On the Shareholder Wealth Maximization Objective of Corporate Governance: The Case of Leveraged Recapitalizations

M. Mark Walker (Department of Economics Finance, 301 Conner Hall, University of Mississippi, University, MS 38677)

Managerial Finance

ISSN: 0307-4358

Publication date: 1 April 1996

Abstract

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.

Citation

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/eb018559

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Publisher

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MCB UP Ltd

Copyright © 1996, MCB UP Limited

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