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Stock Options and Capital Structure

Author

Listed:
  • Macminn, R.D.
  • Page, F.H.

Abstract

The empirical evidence on sources of corporate financing strongly suggests that firms prefer internally generated funds to debt and debt to equity in financing their investment activities. What is the economic rationale for this preference ordering or pecking order? We provide an explanation based on managerial compensation.

Suggested Citation

  • Macminn, R.D. & Page, F.H., 2001. "Stock Options and Capital Structure," Papiers d'Economie Mathématique et Applications 2001.36, Université Panthéon-Sorbonne (Paris 1).
    • Handle: RePEc:fth:pariem:2001.36
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    References listed on IDEAS

    as
    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    2. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    3. Brennan, Michael J & Kraus, Alan, 1987. "Efficient Financing under Asymmetric Information," Journal of Finance, American Finance Association, vol. 42(5), pages 1225-1243, December.
    4. G. Hanoch & H. Levy, 1969. "The Efficiency Analysis of Choices Involving Risk," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(3), pages 335-346.
    5. Bizjak, John M. & Brickley, James A. & Coles, Jeffrey L., 1993. "Stock-based incentive compensation and investment behavior," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 349-372, April.
    6. Thomas H. Noe, 1988. "Capital Structure and Signaling Game Equilibria," The Review of Financial Studies, Society for Financial Studies, vol. 1(4), pages 331-355.
    7. DeFusco, Richard A & Johnson, Robert R & Zorn, Thomas S, 1990. "The Effect of Executive Stock Option Plans on Stockholders and Bondholders," Journal of Finance, American Finance Association, vol. 45(2), pages 617-627, June.
    8. Lambert, Richard A. & Lanen, William N. & Larcker, David F., 1989. "Executive Stock Option Plans and Corporate Dividend Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 24(4), pages 409-425, December.
    9. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    10. Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2006. "Managerial incentives and risk-taking," Journal of Financial Economics, Elsevier, vol. 79(2), pages 431-468, February.
    11. Rothschild, Michael & Stiglitz, Joseph E., 1970. "Increasing risk: I. A definition," Journal of Economic Theory, Elsevier, vol. 2(3), pages 225-243, September.
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    Cited by:

    1. Nie, George Y., 2024. "The Missing Dimension of Risk: Evidence from Inside Debt Maturity and Acquisition Choices," SocArXiv jd3c2, Center for Open Science.

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    More about this item

    Keywords

    CAPITAL MARKET ; PRICES ; FINANCING;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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