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Journal of Financial Economics Vol. 24 No. 1 1989

Triggering the 1987 stock market crash

Mark L. Mitchell1,2,3; Jeffry M. Netter1,2,3

1 United States Securities and Exchange Commission · 2 University of Georgia · 3 Clemson University

Abstract

We present evidence that a tax bill containing antitakeover provisions proposed by the U.S. House Ways and Means Committee on October 13, 1987 and approved by the Committee on October 15 was the fundamental economic event causing the greater than 10% decline in the stock market on October 14–16, which arguably triggered the October 19 crash. The bill, which eventually passed without most of the antitakeover provisions, would have limited the deductibility of interest on debt incurred to finance corporate takeovers, leveraged buyouts and recapitalizations, and imposed other restrictions on hostile takeovers.

DOI
10.1016/0304-405x(89)90071-8
Volume
24
Issue
1
Pages
37-68
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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