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 non‐finance writers) that the market for corporate control is inefficient and, in many cases, outright destructive. Alternative systems of corporate governance should be explored.
Walker, M. (1996), "On the Shareholder Wealth Maximization Objective of Corporate Governance: The Case of Leveraged Recapitalizations", Managerial Finance, Vol. 22 No. 4, pp. 53-70. https://doi.org/10.1108/eb018559Download as .RIS
MCB UP Ltd
Copyright © 1996, MCB UP Limited