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Theory of the Firm
- Publisher
- Emerald Publishing
- Copyright
- Copyright © Emerald Group Publishing Limited
- ISSN
- 0307-4358
- DOI
- 10.1108/eb018559
- Publisher site
- See Article on Publisher Site
Abstract
Increases in stockholder wealth around leveraged recapitalization recap announcements are related more to reductions in the firm's financial slack than improvements in operating efficiency. Moreover, while recaps significantly reduce the firm's workforce and asset base, they do not improve operating profitability. These results support the argument often espoused by nonfinance writers that the market for corporate control is inefficient and, in many cases, outright destructive. Alternative systems of corporate governance should be explored.
Journal
Managerial Finance – Emerald Publishing
Published: Apr 1, 1996