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The Impact of Capital Structure Change on Firm Value: Some Estimates

The Impact of Capital Structure Change on Firm Value: Some Estimates This study develops a model based on current corporate finance theories which explains stock returns associated with the announcement of issuer exchange offers. The major independent variables are changes in leverage multiplied by senior security claims outstanding and changes in debt tax shields. Parameter estimates are statistically significant and consistent in sign and relative magnitude with model predictions. Overall, 55 percent of the variance in stock announcement period returns is explained. The evidence is consistent with tax‐based theories of optimal capital structure, a positive debt level information effect, and leverage‐induced wealth transfers across security classes. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

The Impact of Capital Structure Change on Firm Value: Some Estimates

The Journal of Finance , Volume 38 (1) – Mar 1, 1983

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References (20)

Publisher
Wiley
Copyright
1983 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1983.tb03629.x
Publisher site
See Article on Publisher Site

Abstract

This study develops a model based on current corporate finance theories which explains stock returns associated with the announcement of issuer exchange offers. The major independent variables are changes in leverage multiplied by senior security claims outstanding and changes in debt tax shields. Parameter estimates are statistically significant and consistent in sign and relative magnitude with model predictions. Overall, 55 percent of the variance in stock announcement period returns is explained. The evidence is consistent with tax‐based theories of optimal capital structure, a positive debt level information effect, and leverage‐induced wealth transfers across security classes.

Journal

The Journal of FinanceWiley

Published: Mar 1, 1983

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