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Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage
Author(s) -
Garvey Gerald T.,
Hanka Gordon
Publication year - 1999
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/0022-1082.00116
Subject(s) - leverage (statistics) , debt , capital structure , statute , business , control (management) , monetary economics , market for corporate control , state (computer science) , capital (architecture) , financial system , industrial organization , finance , corporate governance , economics , law , shareholder , management , archaeology , history , algorithm , machine learning , computer science , political science
We find that firms protected by “second generation” state antitakeover laws substantially reduce their use of debt, and that unprotected firms do the reverse. This result supports recent models in which the threat of hostile takeover motivates managers to take on debt they would otherwise avoid. An implication is that legal barriers to takeovers may increase corporate slack.