Underinvestment, Capital Structure and Strategic Debt Restructuring∗

Abstract

In this paper the investment and liquidation policy of a levered firm is analyzed. The possibility of renegotiating the original debt contract is included. It is shown that the shareholders’ option to restructure the outstanding debt exacerbates Myers’ (1977) underinvestment problem. This result is due to a higher wealth transfer from the shareholders to… (More)

Topics

Figures and Tables

Sorry, we couldn't extract any figures or tables for this paper.

Slides referencing similar topics