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Manager's hypothesis









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发表于 2018-9-6 16:08:08 | 显示全部楼层 |阅读模式
1 manager's hypothesis
Explaining the company's financing decision from the perspective of the company's internal managers is one of the hotspots of the company's financing choice theory. Unlike the previous financing choice theory based on the interests of the company's external shareholders and bondholders, this theory holds that the company's managers' financing The choice is based on maximizing its own interests. The interests of managers are reflected in the control of the company and the continuous investment of new projects (regardless of the profitability of the project), the company's financing decisions depends on whether the manager's interests can be met. If the company does not have the threat of hostile takeovers, the manager has no incentive to issue bonds because the issuance of bonds may lead to bankruptcy of the company and the replacement of the manager. On the contrary, if the company has the possibility of hostile takeovers, according to the traditional financing decision theory, the company should issue ordinary bonds, so that managers can make promises not to implement value reduction projects, and reduce the probability of bankruptcy. This commitment promises to increase the company's pre-existing value so that managers can effectively eliminate potential hostile takeovers. However, such a decision still has the possibility of bankruptcy due to the increase in bonds, but this possibility is reduced by the implementation of projects with increased value, and the maximization of the interests of managers is still not guaranteed. On the basis of the Zweibel model, Nobuyuki and Isagawa proposed the hypothesis of convertible bond financing. Because convertible bonds have the outstanding characteristics of uncertainty and flexibility in the conversion of stocks, by using well-designed redeemable convertible bonds, managers can effectively eliminate the threat of hostile takeovers and bankruptcy while implementing value-added projects.
2 The main policy implications of the manager's hypothesis
1 a company with large scale and good cash flow;

       2 companies with hostile takeovers;

      3 The company with a low proportion of managers.


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