Specific Human Capital, Credible Commitment and Optimal Capital Structure

In this paper, we show that although ex ante equityholders would like to adopt an optimal displacement and operating policy, they may not have incentives to implement such a policy ex post when the manager acquires firmspecific human capital and becomes indispensable to the firm¡¯s continued operation. An optimal mix of debt and equity can serve as a commitment device in disciplining the manager.

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Year of publication:	2004
Authors:	Wang, Xiaozu ; Zhu, Tian
Published in:	Annals of Economics and Finance. - China Economics and Management Academy, ISSN 1529-7373. - Vol. 5.2004, 1, 3, p. 47-59
Publisher:	China Economics and Management Academy
Subject:	Capital structure \| Bankruptcy \| Specific human capital \| Credible commitment \| Managerial incentive

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; G33 - Bankruptcy; Liquidation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009150914