Measuring Investment Distortions Arising from Stockholder-Bondholder Conflicts (1999)
| Venue: | Journal of Financial Economics |
| Citations: | 25 - 2 self |
BibTeX
@ARTICLE{Parrino99measuringinvestment,
author = {Robert Parrino and Michael S. Weisbach},
title = {Measuring Investment Distortions Arising from Stockholder-Bondholder Conflicts},
journal = {Journal of Financial Economics},
year = {1999},
pages = {3--42}
}
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Abstract
We examine the importance of stockholder}bondholder con#icts in capital-structure choice. Numerical techniques are used to compute the expected wealth transfer between stockholders and bondholders when a "rm adopts a new project. We characterize the set of positive NPV projects that stockholders prefer to ignore and the set of negative NPV projects that stockholders want to accept. The results illustrate how these distortions vary with "rm and project characteristics. We also estimate the impact of stockholder}bondholder con#icts on investment decisions for 23 di!erent "rms and examine
