Dodging Bullets : Changing U.S. Corporate Capital Structure in the 1980s and 1990s Hardback

by Robert N. McCauley, Judith S. Ruud, Frank Iacono

Part of the The MIT Press series

Hardback

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Description

An entertaining summary of the broad reshaping of U.S. corporate finance in the last decade and a half. The late 1980s saw a huge wave of corporate leveraging.

The U.S. financial landscape was dominated by a series of high-stakes leveraged buyouts as firms replaced their equity with new fixed debt obligations.

Cash-financed acquisitions and defensive share repurchases also decapitalized corporations.

This trend culminated in the sensational debt-financed bidding for RJR-Nabisco, the largest leveraged buyout of all time, before dramatically reversing itself in the early 1990s with a rapid return to equity.This entertaining summary of the broad reshaping of U.S. corporate finance in the last decade and a half looks at three major issues: why corporations leveraged up in the first place, why and how the leverage wave came to an end, and what policy lessons are to be drawn.Using the Minsky-Kindleberger model as a framework, the authors interpret the rise and fall of leveraging as a financial market mania.

In the course of chronicling the return to equity in the 1990s, they address a number of important corporate finance questions: How important was the return to equity in relieving corporations' debt burdens?

How did the return to equity affect the ability of young high-tech firms to finance themselves without selling out to foreign firms?