The risk-adjusted cost of financial distress

• 成果类型: Article
• 署名作者: Almeida, Heitor; Philippon, Thomas
• 署名单位: New York University; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2007.01286.x
• 发表日期: 2007
• 页码: 2557-2586
• 关键词: capital structure; corporate; bankruptcy; returns; FIRMS; leverage; stocks

摘要

Financial distress is more likely to happen in bad times. The present value of distress costs therefore depends on risk premia. We estimate this value using risk-adjusted default probabilities derived from corporate bond spreads. For a BBB-rated firm, our benchmark calculations show that the NPV of distress is 4.5% of predistress value. In contrast, a valuation that ignores risk premia generates an NPV of 1.4%. We show that marginal distress costs can be as large as the marginal tax benefits of debt derived by Graham (2000). Thus, distress risk premia can help explain why firms appear to use debt conservatively.