| Author: | Kursten, W. |
| Title: | Risky debt, managerial ownership and capital structure: new fundamental doubts on the classical agency approach |
| Journal: | Journal of Institutional and Theoretical Economics
1995 : SEP, VOL. 151:3, p. 526-555 |
| Index terms: | RISK DEBT AGENCIES |
| Language: | eng |
| Abstract: | The paper deals with Jensen and Meckling's (1976) classical "agency approach" to the optimal capital structure of the firm under conditions of moral hazard. The author provides an analytical test of the three main Jensen and Meckling hypotheses: The hypothesis that the agency costs of debt or equity, resp.) are a monotonically increasing (or decreasing,resp.) function of the firm's debt-ratio, and the hypothesis that the optimal capital structure is determined by the minimum of the total agency costs. The results appear to be rather disappointing. |
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