The cost and timing of financial distress

• 成果类型: Article
• 署名作者: Elkamhi, Redouane; Ericsson, Jan; Parsons, Christopher A.
• 署名单位: University of California System; University of California San Diego; University of Toronto; McGill University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.02.005
• 发表日期: 2012
• 页码: 62-81
• 关键词: Trade off theory; Financial distress; Debt-equity holder conflicts; tax benefits; financial leverage

摘要

Assessments of the trade-off theory have typically compared the present value of tax benefits to the present value of bankruptcy costs. We verify that this comparison overwhelmingly favors tax benefits, suggesting that firms are under-leveraged. However, when we allow firms to experience even modest (e.g., 1-2% annualized) financial distress costs prior to bankruptcy, the cumulative present value of such costs can easily offset the tax benefits. (C) 2012 Elsevier B.V. All rights reserved.