Found 2 article(s) for author 'Capital Structure'

The Untenable Case for Perpetual Dual-Class Stock

The Untenable Case for Perpetual Dual-Class Stock. Kobi Kastiel, Lucian Bebchuk, April 24, 2017, Paper, “We recently placed on SSRN our study, The Untenable Case for Perpetual Dual-Class Stock. The study, which will be published by the Virginia Law Review in June 2017, analyzes the substantial costs and governance risks posed by companies that go public with a long-term dual-class structure.  The long-standing debate on dual-class structure has focused on whether dual-class stock is an efficient capital structure that should be permitted at the time of initial public offering (“IPO”). By contrast, we focus on how the passage of time since the IPO can be expected to affect the efficiency of such a structure.Link

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Corporate Financial Policies in Overvalued Credit Markets

Corporate Financial Policies in Overvalued Credit Markets, Matthew Rhodes-Kropf, March 16, 2015, Paper, We investigate the repercussions of credit market mistakes for a firm’s borrowing and investment decisions. When credit ratings are relatively optimistic, we find evidence that firms take advantage of inaccuracies by issuing more debt, increasing leverage, rolling over more debt and lengthening maturities. The result goes beyond a wealth transfer and has real investment implications: approximately 75% of the funds raised from debt issuance related to credit rating mistakes was used for capital expenditures and cash acquisitions. In the cross section, credit rating mistakes affect financially constrained firms the most, suggesting that debt overvaluation loosens financial constraints. Link

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