Acharya, Viral V; Gale, Douglas M; Yorulmazer, Tanju - C.E.P.R. Discussion Papers - 2009
We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case … structure, debt capacity does not depend upon rollovers and liquidation cost, and is simply equal to expected cash flows from … bad news; under this structure, debt capacity of the asset is decreasing in the liquidation cost and frequency of …