Showing 1 - 10 of 2,044
Persistent link: https://www.econbiz.de/10013141012
This article studies how the managers of a regulated firm can use debt and equity contracts to constrain the regulator's policy through the contingent transfer of control to external investors with high relative liquidation value. External finance increases regulated income and facilitates...
Persistent link: https://www.econbiz.de/10013118682
We investigate equilibrium debt dynamics for a firm that cannot commit to a future debt policy and is subject to a fixed restructuring cost. We formally characterize equilibria when the firm is not required to repurchase outstanding debt prior to issuing additional debt. For realistic values of...
Persistent link: https://www.econbiz.de/10014301989
The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...
Persistent link: https://www.econbiz.de/10010263749
We propose a tractable model of a firm's dynamic debt and equity issuance policies in the presence of asymmetric information. Because "investment-grade" firms can access debt markets, managers who observe a bad private signal can both conceal this information and shield shareholders from...
Persistent link: https://www.econbiz.de/10012429402
We examine the dynamic relations between institutional ownership and a firm's capital structure. We find that a firm's leverage decreases when institutional ownership increases. This result implies that a firm reduces its debt level as institutional investors substitute for the monitoring role...
Persistent link: https://www.econbiz.de/10011117735
This paper examines the optimal capital structure of a firm that delegates its financing decision of a risky project to a manager who is both risk averse and regret averse. Regret aversion is characterized by a utility function that includes disutility from having chosen ex-post suboptimal...
Persistent link: https://www.econbiz.de/10011191202
We consider how equity holders’ bargaining power during financial distress influences the interactions between financing and investment decisions when the firm faces the upper limit of debt issuance. We obtain four results. First, weaker equity holders’ bargaining power is more likely that...
Persistent link: https://www.econbiz.de/10011194177
In this paper, we explore two of the most relevant theories that explain financial policy in small and medium enterprises (SMEs): pecking order theory and trade-off theory. The theoretical section provides an overview of contemporary theories of capital structure. According to the pecking order...
Persistent link: https://www.econbiz.de/10011195007
We analyze the optimal capital structure of a bank issuing countercyclical contingent capital, i.e., notes to be converted into common shares in poor macroeconomic conditions. A comparison of the main effects produced by the countercyclical asset with the simple equity-debt capital structure,...
Persistent link: https://www.econbiz.de/10010574836