Sinking Funds and the Agency Costs of Corporate Debt.

This paper examines whether a firm's sinking fund decision is affected by agency costs. The paper argues that sinking funds can be an effective device to resolve the problems of information asymmetry, risk incentives, and suboptimal investments. Empirical tests are provided. Results show that firms with certain characteristics related to agency problems tend to adopt a sinking fund provision in the bond indenture. Copyright 1990 by MIT Press.

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Year of publication:	1990
Authors:	Kao, Chihwa ; Wu, Chunchi
Published in:	The Financial Review. - Eastern Finance Association - EFA. - Vol. 25.1990, 1, p. 95-113
Publisher:	Eastern Finance Association - EFA

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005226930