Download or read book The Moral Hazard Theory of Corporate Financial Structure written by Scott Williamson and published by Forgotten Books. This book was released on 2018-03-05 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Moral Hazard Theory of Corporate Financial Structure: Empirical Tests The development of the theory of optimal corporate financial structure has been based on the critical assumption that the value of the equity is maximized at the level of debt which maximizes the market value of the finn. Recently, however, Myers (1977) illustrated the breakdown of that assumption under very plausible conditions. Those conditions produce a conflict between bondholders and stockholders, leading to the application of the term moral hazard. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Download or read book Equity Debt and Moral Hazard written by Misa Tanaka and published by . This book was released on 2018 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a model to analyse the optimal ex-ante capital and total loss absorbing capacity (TLAC) requirements, and the ex-post resolution policy of banks. Banks in our model are subject to two types of moral hazard: i) ex-ante, they have the incentive to shirk on project monitoring, thus increasing the risk of failure, and ii) ex-post, poorly capitalised banks have the incentive to engage in asset substitution by 'gambling for resurrection'. Ex-ante moral hazard can be eliminated by ensuring that banks have sufficient capital and uninsured 'bail-inable' debt, while ex-post moral hazard is mitigated by triggering resolution when the minimum capital requirement is breached. We argue that optimal regulation consists of a high TLAC requirement and high capital buffer. Our analysis also suggests that higher system-wide risk would call for a higher capital buffer, but TLAC could be lowered if it does not jeopardise the credibility of bail-in itself.
Download or read book The Moral Hazard Theory of Corporate Financial Structure written by Scott Williamson and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: An in-depth analysis of the moral hazard problem in corporate finance, and how it affects the optimal choice of financial structure. Using empirical tests on real-world data, Williamson offers practical insights for investors and managers alike. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Download or read book A Theory of Capital Structure Under Moral Hazard and Asymmetric Information written by Yul Wha Lee and published by . This book was released on 1989 with total page 136 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Moral Hazard written by Fouad Sabry and published by One Billion Knowledgeable. This book was released on 2024-02-03 with total page 579 pages. Available in PDF, EPUB and Kindle. Book excerpt: What is Moral Hazard The term "moral hazard" refers to a circumstance that occurs in the field of economics and describes a situation in which an economic actor has an incentive to expand its exposure to risk because it does not face the full costs of that risk. As an illustration, when a company is insured, it may be willing to take on additional risk since it is aware that its insurance will cover the costs connected with the risk. It is possible for a moral hazard to take place when, after a financial transaction has taken place, the actions of the party that is taking the risk change in a way that is detrimental to the party that is suffering the costs. How you will benefit (I) Insights, and validations about the following topics: Chapter 1: Moral hazard Chapter 2: Economic bubble Chapter 3: Debt Chapter 4: Contract theory Chapter 5: Adverse selection Chapter 6: Information asymmetry Chapter 7: Savings and loan crisis Chapter 8: Asset-backed security Chapter 9: Mortgage loan Chapter 10: Subprime mortgage crisis Chapter 11: Flight-to-quality Chapter 12: Subordinated debt Chapter 13: Subprime crisis impact timeline Chapter 14: Credit crunch Chapter 15: Subprime crisis background information Chapter 16: Interbank lending market Chapter 17: Government policies and the subprime mortgage crisis Chapter 18: Subprime mortgage crisis solutions debate Chapter 19: Securitization Chapter 20: Financial fragility Chapter 21: 2007-2008 financial crisis (II) Answering the public top questions about moral hazard. (III) Real world examples for the usage of moral hazard in many fields. Who this book is for Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Moral Hazard.
