This paper aims to clarify how contingent convertible bond (CCB) as a debt financing instrument affects the firm's investment policy, agency cost of debt and capital structure. We consider two different conversion thresholds of CCB: One is endogenous and the other is exogenous. We find that...

We develop a continuous-time dynamic contracting model where a risk-neutral principal hires a risk-averse agent to manage a project. The project risk is controlled by the principal or agent, and there is a trade-off between risk premium and a value-destroying effect of risk. No-saving selection...

We develop a dynamic tradeoff model that incorporates both controlling-minority shareholders conflict and shareholders-debtholders conflict to examine the relationship among agency conflicts, expansion investment, capital structure, and debt renegotiation. We show that balancing the two...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...