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| Author: | John, K. |
| Title: | Risk-shifting incentives and signalling through corporate capital structure. |
| Journal: | Journal of Finance
1987 : JUL, VOL. 42:3, p. 623-641 |
| Index terms: | RISK CAPITAL INVESTMENT |
| Language: | eng |
| Abstract: | Optimal corporate financing arrangements for different patterns of temporal resolution of uncertainty in the underlying technology are examined. An agency problem, a signalling problem and an agency-signalling problem arise as special cases. The associated informational equilibria and the optimal financing arrangements are characterized and compared. Empirical implications for debt covenants and the announcement effect of investment policies and leverage increasing transactions on existing stock and bond prices are derived. |
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