Access the full text.
Sign up today, get DeepDyve free for 14 days.
Wilbur Lewellen (1971)
A PURE FINANCIAL RATIONALE FOR THE CONGLOMERATE MERGERJournal of Finance, 26
Lawrence Schall (1972)
Asset Valuation, Firm Investment, and Firm DiversificationThe Journal of Business, 45
Charles Haley, Lawrence Schall (1974)
The theory of financial decisionsJournal of Finance, 29
M. Shubik, G. Thompson (1959)
Games of economic survivalNaval Research Logistics Quarterly, 6
R. Higgins (1971)
Business Finance Issues: DiscussionJournal of Finance, 26
Wilbur Lewellen (1972)
Finance Subsidiaries and Corporate Borrowing CapacityFinancial Management, 1
Edwakd Altman (1969)
Corporate Bankruptcy Potential, Stockholder Returns and Share ValuationJournal of Finance, 24
Franco Modigliani (1963)
CORPORATE INCOME TAXES AND THE COST OF CAPITAL: A CORRECTION, 53
Eamon Kelly (1968)
The profitability of growth through mergersJournal of Finance, 23
J. Lintner (1965)
SECURITY PRICES, RISK, AND MAXIMAL GAINS FROM DIVERSIFICATIONJournal of Finance, 20
Alberts (1970)
The Profitability of Conglomerate Investment Mergers: Sources and ProspectsUniversity of Washington Business Review
Nevins Baxter (1967)
LEVERAGE, RISK OF RUIN AND THE COST OF CAPITAL*Journal of Finance, 22
V. Smith (1970)
Corporate Financial Theory Under UncertaintyQuarterly Journal of Economics, 84
W. Sharpe (1964)
CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK*Journal of Finance, 19
H. Levy, Marshall Sarnat (1970)
Diversification, Portfolio Analysis and the Uneasy Case for Conglomerate MergersJournal of Finance, 25
J. Stiglitz (1967)
A Re-Examination of the Modigliani Miller TheoremThe American Economic Review, 59
Lawrence Schall (1971)
Firm Financial Structure and InvestmentJournal of Financial and Quantitative Analysis, 6
MARCH 1975 CORPORATE BANKRUPTCY AND CONGLOMERATE MERGER ROBERT C. HIGGINS AND LAWRENCE D. SCHALL* SEVERAL IMPORTANT ATTEMPTS have appeared in recent literature to extend standard valuation theories to include corporate bankruptcy. Thus, under various assumptions regarding capital market imperfections and bankruptcy costs, Baxter [5], Smith [16], and Stiglitz [17, 18] argue that there is an optimal firm debt to equity ratio when bankruptcy is possible. Similar attempts to extend valuation theory are evident in the area of corporate diversification and conglomerate merger.' Alberts [1, 2] suggests that the ability of investors to diversify their own portfolios should imply that corporate diversification will produce no added benefits if bankruptcy risk is not present. More recently, Levy and Sarnat [6] show for the single period capital asset pricing model that, in the absence of corporate bankruptcy, conglomerate merger will have no effect on shareholder wealth. Schall [12, 13] shows for the multiperiod case that with bankruptcy risk and without corporate taxes the total value of the firms before conglomerate merger equals the value of the merged firm; the same result holds with corporate taxes if the debt owed by the merged firm equals the total debt owed by the firms
The Journal of Finance – Wiley
Published: Mar 1, 1975
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.