influence of capital structure changes by target firms on the outcome and
Design/methodology/approach – The influence is examined by using predictions of control-driven model developed by Harris and Raviv and signaling theory of debt in capital structure.
Findings – The results are consistent with the predictions of both control-driven model and signaling theory. Significant differences are found between two groups of target firms – management victory targets and dissident victory targets. Specifically: management victory targets feature proxy contests that are accompanied by leverage increasing changes in target firms' capital structure; the same group also realizes better long-run stock performance compared to dissident victory targets; and the long-run abnormal stock performance of management victory targets is significantly positively related to the increases in leverage in the capital structure during proxy contest period.
Originality/value – This paper is the first to directly address the relationship between leverage change and the outcome and long-run performance of proxy contest targets, thus confirming both the defensive and the signaling role of debt on firm's capital structure decision.
To purchase this item please login or register.
Complete and print this form to request this document from your librarian