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This paper embeds an oligopolistic industry structure in a real options framework in which synergy gains of horizontal mergers a rise endogenouslya nd vary stochastically over time. We find that(i) mergers are more likely in more concentrated industries; (ii) mergers are more likely inindustries...
Persistent link: https://www.econbiz.de/10010779541
This paper studies the interaction between product market competition and takeover activity. We develop a dynamic model in which profit-maximizing production decisions of all firms in an industry as well as the timing and terms of a merger between two firms are jointly determined. We show that...
Persistent link: https://www.econbiz.de/10008545855
This paper develops a framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and financing...
Persistent link: https://www.econbiz.de/10005136791
Persistent link: https://www.econbiz.de/10005376917
This paper develops a real options model to study the interaction between industry structure and takeover activity. In an asymmetric industry equilibrium, firms have an endogenous incentive to merge when restructuring decisions are motivated by operating and strategic benefits. The model...
Persistent link: https://www.econbiz.de/10011081143
We study the effect of asset tangibility on corporate financing and investment decisions. Financially constrained firms benefit the most from investing in tangible assets because those assets help relax constraints, allowing for further investment. Using a dynamic model, we characterize this...
Persistent link: https://www.econbiz.de/10011051610
We study to what extent firms spread out their debt maturity dates across time, which we call granularity of corporate debt. We consider the role of debt granularity using a simple model in which a firm's inability to roll over expiring debt causes inefficiencies, such as costly asset sales or...
Persistent link: https://www.econbiz.de/10010958706
We study the interplay between corporate liquidity and asset reallocation. Our model shows that financially distressed firms are acquired by liquid firms in their industries even in the absence of operational synergies. We call these transactions “liquidity mergers,” since their purpose is...
Persistent link: https://www.econbiz.de/10011039206
We study the interaction between financing and investment decisions in a dynamic model, where the firm has multiple debt issues and equityholders choose the timing of investment. Jointly optimal capital and priority structures can virtually eliminate investment distortions because debt priority...
Persistent link: https://www.econbiz.de/10010535042
This article integrates an earnings-based capital structure model into a simple real options framework to analyze the effects of managerial optimism and overconfidence on the interaction between financing and investment decisions. Several empirical implications follow from solving the model....
Persistent link: https://www.econbiz.de/10004987785