Admati, Anat R.; DeMarzo, Peter M.; Hellwig, Martin; … - 2012
We analyze shareholders' incentives to change the leverage of a firm that has already borrowed substantially. As a … result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer … subsidies, the effects of leverage reduction on bank managers or shareholders do not represent a social cost. In fact, we show …