Hossein Asgharian
Professor
Non-linearity in the impact of bankruptcy risk on leverage
Författare
Redaktör
- Emanuel Alfranseder
Summary, in English
The paper investigates the effect of bankruptcy risk on firms’ financing decisions. More specifically, we analyze if a higher probability of bankruptcy reduces incentives for debt financing due to an increase in expected bankruptcy cost. We argue that an increase in bankruptcy risk affects financial decisions only when the probability of bankruptcy is sufficiently high. We therefore model a nonlinear relationship between changes in leverage and bankruptcy risk. Our findings show that an increase in bankruptcy risk has a negative impact on changes in leverage and the impact is clearly nonlinear.
Avdelning/ar
- Nationalekonomiska institutionen
Publiceringsår
2015
Språk
Engelska
Sidor
119-137
Publikation/Tidskrift/Serie
Lund Economic Studies
Issue
188
Dokumenttyp
Del av eller Kapitel i bok
Förlag
Lund University
Ämne
- Business Administration
Status
Published
ISBN/ISSN/Övrigt
- ISSN: 0460-0029
- ISBN: 978-91-7623-303-0