TY - JOUR
T1 - Corporate Control and the Choice of Investment Financing
T2 - The Case of Corporate Acquisitions
AU - AMIHUD, YAKOV
AU - LEV, BARUCH
AU - TRAVLOS, NICKOLAOS G.
PY - 1990/6
Y1 - 1990/6
N2 - We test the proposition that corporate control considerations motivate the means of investment financing—cash (and debt) or stock. Corporate insiders who value control will prefer financing investments by cash or debt rather than by issuing new stock which dilutes their holdings and increases the risk of losing control. Our empirical results support this hypothesis: in corporate acquisitions, the larger the managerial ownership fraction of the acquiring firm the more likely the use of cash financing. Also, the previously observed negative bidders' abnormal returns associated with stock financing are mainly in acquisitions made by firms with low managerial ownership. 1990 The American Finance Association
AB - We test the proposition that corporate control considerations motivate the means of investment financing—cash (and debt) or stock. Corporate insiders who value control will prefer financing investments by cash or debt rather than by issuing new stock which dilutes their holdings and increases the risk of losing control. Our empirical results support this hypothesis: in corporate acquisitions, the larger the managerial ownership fraction of the acquiring firm the more likely the use of cash financing. Also, the previously observed negative bidders' abnormal returns associated with stock financing are mainly in acquisitions made by firms with low managerial ownership. 1990 The American Finance Association
UR - http://www.scopus.com/inward/record.url?scp=84977733861&partnerID=8YFLogxK
U2 - 10.1111/j.1540-6261.1990.tb03706.x
DO - 10.1111/j.1540-6261.1990.tb03706.x
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AN - SCOPUS:84977733861
SN - 0022-1082
VL - 45
SP - 603
EP - 616
JO - Journal of Finance
JF - Journal of Finance
IS - 2
ER -