Showing 1 - 8 of 8
We examine the pervasive view that "equity is expensive" which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. For example, the return on equity...
Persistent link: https://www.econbiz.de/10008662565
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. This resistance is present even without any government...
Persistent link: https://www.econbiz.de/10009528814
Shareholder-creditor conflicts can create leverage ratchet effects, resulting in inefficient capital structures. Once debt is in place, shareholders may inefficiently increase leverage but avoid reducing it no matter how beneficial leverage reduction might be to total firm value. We present...
Persistent link: https://www.econbiz.de/10009774439
We examine the pervasive view that "equity is expensive" which leads to claims that high capital requirements are costly for society and would affect credit markets adversely. We find that arguments made to support this view are fallacious, irrelevant to the policy debate by confusing private...
Persistent link: https://www.econbiz.de/10010203632
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. This resistance is present even without any government...
Persistent link: https://www.econbiz.de/10010323860
Shareholder-creditor conflicts can create leverage ratchet effects, resulting in inefficient capital structures. Once debt is in place, shareholders may inefficiently increase leverage but avoid reducing it no matter how beneficial leverage reduction might be to total firm value. We present...
Persistent link: https://www.econbiz.de/10010323873
We examine the pervasive view that 'equity is expensive' which leads to claims that high capital requirements are costly for society and would affect credit markets adversely. We find that arguments made to support this view are fallacious, irrelevant to the policy debate by confusing private...
Persistent link: https://www.econbiz.de/10010334527
We examine the pervasive view that equity is expensive which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. For example, the return on equity...
Persistent link: https://www.econbiz.de/10010286715