The Impact of Corporate Governance Structures on the Agency Cost of Debt
December 1, 2001
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Summary
This paper uses a stochastic continuous time model of the firm to study how different corporate governance structures affect the agency cost of debt. In the absence of asymmetric information, it shows that control of the firm by debtholders with a minority stake delays the exit decision and reduces the underinvestment problem. Such a governance structure may play an important role in diminishing conflicts between shareholders and debtholders.
Subject: Banking, Corporate governance, Currencies, Debt financing, Economic sectors, External debt, Financial institutions, Inflation, Money, Prices, Stocks
Keywords: agency cost of debt, bankruptcy, cash flow, Corporate governance, Currencies, Debt financing, East Asia, equity firm, equity-financed firm, exit decision, firm increase, firm state, Inflation, minority shareholder, Stocks, WP
Pages:
12
Volume:
2001
DOI:
Issue:
204
Series:
Working Paper No. 2001/204
Stock No:
WPIEA2042001
ISBN:
9781451874501
ISSN:
1018-5941
