Debt in industry equilibrium

• 成果类型: Article
• 署名作者: Fries, S; Miller, M; Perraudin, W
• 署名单位: University of Warwick; Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/10.1.39
• 发表日期: 1997
• 页码: 39
• 关键词: capital structure; corporate-debt; securities; WORKOUTS; POLICY

摘要

This article shows (1) bow entry and exit of firms in a competitive industry affect the valuation of securities and optimal capital structure, and (2) how, given a trade-off between tax advantages and agency costs, a firm will optimally adjust its leverage level after it is set up. We derive simple pricing expressions for corporate debt in which the price elasticity of demand for industry output plays a crucial role. When a firm optimally adjusts its leverage over time, we show that total firm value comprises the value Of discounted cash flows assuming fixed capital structure, plus a continuum of options for marginal increases in debt.