We derive discount rates for depreciation and amortization tax shields resulting from asset step-ups in corporate mergers and acquisitions. By assigning all relevant sources of uncertainty for such kind of tax shields and by accounting for corporate debt it is shown that for APV valuations r*, a...

This paper investigates whether overleverage identifies companies' strategic default incentives. The results show that overlevered firms have lower equity beta than their counterparts. The strategic default option becomes more valuable when the firms are overlevered. Firms are more likely to be...

Debt-type compensation (i.e., inside debt) exacerbates the divergence in risk preference between the CEO and shareholders that in turn affects the firm's capital structure decisions. An excessively risk-averse CEO uses debt that falls short of the shareholders' desired level, and is eager to...

The corporate governance literature has shown that self-interested controlling owners tend to divert corporate resources for private benefits at the expense of other shareholders. Such behavior leads the controlling owners to prefer long maturity debt to short maturity debt, to avoid frequent...

We develop and test a model of debt structure and pricing in leveraged buyouts (LBOs). The model accounts for both market and firm specific variables and illustrates how collateral, security and seniority, as well as target future cash-flows and market interest rates determine the cost of...

Leveraged term loans are typically arranged by banks but distributed to institutional investors. Using novel data, we find that to elicit investors' willingness to pay, arrangers expose themselves to pipeline risk: They have to retain larger shares when investors are willing to pay less than...

This paper examines whether debt renegotiation mitigates the agency costs of asset substitution. Inspired by the studies of Mella-Barral and Perraudin (1997) and Leland (1998), we have developed an analytical continuous time model of a firm that has the option to switch to a higher risk activity...

In this paper, I examine the strategic role of debt structure in improving the bargaining position of a firm's management relative to its non-financial stakeholders. Debt structure is essential for strategic bargaining because it affects the ease of renegotiating debt contracts and thus the...

I construct a structural model in which firms maximize value conditional on being restricted from issuing equity and unsecured debt. Using GMM estimation, I find that a model with both equity and debt constraints fits better than models without constraints or with only one constraint. The...

This dissertation suggests that the tax savings, in firm valuation, are discounted at a rate computed through a model presented in the literature review, which is different from the rates usually used for this purpose either by the top text books from, for example, Neves (2002), Ross,...