Financial structure of the company refers to the structure of financing of business assets and concerns the relationship between their own and borrowed sources of financing. One of the company’s financial goals is to provide optimal financial structure that has the purpose of maximizing...

I develop a dynamic model of financing decisions and optimal debt maturity choice in which creditors face adverse selection and learn about the firm's quality from news. In equilibrium, shareholders may choose to postpone debt issuance to reduce adverse selection and improve the pricing of newly...

Many U.S. corporate bonds are either callable or convertible. While callable bonds provide a higher coupon to bondholders in exchange for a firm's repurchase option of its claim, convertible bonds offer investors the option to exchange a firm's debt to equity. This paper analyzes the choice...

I develop a dynamic capital structure model in which shareholders determine a firm's leverage ratio, debt maturity, and default strategy. In my model, the firm's debt matures all at once. Therefore, after repaying the principal shareholders own all the firm's cash flows and can pick a new...

I analyze both CEO inside debt and firm debt jointly to further investigate the compensation incentives on risky decision-making and the resulting financial policy decisions concerning the debt structure of the firm. I find larger firms with high CEO inside debt tend to diversify, as calculated...

In this paper we build a theoretical model of a firm repurchasing its corporate debt. We find that firm creditors as a group sell debt to the firm only at face value. However, because of the cross-creditor externalities buying back debt is cheaper and easier when there are many creditors, e.g.,...

Corporate debt maturity is a concave function of financial leverage when the debt has restrictive asset-based covenants attached. This concavity kicks in earlier with increasing covenant tightness and is absent when firms have no restrictive asset-based covenants. We argue that this concavity is...

I study the target leverage and partial adjustment activity of firms that issue convertible bonds. Convertibles may help target adjustment efforts by lowering issuance transaction costs and reducing interest expenses. Nevertheless, convertible debt can increase liabilities for an unknown amount...

Profitability is substantial for any firm to maintain business and enable long-term sustainability. Firms' decision on indebtedness and capital structure have influence on potentials for prosperity, growth, and development. This study aims to find a new empirical evidence on the influence of...

This paper develops a new model of debt renegotiation in a structural framework, that accounts for both taxes and bankruptcy costs. We investigate situations where the manager can optimally (on behalf of the equity holder) impose a permanent coupon reduction to creditors, given that the new...