全球智库信息集成服务系统(G2TT): Leverage Dynamics without Commitment

G2TT

来源类型	Working Paper
规范类型	报告
DOI	10.3386/w22799
来源ID	Working Paper 22799
	Leverage Dynamics without Commitment
	Peter DeMarzo; Zhiguo He
发表日期	2016-11-14
出版年	2016
语种	英语
摘要	We analyze equilibrium leverage dynamics in a dynamic tradeoff model when the firm is unable to commit to a leverage policy ex ante. We develop a methodology to characterize equilibrium equity and debt prices in a general jump-diffusion framework, and apply our approach to the standard Leland (1998) setting. Absent commitment, the leverage ratchet effect (Admati et al. 2015) distorts capital structure decisions, leading shareholders to take on debt gradually over time and never voluntarily reduce debt. On the other hand, countervailing effects of asset growth and debt maturity cause leverage to mean-revert towards a long run target. In equilibrium, bond investors anticipate future leverage increases and require significant credit spreads even when the distance to default is large. As a result, the tax benefits of future debt increases are fully dissipated, and equilibrium equity values match those in a model where the firm commits not to issue new debt. In our model, leverage is dependent on the full history of the firm’s earnings. Despite the absence of transactions costs, an increase in profitability causes leverage to decline in the short-run, but the rate of new debt issuance endogenously increases so that leverage ultimately mean-reverts. The target level of leverage, and the speed of adjustment depends critically on debt maturity; nonetheless, in equilibrium shareholders are indifferent toward the debt maturity structure.
主题	Financial Economics ; Corporate Finance
URL	https://www.nber.org/papers/w22799
来源智库	National Bureau of Economic Research (United States)
引用统计
资源类型	智库出版物
条目标识符	http://119.78.100.153/handle/2XGU8XDN/580483
推荐引用方式 GB/T 7714	Peter DeMarzo,Zhiguo He. Leverage Dynamics without Commitment. 2016.

条目包含的文件
文件名称/大小	资源类型	版本类型	开放类型	使用许可
w22799.pdf（837KB）	智库出版物		限制开放	CC BY-NC-SA	浏览