English, Article, Journal or magazine article edition: Excessive Continuation and Dynamic Agency Costs of Debt Jean-Paul Décamps

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Bookmark: http://trove.nla.gov.au/version/22692
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • Excessive Continuation and Dynamic Agency Costs of Debt
Author
  • Jean-Paul Décamps
Physical Description
  • preprint
Notes
  • This paper analyses the incentives of the equityholders of a leveraged company to shut it down in a continuous time, stochastic environment. Keeping the firm as an ongoing concern has an option value but equity and debt holders value it differently. Equityholders decisions exhibit excessive continuation and reduce firms value. Using a compound exchange option approach, we characterise the resulting agency costs of debt, derive the ¶price¶ of these costs and analyse their dynamics. We also show how agency costs can be reduced by the design of debt and the possibility of renegotiation.
  • RePEc:fmg:fmgdps:dp348
Language
  • English
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