This paper studies whether debt renegotiation mitigates debt overhang and improves investment efficiency. Using mergers between lenders participated in the same syndicated loans as natural experiments that exogenously reduce the number of lenders and thus make renegotiation easier, I find that...

A recent dramatic rise in the assets managed by passive corporate debt funds has profound implications for firm financing and payout policy. I use fund-specific flows to isolate exogenous increases in firm-level passive debt ownership at a firm. Firms respond to higher levels of passive debt...

The introduction of the 2006 Norwegian shareholder income tax was announced in advance, and it increased top marginal tax rates on individual dividend income from zero to 28 percent. We document strong timing effects on dividend payout on a large panel of non-listed corporations, with a surge of...

Banks face two different kinds of moral hazard problems: asset substitution by shareholders (e.g., making risky, negative net present value loans) and managerial rent seeking (e.g., investing in inefficient “pet” projects and consuming perquisites that yield private benefits). The privately...

This paper presents a dynamic multi-equation model based on a balance sheet identity, where technical aspects of capital structure are highlighted through separately observing debt and equity and their relationship to investment. Additionally, leverage dynamics are interpreted in their role for...

In response to technological change, U.S. corporations have been investing more in intangible capital. This transformation is empirically associated with lower leverage and greater cash holdings, and commonly explained as a precautionary response to reduced debt capacity. We model how firms'...

Making use of a structural model that allows for optimal liquidity management, we study the role that repos play in a bank's financing structure. In our model the bank's assets consist of illiquid loans and liquid reserves and are financed by a combination of repos, long–term debt, deposits...

The aim of this paper is to examine the effect of corporate governance, corporate financing decision, and ownership structure on firm performance. The study uses panel based regression approach; the analysis is based on a sample of 80 listed Kuwait Stock Exchange Market firms, over a period of 9...

The paper provides review of Modigliani-Miller capital structure irrelevance proposition and its development since 1958. The paper suggests some pedagogical insights and introduce risk-shifting interpretations of the MM model. We also discuss shapes of cost of debt and cost of equity functions...