skip to main content
Language:
Search Limited to: Search Limited to: Resource type Show Results with: Show Results with: Search type Index

Corporate restructuring and incentive effects of leverage and taxes

Managerial and decision economics, 1991-12, Vol.12 (6), p.461-472 [Peer Reviewed Journal]

Copyright 1991 John Wiley and Sons Ltd. ;Copyright © 1991 John Wiley & Sons, Ltd. ;Copyright Wiley Periodicals Inc. Dec 1991 ;ISSN: 0143-6570 ;EISSN: 1099-1468 ;DOI: 10.1002/mde.4090120607 ;CODEN: MDECDE

Full text available

Citations Cited by
  • Title:
    Corporate restructuring and incentive effects of leverage and taxes
  • Author: John, Teresa A.
  • Subjects: Acquisitions & mergers ; Business structures ; Corporate income tax ; Corporate reorganization ; Debt ; Effects ; Financial investments ; Financial leverage ; Investment decisions ; Investment tax credits ; Investment value ; Mathematical models ; Present value ; Shareholders ; Statistical analysis ; Studies ; Tax payments
  • Is Part Of: Managerial and decision economics, 1991-12, Vol.12 (6), p.461-472
  • Description: Recent empirical studies have indicated that mergers are value enhancing, yet the theoretical aspects of merger gains have not been as well explored. This paper presents a theoretical analysis of mergers. In the model of the firm presented, outstanding risky debt gives rise to agency costs of underinvestment which are offset by the benefit of debt-related tax shields. The trade-off specifies the optimal leverage for a firm. Within this framework, we then consider whether and under what circumstances firm value could be enhanced by a merger. Under a fairly broad set of assumptions it is shown that most firm combinations `improve' investment incentives and increase the value of debt-related tax shields. Mergers between optimally financed firms result in a merged firm that is also optimally financed, but such mergers are not synergistic. Nevertheless, firm value may be increased if mergers are undertaken in tandem with a refinancing program to bring the combined firms from suboptimal to optimal debt levels.
  • Publisher: London: John Wiley & Sons, Ltd
  • Language: English
  • Identifier: ISSN: 0143-6570
    EISSN: 1099-1468
    DOI: 10.1002/mde.4090120607
    CODEN: MDECDE
  • Source: Alma/SFX Local Collection
    ProQuest Central
Back to results list
INSPIRE LIBRARY - TON DUC THANG UNIVERSITY (84-028) 37 755 057 Feedback
19 Nguyen Huu Tho St. Dist.7, HCM thuvien@tdtu.edu.vn

Copyright © 2017 INSPIRE LIBRARY - TON DUC THANG UNIVERSITY

Searching Remote Databases, Please Wait