[The proliferation of control contests for large public corporations at 50%+ premiums above market illustrates the wide divergence between open-market stock prices and equity exchange values. This paper considers equity valuation in corporate control transactions-e.g., management buyouts and hostile takeovers-that engender potentially severe manager-stockholder conflicts. These conflicts generate a demand for independent assessments of equity values by investment bankers who specialize in these appraisals. The paper provides evidence from (1) a large sample of fairness opinions on management buyouts, and (2) a small sample of investment bankers' working papers which indicates that investment bankers' valuation techniques make extensive use of accounting data. This demand for accounting information in equity valuation is distinct from that previously recognized in the capital markets or contracting literatures.]

The proliferation of control contests for large public corporations at 50% + premiums above market Illustrates the wide divergence between open-market stock prices and equity exchange values. This paper considers equity valuation in corporate control transactions-e.g., management buyouts and hostile takeovers-that engender potentially severe manager-stockholder conflicts. These conflicts generate a demand for independent assessments of equity values by investment bankers who specialize in these appraisals. The paper provides evidence from (1) a large sample of fairness opinions on management buyouts, and (2) a small sample of investment bankers' working papers which indicates that investment bankers' valuation techniques make extensive use of accounting data. This demand for accounting information in equity valuation is distinct from that previously recognized in the capital markets or contracting literatures.

This paper studies the dividend policy adjustments of eighty NYSE firms to protracted financial distress as evidenced by multiple losses during 1980-85. Almost all sample firms reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent binding debt covenants, dividends are cut more often than omitted, suggesting that managerial reluctance is to the omission and not simply the reduction of dividends. Moreover, managers of firms with long dividend histories appear particularly reluctant to omit dividends. Finally, some dividend reductions seem strategically motivated, e.g., designed to enhance the firm's bargaining positions with organized labor.

This paper studies the dividend policy adjustments of 80 NYSE firms to protracted financial distress as evidenced by multiple losses during 1980–1985. Almost all sample firms reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent binding debt covenants, dividends are cut more often than omitted, suggesting that managerial reluctance is to the omission and not simply the reduction of dividends. Moreover, managers of firms with long dividend histories appear particularly reluctant to omit dividends. Finally, some dividend reductions seem strategically motivated, e.g., designed to enhance the firm's bargaining position with organized labor.

This paper studies the dividend policy adjustments of 80 NYSE firms to protracted financial distress as evidenced by multiple losses during 1980–1985. Almost all sample firms reduced dividends, and more than half apparently faced binding debt covenants in years they did so. Absent binding debt covenants, dividends are cut more often than omitted, suggesting that managerial reluctance is to the omission and not simply the reduction of dividends. Moreover, managers of firms with long dividend histories appear particularly reluctant to omit dividends. Finally, some dividend reductions seem strategically motivated, e.g., designed to enhance the firm's bargaining position with organized labor.