Tobin's q debt overhang and investment
Webbfor Tobin’s marginal q, equal to average Q minus a debt overhang correction term (the ratio of bondholders’ recovery in default over capital). This proxy along with other assumptions, notably assumptions on the adjustment cost function, … Webbal. (2011)). Debt maturity may also affect the debt overhang by altering incentives to invest. According to Myers (1977), short-term debt reduces the debt overhang problem because the value of shorter debt is less sensitive to the value of the firm and thus receives a much smaller benefit from new investment.
Tobin's q debt overhang and investment
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Webbtion of Tobin’s q theory, which implies that current investment moves one-for-one with q, the ratio of the firm’s financial market value to its capital stock. This pre-diction, … Debt overhang distorts both the level and composition of investment, with underinvestment being more severe for long-lived assets. An empirical proxy for the shadow price of capital to equity is derived. Use of this proxy yields a structural test for debt overhang and its mitigation through issuance of additional secured debt.
Webb1 nov. 2024 · To better illustrate the relation between debt overhang and investment, we provide a simple investment model where the manager’s reward does not only depend on profits but also on the efficiency of the committed investment projects. 15 The adjustment serves as an investors’ insurance mechanism against possible managerial frauds and it …
WebbSemantic Scholar extracted view of "Tobin&Apos;S Q and Financial Policy" by Robert S. Chirinko. Skip to search form Skip to main content Skip to account menu. Semantic Scholar's Logo. Search 210,104,061 papers from all fields of science. Search. Sign In Create Free Account. Webb1 apr. 2024 · Tobin's "Q", Debt Overhang, and Investment. Article. Feb 2004; Christopher A. Hennessy; Incorporating debt in a dynamic real options framework, we show that underinvestment stems from truncation ...
Webb4 dec. 2006 · Dynamic Investment, Capital Structure, and Debt Overhang. S. Sundaresan, Neng Wang. Published 4 December 2006. Economics. Macroeconomics eJournal. We develop a dynamic contingent-claim framework to model S. Myers’s idea that a firm is a collection of growth options and assets in place.
Webbfractionalisation, debt overhang, insufficient fiscal stimulus, excessive financial regulation, and some mix of all of the above. This paper surveys the alternative viewpoints. We argue that until significant pockets of private, external and public debt overhang further abate, the potential role of other headwinds to economic t to green insuranceWebb1 mars 2024 · Diamond D, He Z (2014) A theory of debt maturity: The long and short of debt overhang. J. Finance 69 (2): 719 – 762. Google Scholar; Fan H, Sundaresan S (2000) Debt valuation, renegotiation, and optimal dividend policy. Rev. Financial Stud. 13 (4): 1057 – 1099. Google Scholar; Fischer E, Heinkel R, Zechner J (1989) Dynamic capital structure … tto genshin impacWebb27 nov. 2005 · Debt overhang distorts both the level and composition of investment, with underinvestment being more severe for long-lived assets. An empirical proxy for the … phoenix life funds