Short-term debt and incentives for risk-taking

被引:43
作者
Della Seta, Marco [1 ]
Morellec, Erwan [2 ,3 ]
Zucchi, Francesca [4 ]
机构
[1] STOXX Ltd, Theilerstr 1A, CH-6300 Zug, Switzerland
[2] Ecole Polytech Fed Lausanne, Swiss Finance Inst, Extranef 210, CH-1015 Lausanne, Switzerland
[3] Ctr Econ Policy Res CEPR, 33 Great Sutton St, London EC1V 0DX, England
[4] Fed Reserve Board Governors, 20th St & Constitut Ave NW, Washington, DC 20551 USA
关键词
Short-term debt financing; Rollover risk; Risk-taking; Financing frictions; OPTIMAL CAPITAL STRUCTURE; MATURITY STRUCTURE; ROLLOVER RISK; AGENCY COSTS; CREDIT RISK; LIQUIDITY; INVESTMENT; POLICY; ENFORCEMENT; OPTIONS;
D O I
10.1016/j.jfineco.2019.07.008
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We challenge the view that short-term debt curbs moral hazard and demonstrate that, in a world with financing frictions and fair debt pricing, short-term debt generates incentives for risk-taking. To do so, we develop a model in which firms are financed with equity and short-term debt and cannot freely optimize their default decision because of financing frictions. We show that when firms are close to distress, the dynamic interaction of operating and rollover losses fuels default risk. In such instances, shareholders find it optimal to increase asset risk to improve interim debt repricing and prevent inefficient liquidation. These risk-taking incentives do not arise when debt maturity is sufficiently long. (C) 2020 Elsevier B.V. All rights reserved.
引用
收藏
页码:179 / 203
页数:25
相关论文
共 50 条
  • [31] Shareholder risk-taking incentives in the presence of contingent capital
    Fatouh, Mahmoud
    McCunn, Ayowandc A.
    JOURNAL OF FINANCIAL REGULATION AND COMPLIANCE, 2022, 30 (01) : 25 - 42
  • [32] Why are US firms using more short-term debt?
    Custodio, Claudia
    Ferreira, Miguel A.
    Laureano, Luis
    JOURNAL OF FINANCIAL ECONOMICS, 2013, 108 (01) : 182 - 212
  • [33] Inside debt and firm risk-taking: Evidence from the UK pension reform
    Li, Hao
    Zhao, Jinsha
    JOURNAL OF BUSINESS FINANCE & ACCOUNTING, 2020, 47 (9-10) : 1316 - 1364
  • [34] Taming the dark side of asset liquidity: The role of short-term debt
    Huang, Guan-Ying
    Huang, Henry Hongren
    Lee, Chun, I
    INTERNATIONAL REVIEW OF ECONOMICS & FINANCE, 2020, 69 : 539 - 562
  • [35] ESG disclosure, CEO power and incentives and corporate risk-taking
    Ali, Faek Menla
    Wu, Yuanyuan
    Zhang, Xiaoxiang
    EUROPEAN FINANCIAL MANAGEMENT, 2024, 30 (02) : 961 - 1011
  • [36] Bank CEO risk-taking incentives and bank lending quality
    Zhai, Rui-Xiang
    Ho, Po-Hsin
    Lin, Chih-Yung
    Tran Thi Thuy Linh
    REVIEW OF QUANTITATIVE FINANCE AND ACCOUNTING, 2023, 60 (03) : 949 - 981
  • [37] Applications of fixed effect models to managerial risk-taking incentives
    Huang, Yin-Siang
    Lee, Cheng-Few
    Lin, Chih-Yung
    QUARTERLY REVIEW OF ECONOMICS AND FINANCE, 2023, 92 : 249 - 261
  • [38] Are US firms using more short-term debt?*
    Byun, Seong K.
    Lin, Zhilu
    Wei, Siqi
    JOURNAL OF CORPORATE FINANCE, 2021, 69
  • [39] Is short-term debt a substitute for or complementary to good governance?
    Anginer, Deniz
    Demirguc-Kunt, Asli
    Simsir, Serif Aziz
    Tepe, Mete
    BORSA ISTANBUL REVIEW, 2022, 22 (02) : 197 - 208
  • [40] Political Corruption and Corporate Risk-Taking
    Hinh Khieu
    Nam H. Nguyen
    Hieu V. Phan
    Jon A. Fulkerson
    Journal of Business Ethics, 2023, 184 : 93 - 113