Download or read book Financing and Corporate Growth Under Repeated Moral Hazard written by Ronald W. Anderson and published by . This book was released on 2001 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Versus Traditional Securities Under Moral Hazard written by Michel A. Robe and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide an explanation of the widespread use of traditional securities by well-established firms. Standard moral hazard models predict that equity, debt and warrants are almost never optimal financing instruments. We show that issuing these securities is, nevertheless, nearly optimal: the issuer would gain very little by using non-traditional securities instead. Combined with equity, one debt issue (without multiple layers of seniority) and one warrant issue (without multiple exercise prices) suffice to achieve near-optimality. The near-optimality of traditional financing depends crucially on the issuer's ability to use warrants in addition to debt and equity.
Download or read book Investment and Financing Decisions Under Moral Hazard written by Richard Carleton Green and published by . This book was released on 1982 with total page 486 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Heterogeneous Beliefs Moral Hazard and Capital Structure written by Jochen Bigus and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides a new approach to the theory of capital structure by emphasizing the issue that investors and entrepreneurs may have heterogeneous beliefs on future firms returns. Heterogeneous beliefs are possible even when there is symmetric information but individuals evaluate the same information differently. Although heterogeneous beliefs might be an important issue in real life, corporate finance theory hardly addresses them. When heterogeneous beliefs and moral hazard exist, a debt-equity mix might outperform pure debt or pure equity. I examine a situation in which there is perk consumption (which favors debt) and heterogeneous beliefs on project risk (which favors equity in case of risk neutrality) and heterogeneous beliefs on the project's mean (which favors debt). Optimal contracts tend to be highly nonlinear with heterogeneous beliefs.
Download or read book Debt Moral Hazard and Airline Safety written by Georges Dionne and published by Centre for Research on Transportation, Laboratory on Transportation Safety = Centre de recherche sur les transports, Laboratoire sur la sécurité des transports. This book was released on 1993 with total page 80 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Moral Hazard Theory of Corporate Financial Structure written by Scott Williamson and published by Nabu Press. This book was released on 2014-01-05 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a reproduction of a book published before 1923. This book may have occasional imperfections such as missing or blurred pages, poor pictures, errant marks, etc. that were either part of the original artifact, or were introduced by the scanning process. We believe this work is culturally important, and despite the imperfections, have elected to bring it back into print as part of our continuing commitment to the preservation of printed works worldwide. We appreciate your understanding of the imperfections in the preservation process, and hope you enjoy this valuable book.
Download or read book Leveraged Buy Out and Tax Saving Advantage written by Ouidad Yousfi and published by . This book was released on 2009 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers an explanation for the prevalent use of debt in LBO finance. We consider a double sided moral hazard model with three agents: the entrepreneur, the LBO fund and the bank. The entrepreneur and the LBO fund have to provide efforts in order to improve the productivity of their project; efforts are not observable. Under some restrictive conditions, the debt-equity contracts induce the entrepreneur and the LBO fund to invest efficiently. In the sense, without constraining the debt's payments, we show that the efforts depend on the project's quality. If the project is not very risky, the entrepreneur and the LBO fund provide the first best efforts and they share equally the benefit. If it is highly risky, they provide the second best efforts and the benefit's share given to each agent depends on the impact of his effort on the project's performance. When the bank's payments are constrained to be non-decreasing with the project's payoff, the agents' efforts do not depend on the project's quality. Whether the project is financed through a mixture of debt and equity or solely through equity, the entrepreneur and the LBO fund provide the same levels of efforts.We show that the excessive use of debt is explained by the tax saving advantages: the interests of the debt are tax-deductible which creates additional revenues. But these revenues have no impacts on the agents' incentives.
