Taxation, agency conflicts, and the choice between callable and convertible debt

• 成果类型: Article
• 署名作者: Hennessy, Christopher A.; Tserlukevich, Yuri
• 署名单位: University of California System; University of California Berkeley; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2007.09.014
• 发表日期: 2008
• 页码: 374-404
• 关键词: capital structure; AGENCY; Stochastic differential games

摘要

We analyze debt choice in light of taxes and moral hazard. The model features an infinite sequence of nonzero-sum stochastic differential games between equity and debt. Closed-form expressions are derived for all contingent-claims. If equity can increase volatility without reducing asset drift. callable bonds with call premia are optimal. Although callable bonds induce risk shifting, call premia precommit equity to less frequent restructuring and are tax-advantaged. Convertible bonds mitigate risk shifting, but only induce hedging if assets are far from the default threshold. Convertibles are optimal only if risk shifting reduces asset drift sufficiently. (C) 2008 Elsevier Inc. All rights reserved.