| Title: |
Property Rights, Risk and Leverage |
| Authors: |
Richard A. Graff; Joseph P. Kairys; Jel-codes D G |
| Contributors: |
The Pennsylvania State University CiteSeerX Archives |
| Source: |
https://gupea.ub.gu.se/bitstream/2077/2711/1/gunwpe0183_corr.pdf. |
| Publication Year: |
2005 |
| Collection: |
CiteSeerX |
| Subject Terms: |
capital structure; captive finance companies; structured finance |
| Description: |
Risk matters when corporate debt has a positive probability of default. Lenders have traditionally used covenants to protect their property rights because the financing and operating decisions of firms can reduce the value of the firm’s outstanding debt. We examine the use of captive finance subsidiaries and special purposed entities (SPEs) to partition default risk within the firm. A more complex arrangement of property rights within the firm allows the parent firm to retain operating flexibility while offering lenders better protection. We conclude that capital structure is a relevant decision variable for corporate managers because firms are able to obtain leveraged finance at a lower cost when risk is partitioned using separate legal structures within the firm. |
| Document Type: |
text |
| File Description: |
application/pdf |
| Language: |
English |
| Relation: |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.462.5319 |
| Availability: |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.462.5319 |
| Rights: |
Metadata may be used without restrictions as long as the oai identifier remains attached to it. |
| Accession Number: |
edsbas.5049B5A3 |
| Database: |
BASE |