The Agency Cost of Alternative Debt Instruments (Classic Reprint) - Softcover

Antonio Mello

Softcover

ISBN 10: 1332248519 ISBN 13: 9781332248513

Publisher: Forgotten Books, 2018

Synopsis

Excerpt from The Agency Cost of Alternative Debt Instruments

It is now commonly recognized that a firm's capital structure can affect its value through the incentives that are created for the equity holders in favor of one or another investment and operating policy. A place has therefore been created for a positive theory of capital structure. Missing, however, from the literature on agency costs in finance have been models that enable us to measure the effects of capital structure on the value of the firm's assets. In this paper we show how contingent claims models can be used to measure and compare the agency costs of different forms of debt-fixed rate and indexed. The model can be used to determine the optimal indexing structure and the optimal parameters of the debt contract. The case of index linked debt that we study in this paper is a commodity bond.

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Edition details

• Publisher: Forgotten Books
• Publication date: 2018
• Language: English
• ISBN 10: 1332248519
• ISBN 13: 9781332248513
• Binding: Paperback
• Number of pages: 40