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Managerial Ownership, Takeover Defenses, And Debt Financing

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  • Şenay Ağca
  • Sattar A. Mansi
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    Abstract

    We examine the effect of agency conflicts on debt financing and show that managerial ownership and its interaction with takeover defenses affect these decisions. We find that (1) the relation between leverage and takeover defenses becomes insignificant when we control for the interaction of these defenses with managerial ownership, and (2) firms with large managerial ownership operate at high debt levels unless they have a large number of takeover defenses. Therefore, a two-dimensional aspect of governance that includes the interaction between managerial ownership and takeover defenses is useful in understanding the effect of agency conflicts on firms' debt financing decisions. (c) 2008 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 31 (2008)
    Issue (Month): 2 ()
    Pages: 85-112

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    Handle: RePEc:bla:jfnres:v:31:y:2008:i:2:p:85-112

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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    Cited by:
    1. Christopher F. Baum & Atreya Chakraborty & Liyan Han & Boyan Liu, 2012. "The effects of uncertainty and corporate governance on firms’ demand for liquidity," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 515-525, February.
    2. Hubert De La Bruslerie & Imen Latrous, 2012. "Ownership Structure and Debt Leverage: Empirical Test of a Trade-Off Hypothesis on French Firms," Post-Print halshs-00674250, HAL.
    3. Lookman, Aziz A., 2009. "Bank borrowing and corporate risk management," Journal of Financial Intermediation, Elsevier, vol. 18(4), pages 632-649, October.
    4. de La Bruslerie, Hubert & Latrous, Imen, 2012. "Ownership structure and debt leverage: Empirical test of a trade-off hypothesis on French firms," Journal of Multinational Financial Management, Elsevier, vol. 22(4), pages 111-130.

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