Junk Bonds: How High Yield Securities Restructured Corporate America

Hardcover | April 30, 1999

byGlenn Yago

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Junk bonds burst into the nation's headlines as the fastest growing and most controversial financial instruments of the 1980s. Branded with an unflattering nickname, these high yield securities were tarnished in the public eye by waves of negative publicity. Critics cast the financiers andentrepreneurs who pioneered their use as symbols of a decade of greed and financial excess. By the end of the 1980s, the heyday of junk bonds had seemingly come to a close with the conviction of junk bond pioneer Michael Milken and the bankruptcy of Drexel Burnham Lambert, the brokerage thatdominated the high yield market. But the controversy surrounding junk bonds continues. Now, in Junk Bonds, business professor Glenn Yago turns the tables on conventional wisdom about this new financial technology. He offers the first systematic examination of the facts about high yield securities. His analysis provides hard evidence that demystifies junk bonds and explodesmany of the popular myths that surround them. Junk Bonds sheds light on the role of high yield financing in what Yago calls the democratization of capital. Before the advent of junk bonds, only companies with an "investment grade" rating--five percent of the 23,000 American companies with sales over $35 million--had access to long termcapital. In effect, the author argues, 95 percent of American companies were denied the means to finance growth and business development. Yago shows how junk bonds changed all that, breathing life into thousands of American companies that had been shunned by the capital markets. His researchdemonstrates that these "junk" companies outperformed many Fortune 500 firms in job creation, product development, sales, and business innovation. The real contribution of junk bonds, according to Yago, was to improve the productivity and competitiveness of American business by restructuring companies in the wake of the corporate conglomerations of the 1960s and 1970s. His findings show that divestitures by companies financed with highyield bonds were not necessarily destructive. Many sold-off units flourished as independent enterprises at a time when numerous "investment grade" companies stagnated or closed plants or fired workers. This restructuring of corporate America has enabled businesses to compete in a changinginternational environment, benefiting managers, workers, stockholders, and investors alike. Junk Bonds provides readers with a scholarly analysis that shears away the hype and hysteria that often accompany rapid change. And at a time when Wall Street is under greater scrutiny than at any time since the Depression, this provocative study provides a timely and thoughtful contributionto the debate surrounding junk bonds.

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From Our Editors

In this book, the author offers the first systematic examination of the facts about high yield securities, providing hard evidence that demystifies junk bonds and explodes many of the popular myths that surround them.

From the Publisher

Junk bonds burst into the nation's headlines as the fastest growing and most controversial financial instruments of the 1980s. Branded with an unflattering nickname, these high yield securities were tarnished in the public eye by waves of negative publicity. Critics cast the financiers andentrepreneurs who pioneered their use as symb...

From the Jacket

In this book, the author offers the first systematic examination of the facts about high yield securities, providing hard evidence that demystifies junk bonds and explodes many of the popular myths that surround them.

Glenn Yago is Director of the Economic Research Bureau and Associate Professor of Management at the State University of New York at Stony Brook. He has testified before federal and state committees and his articles have appeared in The New York Times, The Wall Street Journal, and many other publications. He is also a director and prin...

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Format:HardcoverDimensions:272 pages, 9.49 × 6.3 × 0.94 inPublished:April 30, 1999Publisher:Oxford University Press

The following ISBNs are associated with this title:

ISBN - 10:019506111X

ISBN - 13:9780195061116

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From Our Editors

In this book, the author offers the first systematic examination of the facts about high yield securities, providing hard evidence that demystifies junk bonds and explodes many of the popular myths that surround them.

Editorial Reviews

"Glenn Yago has masterfully dissolved the misconceptions and delusions regarding the use of junk financings. Junk Bonds is a coll, well-documented rejoinder to those whose indignation is not matched by their knowledge, and the best source for readers wanting to know just what all the fuss hasbeen about."--Robert Sobel, Hofstra University