The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Incentive Conflicts, Bundling Claims, and the Interaction among Financial Claimants
Published: 06/01/1993 | DOI: 10.1111/j.1540-6261.1993.tb04725.x
CHESTER S. SPATT, FREDERIC P. STERBENZ
We show that for certain capital structures equity has an incentive to buy out another claim and alter the firm's investment strategy so as to maximize the combined value of equity and the acquired claim. This restructuring may reintroduce agency problems into capital structures which appear to avoid agency conflicts. By bundling claims, it is possible to avoid this agency problem. The agency problem is also eliminated by dispersed ownership of the claims.
Warrant Exercise, Dividends, and Reinvestment Policy
Published: 06/01/1988 | DOI: 10.1111/j.1540-6261.1988.tb03951.x
CHESTER S. SPATT, FREDERIC P. STERBENZ
In this paper, we examine sequential exercise strategies by warrantholders and the gain from hoarding warrants. We analyze several obstacles to acquiring large blocks in order to exploit sequential strategies. First, we identify several reinvestment policies for which sequential exercise is not advantageous, thereby eliminating the gain from hoarding. However, sequential exercise strategies may be advantageous for monopoly or oligopoly warrantholders, even absent dividends, because using exercise proceeds to repurchase stock or to expand the firm's scale increases the riskiness of an equity share. Second, oligopoly warrantholders can receive a smaller warrant value than perfectly competitive warrantholders, suggesting a potential cost to unsuccessful hoarding.