Earticle

초록

영어

In contrast to the standard capital structure theory prediction that builds on a trade-o¤ between interest tax shields and expected bankruptcy costs, public firms use debt quite conservatively. To address this well known debt conservatism puzzle (Graham 2000), I argue that servicing debt drains valuable liquidity for a financially constrained firm and hence endogenously creates ‘debt servicing costs,’which have received little attention in the literature. To examine the in‡uence of debt servicing costs on capital structure choices, I develop and estimate a dynamic corporate finance model with interest tax shields, liquidity management, investments, external debt and equity financing costs, and capital adjustment costs. By using the marginal value of liquidity as a natural measure of the debt servicing costs, I find that (1) an increase in financial leverage results in higher debt servicing costs, even with risk-free debt. (2) a smaller firm tends to experience greater debt servicing costs because of its endogenously large investment demands; and (3) in the majority of cases, equity proceeds are used for cash retention as well as capital expenditure, especially when a firm faces large current and future investment needs. Furthermore, my simulation and empirical analyses cross-sectionally show that large debt servicing costs are closely associated with low leverage and frequent equity financing.

목차

Abstract
 1 Introduction
 2 Model
  2.1 Pro•ts and Investment
  2.2 Liquidity and Debt
  2.3 Tax, Payout, and Valuation
 3 Quantitative Analysis
  3.1 Calibration
  3.2 Growing Debt Obligations: Investment and Financing Policies
  3.3 Debt Servicing Costs
  3.4 Equity Financing and Cash Retention
 4 Comparative Statics
  4.1 Comparative Statics I: Fixed Operating Cost
  4.2 Comparative Statics II: Convex Capital Adjustment Costs
 5 Empirical Analysis
  5.1 Convex Capital Adjustment Costs
  5.2 Future Investments and Capital Structure Choice
 6 Conclusion
 Appendix

저자

• Jeong Hwan Lee [ College of Economics and Finance, Hanyang University. ]

참고문헌

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간행물

표지보기 관심저널 등록

• 간행물명

  한국재무학회 학술대회

• 간기

  부정기

• 수록기간

  2006~2024

• 십진분류

  KDC 325 DDC 330