The Journal of Finance

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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Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00116

Gerald T. Garvey, Gordon Hanka

We find that firms protected by “second generation” state antitakeover laws substantially reduce their use of debt, and that unprotected firms do the reverse. This result supports recent models in which the threat of hostile takeover motivates managers to take on debt they would otherwise avoid. An implication is that legal barriers to takeovers may increase corporate slack.

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Capital Structure and Corporate Control: The Effect of Antitakeover Statutes on Firm Leverage

Published: 12/17/2002   |   DOI: 10.1111/0022-1082.00116

Gerald T. Garvey, Gordon Hanka

We find that firms protected by “second generation” state antitakeover laws substantially reduce their use of debt, and that unprotected firms do the reverse. This result supports recent models in which the threat of hostile takeover motivates managers to take on debt they would otherwise avoid. An implication is that legal barriers to takeovers may increase corporate slack.

  View PDF     Read article online