Ambiguity and the Tradeoff Theory of Capital Structure

• 成果类型: Article
• 署名作者: Izhakian, Yehuda; Yermack, David; Zender, Jaime F.
• 署名单位: City University of New York (CUNY) System; Baruch College (CUNY); New York University; National Bureau of Economic Research; University of Colorado System; University of Colorado Boulder
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4074
• 发表日期: 2022
• 页码: 4090-4111
• 关键词: capital structure; leverage; ambiguity aversion; Ambiguity measure; Ambiguity index; Perceived probabilities

摘要

We examine the impact of ambiguity, or Knightian uncertainty, on the capital structure decision, using a static tradeoff theory model in which agents are both ambiguity and risk averse. The model confirms the well-known result that greater risk???the uncertainty over outcomes???leads firms to decrease leverage. Conversely, the model indicates that greater ambiguity???the uncertainty over the probabilities associated with the outcomes???leads firms to increase leverage. Using a theoretically based measure of ambiguity, our empirical analysis presents evidence consistent with these notions, showing that ambiguity has an important and distinct impact on capital structure.