We empirically investigate the relation between corporate value, leverage, and equity ownership. For ‘high-growth’ firms corporate value is negatively correlated with leverage, whereas for ‘low-growth’ firms corporate value is positively correlated with leverage. The results also hint that the allocation of equity ownership among insiders, institutions, blockholders, and atomistic outside shareholders is of marginally greater significance in low-growth than in high-growth firms. The overall interpretation of the results is that debt policy and equity ownership structure ‘matter’ and that the way in which they matter differs between firms with many and firms with few positive net present value projects.
Journal of Financial Economics – Elsevier
Published: Sep 1, 1995
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