Yagi, Kyoko; Takashima, Ryuta - In: Economic Modelling 29 (2012) 6, pp. 2407-2416
We develop a model to examine the timing of investment decisions in relation to the issuance of convertible debt by firms. Our model shows that when the demand shock has higher volatility, the firm finances the investment cost with high-coupon convertible debt. We find that default occurs...