Performance Relevance of Capital Structure Choices

Financing Innovations and Capital Structure Choices

Deviation from the Target Capital Structure and Acquisition Choices

This study finds that managers take the deviations from their target capital structures into account in planning and structuring acquisitions. Specifically, firms that are overleveraged relative to their target debt ratios are less likely to make acquisitions, are less likely to fund acquisitions with debt, acquire smaller targets, pay lower premiums and receive favorable market reactions to ac...

Capital Structure and Firm Performance:

Corporate governance theory predicts that leverage affects agency costs and thereby influences firm performance. We propose a new approach to test this theory using profit efficiency, or how close a firm’s profits are to the benchmark of a best-practice firm facing the same exogenous conditions. We are also the first to employ a simultaneous-equations model that accounts for reverse causality f...

Strategic Assets, Capital Structure, and Firm Performance

Possession of strategic assets is a necessary condition for sustained competitive advantage. This condition is, however, not sufficient. Firms require financial management capability to realize the rents present in their strategic assets. The firm-specific nature of strategic assets implies that they be financed primarily through equity; other less specific assets should be financed through deb...

Working Capital Management, Corporate Performance, and Strategic Choices of the Wholesale and Retail Industry in China

We examine the influence of strategic choice on working capital configurations and observe how the relationship between working capital ratio and operational performance differs depending on strategy. By clustering the strategic factors of the wholesale and retail industry, we find three categories of strategies: terminal market strategy, middle market strategy, and hybrid strategy. Using the p...