Giamouridis, Daniel; Prassa, Chara - 2021
This paper examines whether debt renegotiation mitigates the agency costs of asset substitution. Inspired by the … firm that has the option to switch to a higher risk activity and renegotiate the terms of the debt. Our model creates a … substitution. Our findings indicate that, in most cases, debt renegotiation substantially reduces agency costs of asset …