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→Roden & Lewellen 1995
Attempts to explain why observed financing choices were made by individual firms. Identifies relationships between the characteristics of the target firms and the types of financings that were employed in their acquistion. Evidence that LBO financing decisions appear systematically to be affected by the target firm's growth prospects, the level and variability of return on its assets, its pre-buyout liquidity position, and by tax considerations and post-buyout restructuring plans.
Data:
LBOs that took place in the ten-year period from 1981 to 1990. Annual lists published in Mergers and Acquisitions. Then SEC 10k, 8k or 14D filing. More balance sheet and income statement info from COMPUSTAT and Moody's. Final sample was 107 LBOs
Variables:
*Target-firm size (SIZE)
*Target-firm liquidity (LIQUIDITY)
*Asset sales subsequent to the lbo (ASSETSALE)
*Target-firm return on assets (ROA)
*Target-firm growth opportunities (GROWTH and MRKTBOOK)
*target-firm earnings variability (EARNINGVAR)
*free cash flow ratio (FREECASH)
*acquisition premium paid (PREMIUM)
*trend variable (TIMEDUM)
Dependent variables:
*PBANKL the percentage of the total buyout financing package that is represented by senior bank debt
*PDEBTSEC: the percentage of the total package that consists of issues of junior debt securities
*PPREFER: the percentage of the total package represented by issues of preferred stock
*PCOMMON: the percentage of the total that consists of common equity provided by the buyout group
*PCASH: the percentage of the total that comes from the use of the target firm's existing cash and marketable securities balances
==James==
