This paper investigates the effect of corporate risk management on dividend policy. We extend the signaling framework … level, the lower the incremental dividend. This result is in line with the purpoted positive relation between information … asymmetry and dividend policy (e.g., Miller and Rock, 1985) and the assertion that risk management alleviates the information …

Given equity’s convex payoff function, shareholders can transfer wealth from bondholders by increasing firm risk. We … a measure of shareholders’ risk incentives induced by convertible debt using a contingent claims framework. We then …

problem by curbing shareholders’ incentive to increase risk. This is because claimholders design the capital structure … between shareholders and convertible debtholders. We show that two risk-shifting scenarios arise as attainable Nash equilibria …. Pure asset substitution occurs when, despite convertible debtholders not exercising their conversion option, shareholders …