The trade-off theory on capital structure is tested by modelling the capital structure target asthe solution to a maximization problem. This solution maps asset volatility and loss givendefault to optimal leverage. By applying nonlinear structural equation modelling, theseunobservable variables...

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...

We propose a structural model with an optimal switching of diffusion regime which integrates a wide range of investment reversibility. The default boundary and switching thresholds are endogenously determined, and we can examine conflict of interest between shareholders and creditors from...

Building on the trade-off between agency costs and monitoring costs, we develop a dynamic theory of optimal capital structure with financial distress and reorganization. Costly monitoring eliminates the agency friction and thus the risk of inefficient liquidation. Our key assumption is that...

This work documents the existence of a cointegration relationship between credit spreads, leverage and equity volatility for a large set of US companies. It is shown that accounting for the long-run equilibrium dynamic between these variables is essential to correctly explain credit spread...

We revisit the optimal capital structure model with endogenous bankruptcy first studied by Leland (1994) and Leland and Toft (1996). Differently from the standard case, where shareholders observe continuously the asset value and bankruptcy is executed instantaneously without delay, we assume...

We develop a contingent claims model for a firm in financial distress with a formal account for renegotiations under the U.S. bankruptcy procedure (known as Chapter 11). Shareholders and two classes of creditors (senior and junior) alternatively propose a reorganization plan subject to a vote....

We develop a contingent claims model of a firm in financial distress with a formal account for renegotiations under the Chapter 11 bankruptcy procedure. Shareholders and two classes of creditors (senior and junior) alternatively propose a reorganization plan subject to a vote. The bankruptcy...