Macroeconomic Conditions, Growth Opportunities andthe Cross-Section of Credit Risk

This paper develops a dynamic trade-off model of optimal capital structure that takes intoaccount the fact that most firms have both invested assets and growth opportunities. Thesetwo sources of value react quite differently to business cycle risk. In particular, growth optionsare more sensitive to regime changes than invested assets. Growth firms" are, therefore, en-dogenously more likely to default in recession, when doing so is expensive.[...]

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Year of publication:	2010-05-28
Authors:	Arnold, Marc ; Wagner, Alexander ; Westermann, Ramona
Institutions:	Swiss National Centre of Competence in Research North South <Bern>
Subject:	Leverage-Effekt \| Kreditrisiko \| Unternehmenswachstum \| company growth \| Makroökonomie \| Kapitalstruktur \| capital structure

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Extent:	559104 bytes 73 p. application/pdf
Series:	FINRISK Working Paper Series Working Paper ; No. 608
Type of publication:	Book / Working Paper
Language:	English
Classification:	G32 - Financing Policy; Capital and Ownership Structure ; Management and business organisation. General ; Strategic management ; Capital budgeting, budgetary planning and budgetary control ; Procurement of capital ; Individual Working Papers, Preprints ; No country specification
Source:	USB Cologne (business full texts)

Persistent link: https://www.econbiz.de/10009305114