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The Effect of Capital Structure When Expected Agency Costs are Extreme

Harvey, Campbell R. - 2001

We provide new evidence that debt creates shareholder value for firms that face agency costs. Our tests are unique in two respects. First, we focus on a sample of firms with potentially extreme agency problems. We study emerging market firms where the routine use of pyramid ownership structures...

Persistent link: https://www.econbiz.de/10012470266

Leverage as a State Variable for Employment, Inventory Accumulation, andFixed Investment

Calomiris, Charles W. - 1994

The importance of a firm's balance sheet for determining its investment and employment decisions is the central … assumption of macroeconomic models of 'debt deflation' or 'debt overhang.' According to these models, firm investment decisions …, investment, and inventory accumulation to exogenous changes in sales depend on the leverage of the firm. We find that leverage …

Persistent link: https://www.econbiz.de/10012474120

A Litner Model of Payout and Managerial Rents

Lambrecht, Bart M. - 2010

We develop a dynamic agency model where payout, investment and financing decisions are made by managers who attempt to … accomplished by borrowing or lending. Payout is not cut back to finance capital investment. Risk aversion causes managers to …

Persistent link: https://www.econbiz.de/10012462445

The Economics of Earnings Manipulation and Managerial Compensation

Crocker, Keith J. - 2006

This paper examines managerial compensation in an environment where managers may take a hidden action that affects the actual earnings of the firm. When realized, these earnings constitute hidden information that is privately observed by the manager, who may expend resources to generate an...

Persistent link: https://www.econbiz.de/10012466016

Monetary Easing, Leveraged Payouts and Lack of Investment

Acharya, Viral V. - 2019

, potentially spurring productive investment. Low interest rates, however, also induce entrepreneurs to lever up so as to increase … their incentives thereby lowering productivity and discouraging investment. If leverage is unregulated (for example, due to … payouts by stimulating investment in response to adverse shocks only up to a level below the first-best. The optimal monetary …

Persistent link: https://www.econbiz.de/10012480414

Dynamic Debt Maturity

He, Zhiguo - 2016

A firm chooses its debt maturity structure and default timing dynamically, both without commitment. Via the fraction of newly issued short-term bonds, equity holders control the maturity structure, which affects their endogenous default decision. A shortening equilibrium with accelerated default...

Persistent link: https://www.econbiz.de/10012456753

Corporate Debt Structure and the Financial Crisis

De Fiore, Fiorella - 2014

We present a DSGE model where firms optimally choose among alternative instruments of external finance. The model is used to explain the evolving composition of corporate debt during the financial crisis of 2008-09, namely the observed shift from bank finance to bond finance, at a time when the...

Persistent link: https://www.econbiz.de/10012457936

Banks as Secret Keepers

Dang, Tri Vi - 2014

, reducing the efficiency of trade. This need for opacity conflicts with the production of information about investment projects …

Persistent link: https://www.econbiz.de/10012458411

Systematic Risk, Debt Maturity, and the Term Structure of Credit Spreads

Chen, Hui - 2012

We build a dynamic capital structure model to study the link between firms' systematic risk exposures and their time-varying debt maturity choices, as well as its implications for the term structure of credit spreads. Compared to short-term debt, long-term debt helps reduce rollover risks, but...

Persistent link: https://www.econbiz.de/10012460293

Debt Financing in Asset Markets

He, Zhiguo - 2012

We study rollover risk and collateral value in a dynamic asset pricing model with endogenous debt financing by extending the framework of Geanakoplos (2009) with a generic binomial tree and time-varying heterogeneous beliefs. Optimistic borrowers face rollover risk if the belief dispersion...

Persistent link: https://www.econbiz.de/10012460724