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MANAGERIAL OWNERSHIP, TAKEOVER DEFENSES, AND DEBT FINANCING
Author(s) -
Ağca Şenay,
Mansi Sattar A.
Publication year - 2008
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2008.00233.x
Subject(s) - leverage (statistics) , business , debt , corporate governance , agency (philosophy) , finance , debt financing , agency cost , affect (linguistics) , principal–agent problem , control (management) , monetary economics , financial system , accounting , shareholder , economics , philosophy , linguistics , management , epistemology , machine learning , computer science
We examine the effect of agency conflicts on debt financing and show that managerial ownership and its interaction with takeover defenses affect these decisions. We find that (1) the relation between leverage and takeover defenses becomes insignificant when we control for the interaction of these defenses with managerial ownership, and (2) firms with large managerial ownership operate at high debt levels unless they have a large number of takeover defenses. Therefore, a two‐dimensional aspect of governance that includes the interaction between managerial ownership and takeover defenses is useful in understanding the effect of agency conflicts on firms' debt financing decisions.