This paper considers project financing under adverse selection and moral hazard and makes three contributions. First, the issue of combinations of debt and equity is explained as the outcome of the interaction between adverse selection and moral hazard. Second, it shows that, in the presence of moral hazard, adverse selection may result in the conversion of negative into positive NPV projects l...

Bank payouts divert cash to shareholders, while leaving behind riskier and less liquid assets to repay debt holders in the future. Bank payouts, therefore, constitute a type of risk-shifting that benefits equity holders at the expense of debt holders. In this paper, we provide insights on how incentives stemming from inside debt impact bank payout policy in a manner that protects debt holder in...

This paper argues that credit frictions and asset trading costs signi cantly increase the probability of a Sudden Stop in the early stages of nancial globalization, and that this in turn, signi cantly alters the long-run external capital structure of emerging market economies. Upon opening the capital account, domestic agents have an incentive to accumulate debt and sell domestic equity in orde...

We review and extend recent contingent claims models of capital structure. We focus on two models with analytic formulas in perpetual horizonLeland (1994) and Mauer and Sarkar (2004). We implement the investment option in both models in finite horizon with a numerical lattice while maintaining the analytic structure for the capital structure decisions in the second stage by maintaining the perp...

This paper estimates the systematic risk of the debt in public leveraged recapitalizations. We calculate this risk as a function of the difference in systematic equity risk before and after the recapitalization. The increase in equity risk is surprisingly small after a recapitalization, ranging from 37% to 57%, depending on the estimation method. If total company risk is unchanged, the implied ...

The purpose of this study was to analyze the financial performance before and during Covid-19 pandemic in automotive component sub-sector companies listed on Indonesia Stock Exchange. This uses ratio analysis by testing hypotheses using paired sample t-tests data collection techniques form statement searches literature studies. results showed that there were no significant differences current d...

the debt is one of the principal component of accounting equation and capital structure of most companies. during last fifteen years the usage trend of debt was increasingly improved in companies' eps. american ones. in this research we tried to answer the following question: is there any meaningful relation between debt ratio and return on assets (roa) in sec of tehran and its industries?...

This study aims to determine the effect of variable current ratio, debt equity ratio and ROA on capital structure. research method is descriptive quantitative. Data collection techniques were carried out through documentation data analysis using multiple linear F test t test. The results showed, a) has a value tcount<ttable, namely -0.988<1.66105 with significant level 0.326> 0.05; b) ...