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Leverage and risk-taking in a dynamic model

Berg, Tobias; Heider, Florian - 2024

, evident in data from both the U.S. and Europe. Firms with medium leverage avoid risk to preserve the option of issuing safe … by debt-holders due to future risk-taking incentives. Our model offers new insights on the interaction between companies …' debt financing and their risk profiles. …

Persistent link: https://www.econbiz.de/10014584403

Financial Contracting as Behavior Towards Risk

Krainer, Robert - 2014

-up the manager of the representative firm should always make production-investment decisions that conform to the risk … aversion of stockholders and then use financing decisions to offset any effect of a change in operating risk on the market …

Persistent link: https://www.econbiz.de/10013055404

Risk-taking, competition and uncertaint : do contingent convertible (CoCo) bonds increase the risk appetite of banks?

Fatouh, Mahmoud; Neamtu, Ioana; Wijnbergen, Sweder van - 2022

conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk … sample selection bias, we show that CoCo bonds issuance has a strong positive e↵ect on risk-taking behaviour, particularly … amplifies the impact of CoCo bonds on risk-taking. …

Persistent link: https://www.econbiz.de/10012887890

Uncertainty, Investment Spikes, and Leverage Adjustments

Im, Hyun Joong - 2020

We study the effects of uncertainty on corporate leverage adjustments with respect to investment spikes and find that overlevered and underlevered firms behave very differently in response to the combination of uncertainty and investment spikes. Overlevered firms facing high uncertainty converge...

Persistent link: https://www.econbiz.de/10012855716

De and re-levering betas with risky debt

Krause, Marko Volker - In: Business research 12 (2019) 2, pp. 703-720

-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying …

Persistent link: https://www.econbiz.de/10012256377

How Does Uncertainty Influence Target Capital Structure?

Im, Hyun Joong - 2020

This study investigates how uncertainty affects firms' target capital structure using a panel data set of U.S. public manufacturers between 2003 and 2018 and finds that high-uncertainty firms have 10.1 (8.1) percentage points lower mean book (market) targets than low-uncertainty firms. This...

Persistent link: https://www.econbiz.de/10012850812

Structured XVAs

Renzitti, Stefano - 2022

Using a continuous time, structural model of a dealer-bank, we derive fair value equations for credit risky financial products that can not be perfectly hedged, fully taking into account the impact the contracts have on the dealer-bank's earnings volatility and, consequently, their solvency and...

Persistent link: https://www.econbiz.de/10014236041

Size, Leverage, and Risk-Taking of Financial Institutions

Bhagat, Sanjai - 2018

We investigate the link between firm size and risk-taking among financial institutions during the period of 1998 …-2008 and make three contributions. First, size is positively correlated with risk-taking measures even when controlling for … other observable firm characteristics. This is consistent with the notion that “too-big-to-fail” policies distort the risk …

Persistent link: https://www.econbiz.de/10012940151

An Experimental Analysis of Risk Shifting Behavior

Hernandez-Lagos, Pablo - 2016

We study risk-shifting behavior in a laboratory experiment, a setup that overcomes methodological hurdles faced by … empiricists in the past. The participants are high-level managers. We observe risk shifting in a simple setup, but less in a setup … with a continuation value. Reputation effects also reduce risk shifting. When combined, a continuation value and reputation …

Persistent link: https://www.econbiz.de/10013006195

Idiosyncratic Risk, Risk-Taking Incentives and the Relation Between Managerial Ownership and Firm Value

Florackis, Chris - 2020

risk to managers and encouraging risk-substitution; that is, managers with relatively undiversified personal portfolios … tend to pass up profitable projects with high idiosyncratic (firm-specific) risk in favor of less-profitable projects that … have greater aggregate (market) risk. Using parametric and semi-parametric estimation methods, we examine how managerial …

Persistent link: https://www.econbiz.de/10012857237