Institutional Investor Attention, Agency Conflicts, and the Cost of Debt

The Agency Cost of Alternative Debt Instruments

Investment Reversibility and Agency Cost of Debt

Previous research has argued that debt financing affects equityholders’ investment decisions, producing substantial inefficiency. This paper shows that the size of this inefficiency depends on the degree of investment reversibility. In a dynamic model of financing and investment, the paper provides an upper bound for the inefficiency produced by debt financing. The upper bound is decreasing in ...

Workplace Injuries and the Agency Cost of Debt

This paper examines how rm nancial policy impacts investment in workplace safety. The agency theory of capital structure hypothesizes that the use of corporate debt can have a signi cant impact on the rm's nonnancial stakeholders such as its employees. Using plant-level data on employee injuries from the Survey of Occupational Injuries and Illnesses, this paper tests whether rm leverage and nan...

Corporate Refinancing, Covenants, and the Agency Cost of Debt

How valuable are restrictive debt covenants in reducing the agency costs of debt? I answer this question by exploiting the revealed preference decision to refinance fixed-coupon debt, which weighs observable interest rate savings against the unobservable costs of a change in restrictive debt covenants induced by refinancing. Plausibly exogenous variation in this trade-off reveals that firms req...

Founding family ownership and the agency cost of debt

We investigate the impact of founding family ownership structure on the agency cost of debt. We find that founding family ownership is common in large, publicly traded firms and is related, both statistically and economically, to a lower cost of debt financing. Our results are consistent with the idea that founding family firms have incentive structures that result in fewer agency conflicts bet...