I would like to read more about some of Michael Jensen’s research when I have time - saw on pg 117 of reading 29. "Agency theory posits that a reduction in net agency costs of equity results from an increase in the use of debt versus equity. That is, there is an agency cost savings associated with the use of debt. Similarly, the more financially leveraged a company is, the less freedom managers have to either take on more debt or untowardly spend cash. This is the foundation of Michael Jensen’s free cash flow hypothesis. Higher debt levels discipline managers by forcing them to make fixed debt service payments. "
Yeah, I read trough one or two of his articles while studying materials about buyouts for my master thesis. The Jensen’s article about agency cost of FCF was one of those articles that I have remembered the most. Also, articles about the impact of method of payment in take-overs are quite interesting, e.g. those by Kaplan or Travlos. Are you somehow interested in this topic?
Yeah - I definitely think this is going to be one of the things I am going to run into / research later. You studied it in your MSF or MBA?
I did it in my finance MA (Europe). Unfortunately at the moment the markets are not very favourable, but I would like to get into the corporate finance / M&A area within the next few years.