The impact of redemption activity on the available supply of limited-purpose subsidiary issues is striking; of the 41 limited-purpose subsidiaries that issued DARPS over the period 1984-1988, 34 had redeemed by the first quarter of 1991.
The purpose of the questionnaire was to enrich the statistical analysis by providing information on the perceptions of financial decision-makers concerning their experiences with the entire process of using DARPS as a financing vehicle.
The results of the survey suggest that the respondents initially were attracted to the DARPs market due to its lower cost and moreover, that the yield established in the dividend reset process was "fair." For example, asked to agree or disagree with the statement that "the principal reason for initially issuing DARPs was the ability to raise funds more cheaply than other sources" (Question 1), 16 of the 24 respondents agreed (a mean response of 2.417).
To explore the importance of changes in the tax position of the issuing firms, we asked respondents to agree or disagree with the statement that "the changing tax position of my firm reduced the attractiveness of DARPs." The mean response to this question was 3.667, but the responses were bimodal: ten of the 24 respondents agreed, while 14 of 24 disagreed.
Question 6 probed the importance of the reduction in the dividend exclusion with the following statement: "The reduction in the dividends-received deduction made our DARPS issue prohibitively expensive." Perhaps surprisingly, only one firm agreed with this statement, while 14 of 23 respondents disagreed and eight were neutral.