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Unformatted text preview: Institutional Investors will sell for a quick profit and may not have the best interests of the firm in mind Closely held shares are more likely to consider strategic objectives when making decisions Fear of takeover increases management diligence Cutting costs Making disposals Increasing leverage Buying back their own stock Diversification into other industries o Negative Considerations Financial Distress/ Insolvency Explicit Costs Implicit Costs Long-term investments and R&D Devaluation of Bonds Increased risk- Junk Bonds RJR Nabisco- Bond Covenants MBO conflicts Increased conflicts with bondholders Paying large dividends Risk shifting Underinvestment...
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This note was uploaded on 03/19/2008 for the course LAW 101 taught by Professor Stone during the Spring '06 term at Yeshiva.
- Spring '06