The following thesis tries to take benefit of the unique setting of a corporate spin-off transaction in order to investigate capital structure determinants. The study reveals evidence that companies involved in a European spin-off transaction allocate financial leverage ratios according to the pecking order theory. Profitability of post-spin-off companies affects financial leverage ratios negatively. Growth, lower financial distress costs and the size of a company influences the financial leverage ratio positively. No relation is observed between non-debt tax shield and financial leverage. Even though post-spin-off companies emerging from the spin-off transaction with lower leverages are associated with higher business risk, no evidence is found that risk influences financial leverage ratios.

This paper investigates how firms determine the capital structure of a subsidiary that is divested in a spin-off. In a spin-off, the parent divides the assets of the firm and chooses the capital structure for the new, stand-alone entity. Unlike the firms in other capital structure studies, the subsidiary's leverage ratio is its initial capital structure. Thus, the typical explanations for why firms' leverage ratios may deviate from their target ratios do not apply. I therefore use this sample to investigate how firms determine their capital structure. I find that the subsidiary has a leverage ratio lower than the parent but similar to a comparable non-spin-off firm. Also, similar to other firms, the subsidiary's leverage is negatively related to growth and positively related to its collateral value. However, unlike other firms, leverage is not inversely related to profitability. Further, the difference between the subsidiaries' and comparable firms' leverage ratios is positively related to profitability. These results support the predictions of the trade off theory of capital structure and provide insight into why previous studies find a negative relation between leverage and profitability.

Incorporates estimation risk in portfolio choice and also covers a risk measure for retail investment products, understanding and exploiting momentum in stock returns. This book includes: Introduction - Corporate restructuring; mergers and acquisitions in Europe; and the performance of acquisitive companies in the US.

This bachelor thesis investigates how corporate spin-offs influenced abnormal returns, debt covenant ratios, covenant types, information asymmetry, and CEO behavior between 2005 and 2015. For this purpose, covenant ratios were collected from a sample of 111 spin-off executions and a sample of peers. The author found that there is a positive cumulative abnormal return at the time of the spin-off announcement. In addition, the author found that spin-off executions lead to significantly less restrictive debt covenant ratios and performance covenants were far more desired than capital covenants. Although very few CEOs of the pre-spin-off parent companies became CEO of the spin-off company, low minimum required fixed-charge coverage ratios might be an incentive for the CEO to do so.

We survey the empirical literature on corporate financial restructuring, including breakup transactions (divestitures, spinoffs, equity carveouts, tracking stocks), leveraged recapitalizations, and leveraged buyouts (LBOs). For each transaction type, we survey techniques, deal financing, transaction volume, valuation effects and potential sources of restructuring gains. Many breakup transactions appear to be a response to excessive conglomeration and attempt to reverse a potentially costly diversification discount. The empirical evidence shows that the typical restructuring creates substantial value for shareholders. The value-drivers include elimination of costly cross-subsidizations characterizing internal capital markets, reduction in financing costs for subsidiaries through asset securitization and increased divisional transparency, improved (and more focused) investment programs, reduction in agency costs of free cash flow, implementation of executive compensation schemes with greater pay-performance sensitivity, and increased monitoring by lenders and LBO sponsors. Buyouts after the 1990s on average create value similar to LBOs of the 1980s. Recent developments include consortiums of private equity funds (club deals), exits through secondary buyouts (sale to another LBO fund), and evidence of persistence in fund returns. LBO deal financing has evolved toward lower leverage ratios. In Europe, recent deals are financed with less leveraged loans and mezzanine debt and more high-yield debt than before. Future research challenges include integrating analyses across transaction types and financing mixes, and producing unbiased estimates of the expected return from buyout investments in the presence of limited data on portfolio companies that do not return to public status.

Aswath Damodaran, distinguished author, Professor of Finance, and David Margolis, Teaching Fellow at the NYU Stern School of Business, has delivered the newest edition of Applied Corporate Finance. This readable text provides the practical advice students and practitioners need rather than a sole concentration on debate theory, assumptions, or models. Like no other text of its kind, Applied Corporate Finance, 4th Edition applies corporate finance to real companies. It now contains six real-world core companies to study and follow. Business decisions are classified for students into three groups: investment, financing, and dividend decisions.

The world of M&A has always been complex and nuanced. Corporations encounter their toughest business problems during a divestiture or a merger. At the same time, optimal execution of divestitures can also create high value for the seller as well as the buyer. This book is a collection of leading practices on Divestitures and covers end to end transaction life cycle from readiness through execution including post deal transformation. It contains the synthesis of experiences across a wide array of clients across industries, ranging from $500 million to $100 billion in revenue. Each chapter in this book can stand on its own as an authority on leading practices related to the topic it presents, and together, these chapters provide a comprehensive set of perspectives needed to successfully complete a divestiture. The highlight of the book is valuable real-life examples and references that a business can benefit from, when it is considering, analyzing or implementing a divestiture.