Does Performance-Sensitive Debt mitigate Debt Overhang? - Archive ouverte HAL Accéder directement au contenu
Article Dans Une Revue Journal of Economic Dynamics and Control Année : 2021

Does Performance-Sensitive Debt mitigate Debt Overhang?

Résumé

We model the expansion decision of a levered firm. Straight debt distorts both timing and scaling: the firm invests less and later than its all-equity financed counterpart. The inclusion of performance sensitivity in the debt contract mitigates such distortions. Moreover, performance sensitivity is consistent with firm value maximization within a standard trade-off theory of capital structure. As a result, our model rationalizes the widespread use of performance sensitive debt (PSD), especially amongst fast growth firms.
Fichier principal
Vignette du fichier
558119-JEDC_Chevalier_FORTH.pdf (2.55 Mo) Télécharger le fichier
Origine : Fichiers produits par l'(les) auteur(s)

Dates et versions

hal-03364891 , version 1 (05-10-2021)

Identifiants

Citer

Alain Bensoussan, Benoit Chevalier-Roignant, Alejandro Rivera. Does Performance-Sensitive Debt mitigate Debt Overhang?. Journal of Economic Dynamics and Control, 2021, 131, ⟨10.1016/j.jedc.2021.104203⟩. ⟨hal-03364891⟩

Collections

EMLYON
40 Consultations
119 Téléchargements

Altmetric

Partager

Gmail Facebook X LinkedIn More