Stabsseminar på fredag

Fredag 4. juni holder Institutt for foretaksøkonomi stabsseminar. Seminaret er ved Josef Zechner, University of Vienna. Temaet er "Voluntary Debt Reductions".

02.06.2004 - Stig Nøra

Tid: Fredag 4.juni klokken 12.15-13.45
Sted: Auditorium D

Abstract
According to existing dynamic capital structure trade off theories
equity holders never find it in their best interest to reduce debt
voluntarily before bankruptcy or without renegotiating with creditors.
This paper develops a model in which firms optimize the maturity
structure of debt to commit to future downward restructurings. It is
demonstrated that equityholders of firms with short-term debt may find
it optimal not to replace maturing debt with new debt even if bond
indentures allow them to do so. Committing to refinance existing debt
effectively endogenizes the costs associated with high leverage, such as
expected bankruptcy costs. Ex ante, a short maturity of debt therefore
serves as a commitment to reduce leverage following a decrease in firm's
cash flows. This advantage of short-term debt in avoiding costs of
financial distress is not considered in the existing literature and
motivates an optimal term-structure of corporate debt. Closed form
solutions for the value of equity and debt are derived and it is shown
that the debt capacity of firms increases when choosing a shorter
maturity.

Paper er tilgjengelig på http://www.nhh.no/for/seminars/2004-spring/040604.pdf

Kristian R. Miltersen (59979) Jarle Møen (59612)