Growth opportunities and corporate debt policy: the case of the U.S. defense industry

Goyal, Vidhan K.; Lehn, Kenneth; Racic, Stanko

doi:10.1016/s0304-405x(02)00070-3

Cited by 159 publications

(83 citation statements)

References 24 publications

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“…In the pre-2001 period, the U.S. defense industry was broadly in a consolidation and contraction phase, transitioning away from the Cold War mind-set of the prior decades (e.g., Dial and Murphy 1995, Anand and Singh 1997, Goyal et al 2002. The events of September 2001 caused a significant reset in the industry's focus: the Afghanistan and Iraq wars had their genesis in this event, pushing to the forefront of consideration those products and technologies that would be a better fit with the new security and counterterrorism orientation of the post-2001 environment.…”

Section: Methods and Resultsmentioning

confidence: 99%

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

Aggarwal

2015

Organization Science

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W e assemble a panel data set of firms in the U.S. defense industry between 1996 and 2006 to examine the drivers of heterogeneous incumbent firm adaptation following the industry-wide demand shock of September 11, 2001. This shock entailed not only an increase in aggregate demand but, more importantly, a shift in the relative attractiveness of individual product areas, resulting in the need for firms to reshuffle their product portfolios in response to changing demand conditions. The exogenous nature of the shock allows us to empirically identify the effect of preshock interdependence structures on postshock adaptation outcomes. We find that the locus of coordination inside a firm can explain differential postshock adaptation performance: because interdependencies spanning organizational boundaries are more difficult to manage than those contained within such boundaries, coordination across product areas creates greater adaptation challenges compared with coordination within product areas. We further investigate the moderating effects of product complementarity and organizational grouping, finding results consistent with our hypothesized mechanisms. As one of the first studies to empirically link a firm's locus of coordination with its adaptation performance, this study contributes to our understanding of the role of interdependence and organization design in dynamic environments.

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Section: Methods and Resultsmentioning

confidence: 99%

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

Aggarwal

2015

Organization Science

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“…The firms' future growth options involve agency problems between bondholders and shareholders (González 2013(González , 2015, asymmetries of information (Goyal et al 2002), and higher derived bankruptcy costs (Shleifer, Vishny 1992). Bank borrowing, and particularly short-term bank debt, reduces these problems (Flannery 1986).…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

“…1 Among the independent variables, we used the market to book value ratio (Q) as a proxy for growth opportunities (Goyal et al 2002). The need for external funds (NEF) to finance the firm's new investments was calculated according to Shyam-Sunder and Myers (1999) as:…”

Section: Variables Measurementmentioning

confidence: 99%

How Regulation Affects the Relevance of Bank-Debt Maturity as a Control Mechanism in Developed Countries

González

Saona

Martín

2017

Journal of Business Economics and Management

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Abstract. Improvements in transparency at the country level have modified the relevance of bank debt maturity as a control mechanism. The novelty of this research is that we provide empirical evidence that the maturity of bank borrowing is contingent on the characteristics of the regulatory and the institutional setting about corporate governance. The main implication of our paper is that corporate governance rules have greater influence in civil-law countries than in common-law countries in promoting efficiency in the use of bank debt maturity. The value of this paper is that our results confirm that the implementation of similar regulations on transparency across countries with different legal systems favors the alignment of the role played by short-term bank debt in addressing asymmetric information, agency costs, and inefficient liquidation.

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“…Growth Opportunities; The structure of growth opportunities represented by high market value-book value ratio has a significant effect on a company's financial debt ratio. (Jensen M. C, 1986, Goyal, Lehn and Racic, 2002, Goyal, Lehn and Racic, 2002. Asset Structure; The qualities of assets that a firm possesses are important determinants of the capital structure of the firm.…”

Section: Company-specific Factors Affecting Capital Structurementioning

confidence: 99%

Analysis of The Factors Affecting The Capital Structure of Oil Exploration And Production Companies: Comparative Analysis of TP And The Five Major Oil Exploration And Production Companies in The World

Arslan

Boz²

2017

isarder

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Oil and gas companies are still the most powerful and profitable companies in the world. Knowing the factors that affect the preferences for forming a capital structure of such a critical sector will provide a substantial contribution to the field of capital structur theory which is understated in thef literature. Besides, determining capital structure composition and financing decisions of the oil and gas companies are important issues for national and international investors who are considering to invest in the oil and gas sector, for suppliers providing services to the sector and for banks providing funds to the sector. In this context, for analyzing the factors affecting the capital structures of EXXONMOBIL, BP, SHELL, PETROBRAS, LUKOIL and Turkish Petroleum (TP), linear regression and panel data regression analysis are perfomed by using the data of these companies for the years 2006-2014 (covering 36 quarter period). Empirical results revealed that capex, operating profit, risk and quick ratio have negative relation with leverage, whereas operating net cashflow-growth opportunities-size (all together forming an independent variable) has positive relation with leverage. Additionally, our empirical results mostly support the pecking order theory.

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Growth opportunities and corporate debt policy: the case of the U.S. defense industry

Cited by 159 publications

References 24 publications

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

Organizational Constraints to Adaptation: Intrafirm Asymmetry in the Locus of Coordination

How Regulation Affects the Relevance of Bank-Debt Maturity as a Control Mechanism in Developed Countries

Analysis of The Factors Affecting The Capital Structure of Oil Exploration And Production Companies: Comparative Analysis of TP And The Five Major Oil Exploration And Production Companies in The World

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