Download or read book Endless Money written by William Baker and published by John Wiley & Sons. This book was released on 2009-10-13 with total page 438 pages. Available in PDF, EPUB and Kindle. Book excerpt: A detailed look at how, and why, the American financial system has reached its current state Today's economy and capital markets are faced with the long-term buildup of public and private credit. Furthermore, we face higher taxes, greater spending, and more debt. We are now at a critical crossroads and our leaders have few realistic solutions. Proposals calling for tax reforms or fewer regulations have fallen on deaf ears. In fact, U.S. democracy has become more socialist and reform is needed immediately. Endless Money is an examination of how the U.S. government and the country's financial systems have embraced socialism, and why cultural deterioration reinforces the trend and jeopardizes democracy. In it, author William Baker sees this socialism embodied in two things. The first is the socialization of income, the second is the socialization of credit. Explores the present socialistic qualities of the American government and its financial system Looks back at how today's conditions relate not just to the Great Depression, but ancient empires such as Rome Calls for radical changes such as reduced regulatory power of the Federal Reserve, a considerable devaluation of the dollar in terms of gold, and repeal of income tax Includes a Web site devoted to book, with recommendations, quotes from the financial community, and think tank contacts Insightful and informative, Endless Money examines our current economic condition and describes what the United States can do to get back on the right economic track.
Download or read book A Commodity Linked Bond as an Optimal Debt Instrument in the Presence of Moral Hazard Classic Reprint written by Antonio Mello and published by Forgotten Books. This book was released on 2018-02-21 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from A Commodity Linked Bond as an Optimal Debt Instrument in the Presence of Moral Hazard In this paper we communicate two results. First, we construct an example in which a firm strictly prefers to issue a bond linked to the price of a commodity as opposed to a fixed rate bond. The firm with a fixed rate bond chooses a suboptimal investment policy because the outstanding nominal obligation distorts the incentives of the equity owners. The commodity linked bond resolves this moral hazard problem. Second, we show that in the presence of moral hazard problems the traditional application of contingent claims valuation techniques leads to an incorrect valuation of the the real assets and consequently to an incorrect valuation of the financial liabilities written against those assets. We show how the technique can be adapted to yield correct valuations. Visiting Professor of Finance and Assistant Professor of Finance, respectively, Sloan School of Management, m.i.t. This research is supported in part by the Program on Investments, Finance, and Contracts of the Center for Energy Policy Research, Energy Laboratory, m.i.t. The use of commodity linked debt has been advocated by Lessard primarily as an instrument to improve risk sharing between less developed countries that are significantly dependent upon commodity exports and outside investors. Lessard also noted that the improved risk sharing would have consequences for capital budgeting. However, his argument did not focus upon the very direct nature in which a commodity linked bond could improve the equity owner's incentives to choose the optimal investment and Operating strategy. Lessard's suggestion has become quite popular, and there now exist many pr0posals for indexing of less developed country debt to the prices of various commodities or directly to export earnings. However, almost all of the literature continues to focus upon the problem of improved risk sharing. There is almost no attention given to the improved use of the real assets that can result from the proper design of commodity linked debt. In this paper we focus exclusively on the changes in use of the real assets. Our analysis demonstrates, therefore, why a commodity linked bond may be an optimal financing instrument for a project in a developed country as well as a project in a less developed country. It should be noted that the great majority of commodity linked bonds have been issued in developed countries and that many of the issues have been made by industrial corporations involved in mining or processing the relevant commodities as our analysis would predict and in contradiction to the predictions of most other explanations for the existence of these securities. Our analysis calls attention, moreover, to the fact that the optimal commodity linked contract must be tailored to the particular set of real assets being financed. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Download or read book Debt and Equity as Optimal Contracts written by João Cabral dos Santos and published by . This book was released on 1995 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Optimal Dynamic Risk Sharing in Equity and Debt Markets written by Branko Vladeta Urosevic and published by . This book was released on 2002 with total page 400 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Debt Moral Hazard and Airline Safety written by Université de Montréal. Centre de recherche sur les transports and published by . This book was released on 1994 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a detailed analysis of the relationship between the financial structure of airlines and the safety decisions of managers. It shows that an increase in the debt-equity ratio is theoretically ambiguous on safety. It also provides new econometric results on airline accidents by using a model derived from the Katz family of distributions.
